Dealer and adviser registration categories and requirements throughout Canada are numerous, varied and complex. After several years of consultation, the Canadian Securities Administrators (CSA) have published National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103), which contains amendments to securities legislation and local rules that are intended to harmonize, streamline and simplify dealer and adviser registration categories and requirements.

The main changes brought about by NI 31-103 are:

  • The adoption of a 'business trigger' for dealer registration in lieu of the 'trade' trigger that currently exists in all provinces and territories other than Québec.
  • Registration categories and related requirements are to be harmonized across Canada, and while the number of categories of registration has been reduced significantly, four new categories of registration have been introduced:
    • exempt market dealer, which applies in all provinces and replaces the category of limited market dealer in Ontario as well as Newfoundland and Labrador;
    • restricted dealer, a category for dealers engaged in a limited area of dealing activities with restrictions and proficiency requirements tailored to the dealing activities;
    • restricted portfolio manager, a category for advisers restricted to advising with respect to specified securities with restrictions and proficiency requirements tailored to the advising activity; and
    • investment fund manager, which requires all managers of public and private investment funds to be registered regardless of whether they are in the business of dealing or advising.
  • The introduction of a registration exemption framework for international dealers and international advisers.
  • Exam-based (rather than course-based) proficiency requirements have been prescribed for representatives of each category of dealer, with certain exceptions.
  • Minimal capital requirements under NI 31-303 will impose higher requirements than do current standards.
  • Registered firms will be required to identify each potential and actual conflict of interest and to provide prior written disclosure of a conflict of interest to a client, while dealing with such conflicts in a fair, equitable and transparent manner.
  • Significant harmonization and narrowing of the exemptions from the dealer and adviser registration requirements across Canada.

Canadian residency requirements for all registrants in all provinces and territories are to be eliminated.

In Québec, the Autorité des marchés financiers (AMF) has undertaken a major overhaul of the regulatory framework for mutual fund dealers and scholarship plan dealers.

In all jurisdictions other than Ontario, NI 31-103 becomes effective on September 28, 2009. In Ontario, it becomes effective on a date to be announced by the Ontario government. A number of requirements will not take effect immediately, but will be subject to transition periods to give market participants time to comply with the new requirements once they become effective. Transition timelines are available to registered firms to afford them an opportunity to comply with a number of new requirements.

For a detailed discussion of these changes, please see our August 2009 Legal Update.

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.