On July 11, 2017, the OSC issued its Annual Summary Report for Dealers, Advisers and Investment Fund Managers (OSC Staff Notice 33-748).
The Staff Notice addresses current trends in registration and in deficiencies identified through compliance reviews; types of regulatory action taken by the OSC when it finds serious non-compliance and misconduct; and new and proposed rules and policy initiatives:
- Section 2 - The OSC addresses the review of insurance requirements and confirms its jurisdiction for the registration of MFDA firms and individuals. Current trends in deficiencies relating to the registration of firms and individuals include incomplete registration filings and changes to firm registration filings; a lack of disclosure in the reactivation of registrant applications; use of misleading titles; and late or incorrect updates for notices of termination filings.
- Section 3 - All registrants are reminded to review the collection, documentation and updating of know-your-client information and client account statement information. They are also reminded of best practices surrounding excessive fees being charged to clients.
- The Staff Notice provides guidance on dealers distributing securities in reliance on the new prospectus exemptions, including the prescribed investment limits and the processing of trades for clients who are not family members, close personal friends or close business associates.
- Advisers are cautioned when dealing with vulnerable investors, and the OSC provides guidance for properly accessing clients' accounts. The Staff Notice also addresses deficiencies specific to online advisers.
- Investment fund managers are cautioned on the rules relating to the holding of client assets, as well as on sales practices which ensure that compensation or benefits provided to participating dealers are not excessive. The Staff Notice also addresses advisor discount fee arrangements, which are not in compliance with regulation.
- Section 4 - The OSC has acted on numerous instances of misconduct by registrants. Topics of interest in the latest decisions include: novel dealer business models; disclosure of outside business activity and community involvement/positions of influence; registration of individuals with prior disciplinary history; false client documentation; and misleading staff or the sponsoring firm.
- Section 5 - New initiatives impacting registrants include: a regulatory best interest standard; a review of compensation practices; proposed amendments to registration rules for dealers including client reporting requirements introduced under CRM2; as well as derivatives regulations.
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.
