Yesterday, the Canadian Securities Administrations (CSA)
published the final version of National Instrument 23-102 Use of Client
Brokerage Commissionsand the accompanying companion
policy. The instrument and policy seek to regulate soft dollar
arrangements across Canada, stipulating the types of goods and
services that may be acquired with client brokerage commissions and
prescribing related disclosure requirements. The instrument and
policy apply to registered advisers, who obtain the goods and
services and to registered dealers, who accept the brokerage
NI 23-102 and its companion policy were initially published in July 2006. The 2006 proposals
applied to all types of transactions where brokerage commissions or
similar transaction-based fees were charged, and imposed duties on
advisers to ensure that soft dollars were used to benefit the
client and were reasonable in relation to the value of goods and
services received. The proposals further specified that the goods
and services acquired using client brokerage commissions were
restricted to "order execution services" and
"research", and prescribed detailed disclosure
requirements for advisers. In response to comments submitted, the
CSA republished the proposals in January 2008.
Substantive changes were made to the 2006 proposals regarding: (i)
the breadth of the application of the instrument and policy; (ii)
definitions of order execution services and research services;
(iii) the framework for client brokerage commission practices; (iv)
disclosure of client brokerage commission practices; and (v) the
addition of a transition period.
In the final version of NI 23-102 released yesterday, the CSA
have made further changes to clarify the requirements of the
instrument and respond to comments received. Specifically, the
changes incorporated into the final version of the materials
amendments to the temporal standard for order execution goods
and services. The temporal standard now begins when an adviser
"makes an investment or trading decision"
a reversion to the broader 2006 definition of eligible
"research goods and services" with a corresponding
narrowing of the scope of eligible "order execution goods and
services", which brings NI 23-102 more in line with U.S.
clarifications respecting the instrument's application to
futures contracts and foreign advisers;
clarifications to the obligations of advisers and dealers;
changes to disclosure requirements, including eliminating the
requirements from the 2008 proposals for quantitative
Subject to Ministerial approval, NI 23-102 is intended to come
into force on June 30, 2010 (with a six-month transition period),
at which time Ontario Securities Commission Policy 1.9 -
Use by dealers of brokerage commissions as payment for goods or
services other than order execution services and Policy
Statement Q-20 of the Autorité des marchés financiers
will cease to apply.
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The British Columbia Court of Appeal has recently considered whether the doctrine of unconscionability can be invoked to set aside a contractual clause providing for the payment by one party to the other...
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).