The Canadian securities regulatory authorities are moving forward with two quite different regulatory approaches to non-resident investment fund manager (IFM) registration in Canada, notwithstanding the earlier unanimous commentary, including from BLG, that the CSA should adopt a uniform approach. The two different regulatory approaches raise obvious challenges, particularly for international fund managers wishing to market securities of their funds across Canada. In BLG's most recent Investment Management Bulletin, we describe the registration and exemption regime that will apply in three provinces and the policy approach that will apply in the rest of Canada. Each approach raises unique practical issues, with the registration and exemption approach being,in our view, the most problematic.

One group of three provincial regulators - Ontario, Québec and Newfoundland and Labrador - consider that IFMs that manage investment funds whose securities are distributed in one or more of these provinces generally should register as IFMs in those provinces, regardless of where those IFMs are located and actually carry on the activity of managing investment funds. These regulators have finalized Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Managers (the Rule) and Companion Policy 32-102CP [available here] which provide limited exemptions from IFM registration, generally in circumstances where there are no significant connecting factors to the applicable province, including no active solicitation in the province or where only "permitted clients" invest in the funds.

The other group of regulators, which we refer to as the "rest of Canada", has finalized Multilateral Policy 31-202 Registration Requirement for Investment Fund Managers (the Policy) [available here] that contains guidance on when a non-resident IFM is required to register in those jurisdictions. The regulators in the rest of Canada do not take the position that distribution of securities of an investment fund in these jurisdictions necessarily means that the firm is carrying on the activities of an IFM in those jurisdictions. Rather, there are additional factors that must be considered before a firm must apply for registration as an IFM.

SCOPE AND TIMING

The instruments will apply to international investment fund managers with investors in their funds located in one or more of the jurisdictions of Canada, and also to Canadian fund managers. The term "non-resident" refers to an investment fund manager that does not have a head/principal office or a place of business located in a particular province or territory.

Both instruments are expected to be effective on September 28, 2012 (subject to government approvals in applicable jurisdictions). If an IFM concludes it must be registered in one or more jurisdictions, the firm must apply for such registration in the applicable jurisdiction(s) by December 31, 2012. If a firm wishes to avail itself of one of the exemptions provided for in the Rule, it should take steps right away to amend its practices with respect to distribution of its funds in Ontario, Québec and Newfoundland and Labrador, since the exemptions will be effective immediately on the Rule coming into force.

The Rule and the Policy were first published for comment in February 2012 and were preceded by proposed amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) published for comment in October 2010. Please see Canadian Securities Regulators Publish Proposals for Registration of Non-Resident Investment Fund Managers Investment Management Bulletin March 2012 Borden Ladner Gervais LLP [ available here].

Please click here to access BLG's Investment Management Bulletin Two Distinct Regulatory Approaches for Non-Resident Investment Fund Managers Finalized in Canada - Effective September 28, 2012.

We recommend that you print the Bulletin on "legal" sized paper [8 1/2 X 14] for legibility of our comparison table on pages 2-5, which we hope you will find useful.

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