Impact on Canadian Registered and International Exempt Firms
Effective January 11, 2015
The Canadian Securities Administrators (CSA) recently finalized
amendments to National Instrument 31-103 Registration
Requirements, Exemptions and Ongoing Registrant Obligations
(NI 31-103) and its Companion Policy, as well as to certain related
instruments, that were first published for comment in December
20131. The amendment package, published on October 16,
2014 [available here], makes technical adjustments
as well as more substantive changes intended to establish the
regulatory approaches on long-standing issues, resolve ambiguities
and clarify regulatory intentions. The CSA made some welcome
changes (primarily to provide additional clarity) to the final
amendments in response to well over one hundred commentators,
including comments submitted by Borden Ladner Gervais LLP.
In addition to amending NI 31-103, the CSA also amended National
Instrument 33-109 Registration Information (NI 33-109) and
its Companion Policy, as well as National Instrument 52-107
Acceptable Accounting Principles and Auditing Standards
and its Companion Policy. Amendments to OSC Rule 33-506 (Commodity
Futures Act) Registration Information and its Companion Policy
mirror the amendments to the various registration related forms in
Subject to governmental approvals, the amendments will be
effective on January 11, 2015, although certain provisions have a
six-month transition period.
Exempt market dealers will be limited in the activities that
they may conduct. These restrictions will be effective July 11,
CCOs of all categories of registered dealer (except investment
dealers) must have at least 12 months' of relevant
International portfolio managers will be able to rely on a new
nationally-consistent sub-adviser exemption.
A short-term debt exemption will be available to certain
financial institutions, effective July 11, 2015.
Investment fund managers will need to report NAV adjustments
using a new detailed form.
Firm representatives who serve on the boards of reporting
issuers or have outside business activities, including
"positions of influence", will have enhanced disclosure
obligations and any conflicts of interest raised by these
activities must be managed.
Registrants must give notice in certain circumstances of
acquisitions of securities of another registrant – including
firms registered in "foreign jurisdictions". This latter
addition is new.
All registrants will use updated registration-related forms to
provide information to the regulators.
As with the existing iteration of NI 31-103, it is particularly
important to review the amendments to the Companion Policy, which
provide greater clarity on regulatory expectations, and in some
cases, enhance the base requirements of rules.
The case of Harbouredge Mortgage v Powell is a classic example whereby a secured party registered a financing statement which contained an error in the debtor's name, and therefore lost their claim as a secured creditor.
The Supreme Court of Canada has provided guidance to financial institutions holding otherwise "highly sensitive" information to determine when that information is somewhat less sensitive, such that it can be disclosed.
The purpose of the Clearing Rule is to impose central counterparty clearing of certain OTC derivative transactions in order to mitigate counterparty risk in the derivatives market and to increase financial stability.
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