The Canadian Securities Administrators (the
CSA) have published proposed amendments to
National Instrument 31-103 Registration Requirements,
Exemptions And Ongoing Registrant Obligations (NI
31-103) on December 5, 2013 (the Proposed NI
31-103 Amendments), which included, among other
things, a new short-term debt registration exemption under s.
8.22.1 of NI 31-103 (the Proposed registration
Currently, all CSA members except Ontario, have issued parallel
exemptive relief orders (the blanket orders) where
the dealer registration requirement does not apply to trades in
short-term debt (e.g., commercial paper) by specified
financial institutions. The Proposed registration exemption
contains the same conditions as the blanket orders, including that
the short-term debt instruments have a designated rating.
Proposed permited client requirement
The CSA, however, have added a new requirement limiting
the use of the exemption to trades with permitted clients.
Generally, "permitted clients" are wealthy individuals
and entities, corporations, financial institutions and government
entities; not retail investors.
The CSA stated that it has reviewed current exemptive relief
orders and determined that generally, the trading occurs with
persons that meet the definition of a permitted client. The CSA
also believes that permitted clients generally have sufficient
investment knowledge or resources to obtain expert advice, and
accordingly may not need or wish to have the same level of
protection as other investors.
It should be noted that if the Proposed registration exemption
cannot be satisfied, the trade can likely be conducted through a
registered dealer. Most financial institutions have affiliations or
relationships with registered dealers.
Although the CSA proposes to retain the condition relating to
the securities traded under the Proposed registration exemption
having prescribed credit ratings, the CSA may amend or remove
this condition based on the outcome of work in this area by other
CSA committees. The CSA states that is plans to repeal the
existing exemptive relief orders when the Proposed registration
exemption comes into force.
In Ontario, there are alternate exemptions from the dealer
registration requirement that are available for trading in
short-term debt instruments, such as the exemptions in section 35.1
of the Securities Act (Ontario) and section 4.1 of Ontario
Securities Commission Rule 45-501 Ontario Prospectus and
The CSA has posed a number of questions involving
the Proposed NI 31-103 Amendments and seeks feedback.
The comment period ends on March 5, 2014.
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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