Securities dealers, investment fund managers and others selling
securities into Canada need to be aware of Canada's securities
dealer registration requirements and determine the best way to
comply with them.
Who Must Register as a Securities Dealer?
In Canada, the requirement to register as a securities dealer is
triggered by being in the business of trading in securities, which
is called the business trigger. If you sell securities to investors
in Canada as part of your business, you may trip the trigger and
have to register as a dealer in Canada. Even issuers selling their
own securities and investment fund managers selling securities of
the funds they manage can be caught by the dealer registration
Am I Caught by the Business Trigger?
You may be in the business of trading and trip the trigger if
carry on the kinds of activities normally performed by a broker
intermediate trades in securities between sellers and
engage in frequent or regular trading activities,
are compensated for what you do, or
contact anyone to solicit transactions in securities.
The Canadian regulators have said that issuers of securities and
investment fund managers may have to register as dealers if they
frequently trade in securities, perform activities similar to those
performed by a broker or dealer, or actively solicit investors.
However, registration is generally not required for one-time
activities, limited activities or trading activities that are
considered only incidental to some other business. So, for example,
an investment fund manager who makes a one-time sale of fund
securities in Canada in response to a request from a Canadian
investor should not trip the trigger; however, a fund manager who
seeks out investors in Canada and makes regular Canadian sales
would likely trip the trigger.
What Happens if I Trip the Trigger?
If you are in the business of trading in securities, you will
have to register as a Canadian securities dealer unless there is
some exemption that you can rely on. Issuers and investment fund
managers who trip the trigger might consider registering as an
exempt market dealer, which is the simplest kind of registration
available. But even that simplified type of registration is a
fairly lengthy and relatively complicated process. A number of
requirements may be difficult to satisfy, including having a chief
compliance officer who meets the necessary education and experience
requirements, as well as the registration, education and experience
requirements that apply to all individuals acting as
Do U.S.-Registered Broker-Dealers Get Any Special
If you are already registered as a broker-dealer in the United
States (or another country), you can very easily become qualified
as an international dealer in Canada, which will allow you to trade
securities of non-Canadian companies to Canadian institutional
investors and high-net-worth individuals who qualify as permitted
clients. You will have to appoint a
registered agent in Canada (such as a Canadian law
firm) and comply with a few other simple and straightforward
requirements. International dealer status entitles you to an
exemption from registration, so none of the usual requirements for
actually becoming registered as a dealer in Canada will apply.
Can I Hire Someone Else to Sell Securities for Me?
Even if you are in the business of trading in securities, you
are exempt from the dealer registration requirement if all the
trades that you make to purchasers in Canada are made solely
through an agentthat is registered as a dealer (or qualified as an
international dealer). An investment fund manager may, for example,
wish to engage a Canadian registered dealer to act as the
distributor in Canada. So long as all the sales in Canada are made
solely through that registered dealer, the investment fund manager
will be exempt from registration.
* * * * * * * * * *
Canada and the United States have a lot in common, including the
general principles behind their securities laws. But there are some
differences you might find surprising. This newsletter will provide
answers to some of the most commonly asked questions about
Canada's securities laws. While we hope you find it
interesting, we also hope you understand that it is intended only
to provide general information and should not be considered legal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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