Archived Notices, Instruments, Rules and Policies

CSA Staff Notice 31-331 Follow-up to Broker-Dealer Registration in the Exempt Market Dealer Category July 12, 2012 Introduction On September 2, 2011, Canadian Securities Administrators (CSA or we) published CSA Staff Notice 31-327 Broker-Dealer Registration in the Exempt Market Dealer Category (CSA Staff Notice 31-327). This notice is a follow-up to the CSA Staff Notice 31-327. Substance and Purpose The purpose of this notice is to introduce an Investment Industry Regulatory Organization of Canada (IIROC) Concept Paper published as IIROC Notice 12-0217 (the IIROC proposal). Background CSA Staff Notice 31-327 raised concerns with firms applying for registration, or registered, in the exempt market dealer (EMD) category that are conducting brokerage activities (trading securities listed on an exchange in foreign or Canadian markets) (brokerage activities). It stated that we would be examining this issue to ensure that appropriate regulatory requirements apply to all firms conducting brokerage activities. Consultation We conducted a survey of all EMD firms to determine the extent of these activities. We determined that it is primarily broker-dealer firms registered in the United States that are members of the Financial Industry Regulatory Authority (FINRA) that are conducting brokerage activities. We are of the view that IIROC should oversee these firms because IIROC rules and supervision govern exchange trading practices and address the risks associated with brokerage activities. Accordingly, we have been working with IIROC and have asked IIROC to consider a framework for the oversight of these firms. IIROC Proposal The IIROC proposal introduces a new class of IIROC Member, called a “Restricted Dealer Member”, which is intended to migrate firms currently registered as EMDs or restricted dealers carrying out brokerage activities to IIROC membership. Based on this proposal, firms would surrender their EMD or restricted dealer registration and apply for investment dealer registration as well as seek IIROC membership. Next Steps We look forward to reviewing any comments on the IIROC proposal. At the conclusion of the consultation period, IIROC may make changes to its by-laws and rules. We may also propose changes to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to expressly limit the types of activities that EMDs can conduct.

2 Questions Please refer your questions to any of the following people: Lindy Bremner Senior Legal Counsel, Capital Markets Regulation British Columbia Securities Commission Tel: 604-899-6678 1-800-373-6393 lbremner@bcsc.bc.ca Navdeep Gill Manager, Registration Alberta Securities Commission Tel: 403-355-9043 navdeep.gill@asc.ca Dean Murrison Deputy Director, Legal and Registration Saskatchewan Financial Services Commission Tel: 306 787 5879 dean.murrison@gov.sk.ca Chris Besko Legal Counsel, Deputy Director The Manitoba Securities Commission Tel: 204-945-2561 Toll Free (Manitoba only): 1-800-655-5244 chris.besko@gov.mb.ca Sandra Blake Senior Legal Counsel Ontario Securities Commission Tel: 416-593-8115 sblake@osc.gov.on.ca Sophie Jean Senior Policy Adviser Autorité des marchés financiers Tel: 514-395-0337, ext. 4786 Toll-free: 1-877-525-0337 sophie.jean@lautorite.qc.ca Brian W. Murphy Deputy Director, Capital Markets Nova Scotia Securities Commission Tel: 902-424-4592 murphybw@gov.ns.ca Ella-Jane Loomis Legal Counsel New Brunswick Securities Commission Tel: 506-643-7857 ella-jane.loomis@nbsc-cvmnb.ca Katharine Tummon Superintendent of Securities Prince Edward Island Securities Office Tel: 902-368-4542 kptummon@gov.pe.ca Craig Whalen Manager of Licensing, Registration and Compliance Office of the Superintendent of Securities Government of Newfoundland and Labrador Tel: 709-729-5661 cwhalen@gov.nl.ca Louis Arki, Director, Legal Registries Department of Justice, Government of Nunavut Tel: 867-975-6587 larki@gov.nu.ca Donn MacDougall Deputy Superintendent, Legal & Enforcement Office of the Superintendent of Securities Government of the Northwest Territories Tel: 867-920-8984 donald.macdougall@gov.nt.ca

3 Helena Hrubesova Securities Officer Securities Office, Corporate Affairs (C-6) Government of Yukon Tel: 867-667-5466 helena.hrubesova@gov.yk.ca