Canada: OSC Releases Guidance For PMs Regarding Service Arrangements With IIROC Dealer Members

On November 17th, the Canadian Securities Administrators (CSA) issued Staff Notice 31-347 (the Notice), which provides information and guidance to portfolio managers (PMs) that enter into Portfolio Manager–Dealer Member Service Arrangements (PMDSAs) with dealer members (DMs) of IIROC. Under these PMDSAs, a DM holds an investor's cash and securities (Investments) in an account over which a PM has discretionary trading authority, and executes and settles the investor's trades in the account based on instructions from the PM. The investor is thus a client of both the PM and DM.

The Notice states that PMDSAs can be beneficial for investors and may be entered into by PMs provided all obligations under National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) are met. Certain of these obligations are summarized below.

Books and records

It is not permissible for a PM operating with a PMDSA to rely entirely on a DM's records as a substitute for the PM maintaining its own books and records for its clients' Investment positions and trades within the PMDSA. While a PM may outsource elements of the compilation of books and records to an agent, the PM is responsible for verifying the completeness and accuracy of the information and maintaining it in an accessible form. As part of maintaining its own books and records of its clients' Investment positions and trades, a PM may use information provided from third parties, including DMs, provided the PM takes active steps to ensure the information is complete and accurate (for example, by reviewing and reconciling the information against its other records, such as clients' trade orders and trade confirmations).

Simply downloading information from a DM's system to its own books and records system is not acceptable, as the PM is responsible for ensuring its records are complete and accurate. Further, should a PM use information from DMs when producing a client statement, it is not acceptable to include a disclaimer as to the completeness or accuracy of the information in the statement as the PM is solely responsible for the content of the documents it is required to deliver to clients under NI 31-103.

Written agreements

All PMs that enter into PMDSAs must have executed, written agreements with their DM counterparts. At a minimum, the written agreement should contain the PMDSA's key terms, including the PM and DM's roles and responsibilities.

Statements of investment positions and trades (Statements)

The Notice provides that a PM operating with a PMDSA can satisfy its obligation to deliver Statements to a client when that client's DM, acting as custodian, sends a Statement to the client (for each of the client's accounts at the DM), provided the PM takes a number of steps that are enumerated in the Notice, including (i) verifying that Statements containing the required content are delivered to the client by the DM at the required frequency and (ii) taking reasonable steps to verify that the content of the Statements issued to its clients is complete and accurate, including by regularly reconciling its books and records of client Investment positions and trades against the DM's records, and maintaining evidence of the reconciliations.

If a PM decides to satisfy its Statement obligations by relying on Statements issued by a DM, then the CSA expects the PM to establish reasonable written policies and procedures so it can demonstrate to CSA staff how it is meeting its obligations.

Note that if a PM holds any Investments for a client, or has trading authority over any of the client's Investments that are not held in the client's account at a DM, then the PM may not rely on the Statement issued by a DM to satisfy its Statement delivery obligations for that client. In these cases, the PM must issue its own Statements covering all of the client's Investments that it holds or has trading authority over.

Note as well that while a PM can rely on the Statements issued by a DM to satisfy the PM's obligation to issue Statements (subject to the preceding paragraph and provided the steps enumerated in the Notice are followed), a PM's obligation to issue to its clients an annual report on charges and other compensation and an annual investment performance report must be issued by the PM under the PM firm's name.

Client disclosure

PMs must provide each of their clients served under a PMDSA with written disclosure that clearly and concisely explains the arrangement, including details on (i) the purpose and material terms of the PMDSA, (ii) the key services provided by the PM and DM to the client, and (iii) the key obligations owed by the PM and DM to the client. Additional disclosure is required where a PM will rely on Statements issued by the DM to satisfy the PM's obligation to issue Statements.

The CSA expects this disclosure to be provided to each client before the PM–client relationship begins. When there are any material changes to the PMDSA, the CSA expects the PM to revise the disclosure and notify the client of the changes in a timely manner. For clients subject to existing PMDSAs, the CSA expects that PMs will take steps to provide this disclosure to their clients in a timely manner (for example, within one year of the Notice's publication date), either separately or as part of another communication to clients.

About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see

Law around the world

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 Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions