Canada: Development Of The Client Relationship Model

Last Updated: March 12 2007
Article by Rebecca A. Cowdery

Most Read Contributor in Canada, September 2016

Implementation of the so-called "client relationship model"1 remains a key objective of the Canadian securities regulators’ Registration Reform Project. Proposed National Instrument 31- 103 Registration Requirements2 would mandate delivery by registered dealers and portfolio managers (but not investment fund managers) of a specified relationship disclosure document to clients who do not qualify as "accredited investors"3. The relationship disclosure document, or RDD, is an important element of the client relationship model and is proposed by NI 31-103 to be mandatory for non-SRO dealer and portfolio manager registrants. The Canadian self-regulatory organizations for dealers – the Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada - are expected to publish new rules for their members that would mandate a similar RDD to be given by those dealers to their non-accredited investor clients.

The RDD would be given by registered dealers and portfolio managers to retail clients that are not accredited investors before those registrants perform any registrable activities for those clients. Any material change to the information contained in a firm’s RDD must be disclosed in writing to retail clients before taking any further action after the information changes. Clients are not required to sign any acknowledgement of receipt of the RDD, which is consistent with the CSA’s current direction to minimize unwieldy written client consents and acknowledgements. We assume that the RDD will form an important part of a registered firm’s account opening procedures with retail clients.

The RDD must contain information, written in plain language, that responds to 12 different disclosure points, including a description of conflicts of interest, disclosure of all service fees and charges that will be levied against the client’s account and a description of the compensation that the registrant will receive in relation to the different products that the client may purchase through the registered firm. We believe that the RDD will have to be tailored to the different clients of a registrant, and arguably would need to be tailored to each client of the registrant, since proposed NI 31-103 requires that the RDD contain the know-your- client information that a registered firm is required to collect about the client. The CSA suggest that a registrant consider including in the RDD a description of the registrant’s expectations of its clients – for example, that the client provide full and accurate information to the registrant, carefully review all account information and "understand all fees and costs".

The RDD will be a significant new compliance obligation for registered firms. The objective of the CSA appears to be to ensure that retail clients understand the services that they can expect from a registered firm, including all fees and expenses associated with their account. With the RDD, the CSA attempts to respond to the perennial concerns of investors and their advocates that retail investors need to better understand the registrant-client relationship, including what they can expect by way of on-going service and information. The expectation is that a retail investor can be in a better negotiating position with a registrant about his or her rights. The RDD is designed to be a plain language disclosure document that articulates the features of the registrantclient relationship, as well as a document that will allow the registrant to avoid any misunderstandings with its retail clients about the nature of that relationship.

The requirements to deliver a RDD are in addition to the other disclosure obligations under proposed NI 31-103 – many of which are continuations of existing obligations (albeit in modified forms), including

  • Leverage disclosure information to clients in mandated circumstances
  • Client consent to purchases of securities issued by related or connected issuers
  • Disclosure of policies designed to ensure fairness in allocation of investment opportunities
  • Issuer disclosure statements if the registrant is advising or dealing with a related issuer in specified circumstances.

The RDD is also in addition to the more traditional prospectus disclosure documents that must be delivered to investors acquiring newly issued securities of reporting issuers, including mutual funds.

The RDD supplements the account opening, "know-your-client" reviews and suitability analysis that dealers and portfolio managers must carry out, all of which will be required by and in some cases, enhanced in proposed NI 31-103.


1 The client relationship model refers to certain principles discussed in the January 2004 Concept Proposal of the Ontario Securities Commission (then known as the Fair Dealing Model): (i) clarity and transparency regarding relationships, (ii)transparency of costs, and (iii) transparency regarding performance and costs. The January 2004 Fair Dealing Model concept proposal is available on the OSC’s Website More information about the CSA’s Registration Reform Project, including certain of the concepts behind the client relationship model can be found at

2 Proposed National Instrument 31-103 Registration Requirements was published for comment on February 20, 2007. The comment period ends on June 20, 2007.

3 The phrase "accredited investor" used in proposed NI 31-103 has the same meaning as used in National Instrument 45-106 Prospectus and Registration Exemptions.

* * * * * * * * * * * * * * * *

For more information on proposed NI 31-103, please see BLG’s Investment Management Advisory Canadian Securities Regulators Release Comprehensive Registration Rule for Comment released by our Investment Management Group on February 20, 2007. This Investment Management Advisory is one of eight in the series: Keeping Reforms in Sight: Understanding the Registration Reform Proposals. BLG’s Investment Management Advisories are available on our website at [click on Publications and then select Capital Markets to search current publications].

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.