laurie cook partner, borden ladner gervais llp marc flynn vp regulatory relations and credentialing...

Laurie CookPartner,

Borden Ladner Gervais LLP

Marc FlynnVP Regulatory Relations and Credentialing

Canadian Securities Institute

(Moody’s Analytics)

ARM 2014 ANNUAL EDUCATIONAL CONFERENCEMarch 2014

Canadian Registration Panel 2

Agenda

A. Overview of the Canadian Regulatory Framework

B. Registration Categories and Rules

C. IIROC Registration, Rules and Proficiency Requirements

D. Proposed Reforms Currently Under Review


A. Overview of the Canadian Regulatory Environment

Securities regulations = provincial and territorial competence

10 provinces and 3 territories Canadian Securities Administrators

(CSA) regroups all Commissions SRO: Investment Industry Regulatory

Organization of Canada (IIROC) = FINRA

SRO: Mutual Fund Dealers Association of Canada (MFDA)


National Federal Regulator – Is it On The Horizon?

Challenge of existing framework Hurdle: Constitutional division of powers Recent Supreme Court decision Ontario and BC Proposed Cooperative

Capital Markets Regulator (CCRM) Target launch date: July 2015 More hurdles: Other provinces, another

court challenge (Quebec)


B. To Register or Not To Register – That Is The Question Concerning Canada

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations governs all registration related matters in Canada. A “harmonized rule” that applies in all Canadian jurisdictions (with some “carve-outs”)


Exemptions From Registration

International Dealer

International Adviser

Non-Resident Investment Fund Manager (Ontario, Quebec, Newfoundland and Labrador)


International Exemptions

Must operate within the limitations of the exemption

You must have an agent and address for service in each province where you operate

You will pay fees in Ontario and Saskatchewan You must file a notice with the requisite

regulator each year


Exemptions From Registration

Important concepts to consider when deciding whether to use an exemption:

“Foreign security”

“Canadian Permitted client”


The International Dealer Exemption

The Company must have its head office in a non-Canadian (“foreign”) jurisdiction

The Company must be registered or operating under an exemption from registration in the foreign jurisdiction


What Activities Is An International Dealer Allowed To Engage In?

a)an activity, other than a sale of a security, reasonably necessary to facilitate a distribution of securities offered in a foreign jurisdiction;

b)a trade in a foreign debt security where no prospectus has been filed;

c) a trade in a foreign debt security other than during the security’s distribution;

d)a trade in a foreign security unless the trade is made during the security’s distribution and a prospectus has been filed in Canada;

e)a trade in a foreign security with an investment dealer;

f) a trade in any security with an investment dealer acting as principal.


The International Dealer Exemption Is Not Available Unless

a. the Company’s head office is in a foreign jurisdiction

b. the Company is registered or exempt from registration

c. the Company engages in the business of a dealer

d. the Company is acting as principal or as agent for

i. the issuer of the securities,

ii. a permitted client, or

iii. a person or company that is not a resident of Canada;

e. the Company has filed the requisite Notice with the local regulator


The International Dealer Exemption is not available unless

f. one of the following applies:

i. the Canadian permitted client is registered as an adviser or dealer; or

ii. the Company has notified the Canadian permitted client of all of the following:

the Company is not registered in the local jurisdiction the head office is located in a foreign jurisdiction; all or substantially all of the assets of the Company are situated

outside of Canada; there may be difficulty enforcing legal rights against the

Company; the name and address of the agent for service of process of the

Company in the local jurisdiction.


The International Adviser Exemption

a) the adviser’s head office is in a foreign jurisdiction;

b) the adviser is registered in the foreign jurisdiction;

c) the adviser engages in the business of an adviser;

d) not more than 10% of the consolidated gross revenue of the adviser and its affiliates was derived from advising activities in Canada;

e) the adviser must notify the Canadian permitted client, before providing any advice:

that the adviser is not registered in the local jurisdiction; where the adviser’s head office is located; that all or most of the adviser’s assets may be situated outside of

Canada; there may be difficulty enforcing legal rights against the adviser; the name and address of the adviser’s agent for service.

f) the adviser has filed the requisite Notice with the local regulator.


Non-Resident Investment Fund Manager

A. In Ontario, Quebec and Newfoundland & Labrador

Are you acting as an IFM?

Are you distributing funds in any of these jurisdictions?

Then registration is required unless

All of the security holders are permitted clients, then an exemption is available

Need to make a Notice filing with the requisite securities regulatory authority

B. Other Canadian jurisdictions

Only need to register in these 10 jurisdictions if you are acting as an IFM from a location inside these jurisdictions


I can’t Use The International Adviser Or International Dealer Or Investment Fund Manager Exemptions – Now What?

Registration Requirements

Proficiency

Integrity

Solvency


Registration

Provincial/territorial securities commissions are responsible for registration of all categories of registration except investment dealers

Investment Industry Regulatory Organization of Canada (IIROC) has been delegated registration authority for investment dealers


Passport System

What is the passport system?

Principal regulator

Non-principal regulators

How is the principal regulator determined?


Steps

Enroll on NRD (Forms 1 and 3)

Prepare the Application for registration

(Form 33-109F6)

Apply for registration of individuals via

NRD (Form 33-109F4)


Dealer Categories

1. Investment dealer

2. Mutual fund dealer

3. Scholarship plan dealer

4. Exempt market dealer

5. Restricted dealer


Adviser Categories

6. Portfolio manager

7. Restricted portfolio manager


Investment Fund Manager Category

8. Investment Fund Manager


Categories of Individual Registration

1. Dealing representative

2. Advising representative

3. Associate advising representative

4. Ultimate designated person

5. Chief compliance officer


Category of Individual Approval

1. Permitted individual


Other Registration Related Rules

National Instrument 33-109 Registration Information (NI 33-109)

National Instrument 31-102 National Registration Database (NI 31-102)

Multilateral Instrument 11-102 Passport System (MI 11-102)

National Policy 11-204 Process for Registration in Multiple Jurisdictions (NP 11-204)


C. IIROC – Investment Industry Regulatory Organization of Canada

Delegated powers of registration and supervision of all securities dealers and their registrants

200 member firms, 28,000 registrants

Member and Market Regulation and Oversight

Use National Registration Database (NRD) and provide Advisor Report (= BrokerCheck)

Investment Industry Association of Canada (IIAC) = SIFMA

CSI handles all exams for IIROC


IIROC – Approved Person Categories

Standard Retail Institutional Discretio-nary

Options or Futures

Reg. Rep

Inv. Rep

Trader

Supervisor

Executive

CFO, CCO


IIROC – Proficiency Requirements

Set out in IIROC Rule 2900 All approved persons categories have course requirements Registered Rep (retail) (also known as Investment Advisor)

requirements: 2 courses (9 exam-hours) 90-day internship Additional course (6 exam-hours) within 30 months of registration. On-going CE requirement. Options and futures licensing requires additional courses.

Discretionary Management also required additional courses

American RRs can take New Entrants Course (3 exam-hours) to be registered in Canada.

Canadians can top-up with Series 37/38 in the US.


IIROC Proficiency Education and Exams in Canada

Course and exam development and administration provided exclusively Canadian Securities Institute for over 40 years. Contractual agreement with IIROC.

All candidates must enrol in CSI courses which includes exams. Focus on education rather than test-prep.

CSI’s role: Assist IIROC in updating proficiency standards Develop and maintain course quality Ensure and administer exams in dedicated centers throughout

Canada and internationally Provide effective customer service and record-keeping

CSI also offers “post-licensing” courses and credentials for all financial services verticals


IIROC – Recent Reforms

Client Relationship Model Phase 1 : Relationship disclosure, conflicts of interest

disclosure and enhanced suitability Phase 2: Account performance and account

fee/charge reporting Phase 1: In force, gradual implementation Phase 2: Expect to be adopted by Summer 2014

Use of Titles and Designations Plain Language Project


D. Proposed Reforms Under Review

Concept of Fiduciary Duty Derivatives OTC Registration Women on Boards Changes to the Accredited Investor and

Minimum Investment Amount Prospectus Exemptions


THANK YOU!!For further information, please contact:

Laurie J. Cook Marc FlynnPartner Senior Director-Regulatory Relations and Borden Ladner Gervais LLP Credentialing: (416) 367-6611 Canadian Securities Institute

(Moody’s Analytics): [email protected] : (514) 840-8706

: [email protected]

laurie cook partner, borden ladner gervais llp marc flynn vp regulatory relations and credentialing...

Documents

canadian registration

iiroc registration

registration requirements

registration categories

canadian jurisdictions

foreign jurisdiction

registration related

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