On April 23, 2015, the Ontario Securities Commission (OSC)
published proposed OSC Rule 32-505 - Conditional Exemption from
Registration for United States Broker-Dealers and Advisers
Servicing U.S. Clients from Ontario (the Rule).
The OSC notes that there are US broker-dealers and US advisers
not registered or relying on an exemption in Ontario, but have
offices or employees in Ontario and are (i) trading to, with, or on
behalf of, clients that are resident in the US (US clients), or
(ii) acting as an adviser to US clients. Registration as an adviser
or a dealer, or an exemption from such registration requirements,
is required for a firm and its representatives who act as a dealer
or an adviser in Ontario, even if the firm's clients are not
resident in Ontario; therefore, US broker-dealers and US advisers
may be acting off-side of Ontario securities laws by not being
registered or relying on an exemption from the requirement to
The Rule provides exemptions from the relevant dealer and
adviser registration requirements in Ontario, subject to certain
conditions, for US broker-dealers and US advisers that are trading
to, with, or on behalf of, US clients, or acting as advisers to US
clients, but that trigger the requirement to register as a dealer
or adviser in Ontario because they have offices or employees in
To rely on the exemption contained in the Rule, certain
conditions and filing requirements must be met.
The exemptions under the Rule are not available where trading or
advising involves Ontario residents, whether directly or
indirectly. In considering the availability of the exemptions under
the Rule, the OSC has advised that it will look to the substance of
trades or advice in question when determining if Ontario residents
By relying on the exemptions in the Rule, a US broker-dealer or
US adviser will become a "market participant" and be
subject to the provisions under Ontario law applicable to a market
participant, including those related to record keeping and
The Rule is expected to come into force on July 7, 2015.
US broker-dealers and US advisers that are currently carrying
out activities from Ontario but are not registered or relying on an
exemption from registration should note the OSC has stated the
exemptions in the Rule will only be effective as of the date they
are relied on (i.e., reliance on the exemptions in the Rule will
not cure any prior non-compliance with Ontario securities
Note as well that blanket orders that offer US broker-dealers
and US advisers substantially the same relief as is contained in
the Rule have been issued by the securities regulatory authorities
in all other Canadian provinces and territories.
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