The Ontario Budget Measures Act, 2009 includes some
significant amendments to the Securities Act (Ontario).
Among the changes are amendments to provide the flexibility
required for Ontario to adopt the harmonized national registration
regime contemplated by proposed National Instrument 31-103,
Registration Requirements. The Canadian securities
administrators have published a staff notice advising that they
expect to publish the final version of NI 31-103 in July 2009 and
that it will come into force, with applicable transition periods,
at the end of September 2009, subject to receipt of all necessary
Changes in Registration Requirements
Dealers. As expected, the obligation to
register as a dealer will be changed to a "business
trigger." Dealer firms and representatives of a dealer will
only be required to register if they engage in or hold themselves
out as engaging in the business of trading in securities as
principal or agent. Dealer obligations may, however, be imposed on
persons or companies in the context of prospectus requirements,
including the right of action for rescission or damages for failure
to deliver a prospectus, even if the business trigger is not met
and registration is not required.
Advisers. With few exceptions, firms and
individuals engaged in the business of providing advice on
securities will be required to be registered. The categories of
registered advisers will be reduced and the terminology changed.
Most advisers will be registered as portfolio managers, whether or
not they have discretionary authority. The existing adviser
registration exemption for registered dealers will be removed from
the Act, although it is possible that it may be prescribed by
regulation, including NI 31-103.
Underwriters. Only investment dealers and
exempt market dealers may act as underwriters, making clear that
mutual fund dealers have no power and authority to act as
Investment fund managers. There will be no
business trigger for investment fund manager registration. Unless
exempt, a person who directs the business, operations or affairs of
an investment fund will be required to register as an investment
Financial institutions. Certain Canadian
financial institutions will be exempt from registration as a
dealer, an adviser, an underwriter or an investment fund manager to
the extent that their activities are limited to those permitted by
their governing legislation, subject to any conditions prescribed
Foreign dealers and advisers. The amendments
contemplate that the regulations will provide for exemptions from
registration, although applicable conditions and restrictions have
not yet been published and are expected to be in NI 31-103.
New Sources of Liability
The amendments propose new grounds for statutory liability:
A general requirement that registrants comply with Ontario
securities law, including those relating to business conduct,
account opening, conflicts of interest, tied selling and referral
arrangement, and client complaints. These requirements are expected
to be included in NI 31-103.
A prohibition against registrants making misrepresentations
about matters that an investor would consider important in deciding
whether to enter into or continue a trading or advising
relationship with the person or company. It is not clear how
broadly this latter prohibition will be interpreted.
Suspension of Registration
The amendments provide for suspension of registration by the
Director of the Ontario Securities Commission for failure to comply
with securities law or if the registration is considered unsuitable
or otherwise objectionable. They also provide for automatic
suspension in certain circumstances, including when a required fee
remains unpaid for more than 30 days after its due date or if an
individual registrant ceases to have an employment, agency or
partnership relationship with the sponsoring dealer or adviser. A
suspended registration will be revoked if not reinstated on the
second anniversary of the suspension.
We will continue to follow the passage of this legislation and
the development of NI 31-103 and will keep you apprised of
developments. In the interim, please feel free to contact us if you
have any questions.
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.
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