The Canadian Securities Administrators (CSA) released final amendments to National Instrument 31-103, intended to "enhance the client-registrant relationship". The amendments will come into force on December 31, 2019 provided all outstanding provincial ministerial approvals are obtained. The IIROC and MFDA are expected to amend their respective rules, policies and guidance to be uniform with the CSA amendments, and there will be corresponding amendments to the exemptions for SRO members in Part 9 of NI 31-103.
The key amendments to NI 31-103, which are described in greater detail in the CSA publication linked above, require registrants to:
- Address material conflicts of interest in the client's best interest
- Put the client's interest first when making a suitability determination
- Do more to clarify for clients what they should expect from their registrants
Notably, these amendments contain some positive differences from the original proposed amendments, which the CSA released on June 21, 2018. The final rules contain the following key revisions to the original proposed amendments:
- A materiality qualifier has been added to the conflicts of interest provisions
- Removed prescriptive restrictions to referral arrangements, leaving the referral arrangements as presently in force
- Removed the proposed revision to make certain information publically available
- Made changes to parts of the rules and added guidance to the companion policy to permit registered firms to scale the client focused reforms to their particular operations.
Although the rules are in force as of December 31, 2019, the CSA provide for a phased transition period. Certain rules relating to conflicts and RDI disclosure will come into force on December 31, 2020 and the balance of the rule amendments will only take effect on December 31, 2021. And even then, the CSA clarify their expectations that registrants will not need to immediately implement the new suitability assessments for accounts existing as of that date – reassessments can be scheduled according to the triggers set out in the new Rules.
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.