MSC NOTICE 2005-4 Notice of Rule/Regulation National Instrument 31-101 National Registration System – MSC Rule 2005-2, and Form 31-101F1, Form 31-101F2, and National Policy 31-201 National Registration System Introduction National Instrument 31-101 National Registration System and National Policy 31-201 National Registration System are an initiative of the Canadian Securities Administrators (CSA or we). The CSA has developed the National Registration System (NRS), which may be used by investment dealers, advisers, mutual fund dealers and their sponsored individuals in connection with their application for initial registration, amendments to registration or reinstatement of registration or for the approval or review of certain sponsored individuals. The requirements and procedure under NRS are set out in National Instrument 31-101 National Registration System, Form 31-101F1 Election to use NRS and Determination of Principal Regulator, Form 31-101F2 Notice of Change (collectively, the Instrument) and National Policy 31-201 National Registration System (the Policy). The Instrument has been made or is expected to be made by each member of the CSA, and will be implemented as • a rule in each of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island, • a regulation in Nunavut, Saskatchewan and Québec, • a blanket order in British Columbia, • a code in the Northwest Territories, and • a policy in all other jurisdictions represented by the CSA. We expect the Policy will be adopted as a policy in all jurisdictions. NRS is being implemented pursuant to the Memorandum of Understanding for the Mutual Reliance Review System signed as of October 14, 1999 between members of the CSA (MOU). We expect that all jurisdictions will confirm the inclusion of the Instrument and the Policy in the MOU. In Ontario, the Instrument and other required materials were delivered to the Chair of Management Board of Cabinet (the Minister) in December. The Minister may approve or reject
- 2 - the Instrument or return it for further consideration. If the Minister approves the Instrument or does not take any further action, the Instrument will come into force on the date indicated below. In Québec, National Instrument 31-101 National Registration System was published as a proposed regulation in January 2004. A regulation made under the Securities Act (Québec) (the QSA) is adopted by the Autorité des marchés financiers and, thereafter, must be approved, with or without amendment, by the Minister of Finance prior to coming into force. In addition, it should be noted that the Autorité des marchés financiers shall adopt a regulation under the Act respecting the distribution of financial products and services (the LDPSF) in order to make the NRS applicable to firm in group-savings-plans brokerage and their representatives. Furthermore, the Autorité des marchés financiers is currently evaluating whether it should adopt one or more regulations in order to implement the NRS. Prior to coming into force, a regulation adopted by the Autorité des marchés financiers must be approved, with or without amendment, by the Quebec Government or the Minister of Finance. In Nova Scotia, the Instrument will be delivered to the Minister for non-objection by the Governor in Council in accordance with Nova Scotia securities law after it is adopted as a rule by the Commission. If the Instrument is not objected to by the Governor in Council, it will come into force in April 2004. In Nunavut, a Request for Decision to Cabinet will be required to adopt the Instrument as a regulation under the Securities Act (Nunavut). Provided all necessary ministerial or other governmental approvals are obtained, we expect to implement the Instrument on April 4, 2005. We will implement the Policy at the same time as the Instrument. Substance and Purpose The purpose of NRS is to improve the current registration system through a mutual reliance process. Principles of mutual reliance will be applied to the analysis of registration applications or applications for approval or review of investment dealers, advisers and mutual fund dealers and their sponsored individuals in order to reduce unnecessary duplication in the analysis of applications made in multiple jurisdictions or in subsequent jurisdictions. The Instrument sets out the eligibility requirements for firm filers and individual filers to be able to use NRS. An eligible firm filer elects to use NRS by submitting a Form 31-101F1. Eligible individual filers whose sponsoring firm has elected to use NRS must use NRS when submitting an application to a non-principal regulator. The Instrument provides exemptive relief so that filers under NRS only have to satisfy or comply with the fit and proper requirements, notice requirements and filing requirements applicable in their principal jurisdiction. Fit and proper requirements relate to a filer’s suitability to be registered or to be approved. Filers will continue to be subject to the conduct rules applicable in each jurisdiction where they are registered. The Instrument and Policy contain further description of fit and proper requirements and of conduct rules. The Policy sets out the procedure to be followed by filers who are submitting applications under NRS. A filer’s principal regulator is generally the securities regulatory authority or regulator of the jurisdiction where the firm filer’s head office and directing mind and management is located and where the individual filer’s working office is located.
- 3 - Generally, when submitting an application under NRS, filers will only file the materials required by their principal regulator. Further, filers will normally only deal with their principal regulator on their initial application and when seeking to register in additional jurisdictions. Once the principal regulator has reached a decision on the application, non-principal regulators may opt in or opt out of NRS in connection with that application. Opting out is expected to happen on an exceptional basis. Application for registration or approval of individual filers will be made through the National Registration Database (NRD) implemented under Multilateral Instrument 31-102 National Registration Database and Multilateral Instrument 33-109 Registration Information. In order to allow efficient implementation and application of NRS, three key changes will be made to technology underlying NRD. These changes relate to the selection of principal regulator, opt in / opt out function and unique designation of NRS submissions. In Québec, NRD implementation is principally governed by Regulation 31-102Q respecting National Registration Database and Regulation 33-109Q respecting Registration Information. Those regulations came into force on January 1 st , 2005. NRS does not apply to renewals of registrations as the CSA feels that processing renewals under current legislation through NRS could be lengthier than the current process. Background The Instrument and Policy were published for comment in January and February, 2004. The comment period expired in April, 2004. Summary of written comments received by the CSA During the comment period, the CSA received submissions from nine commentors on the Instrument and Policy. We have considered the comments received and thank all the commentors. The names of the nine commentors and a summary of the comments on the Instrument and Policy, together with our responses, are contained in Appendix A and Appendix B to this Notice. After considering the comments, we have made amendments to the Instrument and Policy to improve the clarity and consistency of the Instrument and Policy. However, as these changes are not material, we are not republishing the Instrument or Policy for a further comment period. Summary of Changes to the Proposed Instrument and Policy See Appendix C to this Notice for a description of the changes made to the versions of the Instrument and Policy since they were published. Local Amendments We are amending or repealing elements of local securities legislation and securities directions in conjunction with implementing NRS. The provincial and territorial securities regulatory authorities may publish, or may have published, these local changes or proposed changes separately in their local jurisdiction.
- 4 - Questions Please refer your questions to any of: Jim Wahl Manager, Registration & Compliance Alberta Securities Commission 4 th Floor, 300 - 5 th Avenue S.W. Calgary, AB T2P 3C4 Direct: (403)297-4281 Fax: (403)297-4113 E-mail: jim.wahl@seccom.ab.ca Susan Toews Senior Legal Counsel Capital Market Regulations British Columbia Securities Commission P.O. Box 10142, Pacific Centre 701 - West Georgia Street Vancouver, BC V7Y 1L2 Direct: (604)899-6764 Fax: (604)899-6814 E-mail: stoews@bcsc.bc.ca Douglas R. Brown General Counsel & Director - Legal, Enforcement & Registration The Manitoba Securities Commission 1130 - 405 Broadway Winnipeg, MB R3C 3L6 Direct: (204) 945-0605 Fax: (204) 945-0330 E-mail: doubrown@gov.mb.ca Andrew Nicholson Director Market Regulation New Brunswick Securities Commission 606 - 133 Prince William Street Saint John, NB E2L 2B5 Direct: (506) 658-3021 Fax: (506) 658-3059 E-mail: andrew.nicholson@nbsc-cvmb.ca
- 5 - Susan W. Powell Manager, Corporate Finance and Market Conduct Securities Commission of Newfoundland and Labrador Government of Newfoundland and Labrador 2 nd Floor, West Block Confederation Building P.O. Box 8700 St. John’s, NL A1B 4J6 Direct: (709)729-4875 Fax: (709)729-6187 E-mail: spowell@gov.nl.ca Brian W. Murphy Deputy Director, Capital Markets Nova Scotia Securities Commission Joseph Howe Building 2 nd Floor, P.O. Box 458 Halifax, Nova Scotia B3J 2P8 Direct: (902) 424-4592 Fax: (902) 424-4625 E-mail: murphybw@gov.ns.ca David M. Gilkes, BA, MA, CFE Manager, Registrant Regulation Capital Markets Branch Ontario Securities Commission 18 th Floor, 20 Queen Street West Toronto, ON M5H 3S8 Direct: (416)593-8104 Fax: (416)593-8240 E-mail: dgilkes@osc.gov.on.ca Mark Gallant Registrar of Securities PEI Securities Division Office of the Attorney General P.O. Box 2000 95 Rochford Street 4 th Floor, Shaw Building Charlottetown, PE C1A 7N8 Direct: (902) 368-4552 Fax: (902) 368-5283 E-mail: mlgallant@gov.pe.ca
- 6 - Maryse Pineault Directrice des pratiques de distribution Direction de l’encadrement de la distribution Autorité des marchés financiers Place de la Cité, Tour Cominar 3 e étage 2640, boulevard Laurier Sainte-Foy, QC G1V 5C1 Direct: (418) 525-0558 ext. 4781 Toll Free: 1-877-525-0337 ext. 4781 Fax: (418) 525-5178 E-mail: maryse.pineault@lautorite.qc.ca Gary Crowe Registrar of Securities Legal Registries Division, Department of Justice Government of Nunavut P.O. Box 1000, STN 570 1 st Floor, Brown Building Iqaluit, NU X0A 0H0 Direct: (867) 975-6586 Fax: (867) 975-6594 E-mail: gcrowe@gov.nu.ca M. Richard Roberts Manager, Corporate Affairs Registrar of Securities Corporate Affairs / Community Services Government of Yukon P.O. Box 2703 2134 Second Avenue Whitehorse, YT Y1A 5H6 Direct: (867) 667-5225 Fax: (867) 393-6251 E-mail: richard.roberts@gov.yk.ca Instrument and Policy The text of the Instrument and Policy follow or can be found elsewhere on a CSA member website. January 7, 2005
APPENDIX A Comment Table National Instrument 31-101 National Registration System Commentors Canadian Bankers Association Mutual Fund Dealers Association of Canada Royal Bank of Canada Edward Jones National Bank of Canada Investment Funds Institute of Canada Wayne A. Robinson Fidelity Investments Canada Limited Investment Dealers Association of Canada Category Comment 1. 31-101 Guidance was requested as to the Definitions definition of “unrestricted adviser” for the purposes of determining eligibility to use NRS, as many advisers have registrations that are subject to both general and specific terms and conditions. Clarification is requested as to the difference between “terms and conditions” and “restrictions”. 2. 31-101 Guidance was requested as to the Application situation of firms with more than of the NRS one category of registration, one of which is not governed by NRS. and would have to apply locally, as Would these firms be excluded from NRS or would they be subject to NRS only insofar as unrestricted practice registration is concerned? Response The term “unrestricted adviser” is used in a general fashion to identify the various categories of adviser registrations that can be sought under NRS (as listed in Appendix A to NI 31-101). The fact that a filer has certain terms and conditions attached to its registration will not prevent the filer from using NRS. This is clarified in the interpretation section of NP 31-201. Such firms would be able to use NRS only with regard to the category that is eligible under NRS they currently must do, when applying in a category that is not their eligible under NRS. The CSA is of the view that no other registration category was common enough between the jurisdictions to be included in NRS. A principal regulator in one jurisdiction would not be qualified to register a registrant in a category that does not exist in its jurisdiction.
- 2 - Category Comment Response 3. 31-101 It was questioned why non-resident Certain members of the CSA Eligibility individuals are not able to use NRS, currently have certain residency and the CSA is encouraged to requirements in connection with consider permitting non-resident registration as an adviser or as a individuals to use NRS in dealer. As this is a requirement connection with individual that cannot be exempted on a registrations associated with NRS general basis, NRS has to be eligible registrant firms. limited to Canadian residents. Further, as certain regulators who register non-resident individuals impose specific terms and conditions, the NRS registration procedure for non-residents would have been too complex. 4. 31-101 Because both firm and individual The CSA’s goal with regard to NRS Applicable registrants will be tied to their is not to harmonize legislation, but Requiremen “home jurisdiction”, firms operating rather to quickly implement a ts in multiple provinces will need to be centralized registration process aware of differences in rules of (i.e. an industry participant dealing each jurisdiction plus IDA and other with only one regulator). applicable SROs. Moreover, the Harmonization will be achieved proposed policy does not address through other efforts. jurisdictional variations. The CSA is The CSA is of the view that it is urged to harmonize registration important to implement NRS even if requirements. harmonization is not yet reached, as NRS has benefits of its own. As it is important to link the filer with the jurisdiction in which it is anticipated that most of its business will be conducted, it is inevitable that firms operating in multiple provinces and who have a centralized registration office will need to be aware of the specific fit and proper requirements for individuals in each jurisdiction.
- 3 - Category Comment Response 5. 31-101 It was submitted that there should The CSA realizes that in certain Temporary be a possibility of having the six situations where there is a change Exemption month delay, to comply with a new of principal regulator, the principal regulator’s requirements, requirements of the new principal extended in certain situations and regulator may not be satisfied within addressed in NI 31-101 so that a a six-month period. Members of formal exemption request would not the CSA will be open to the be required. It may be difficult for possibility of extending this the filer to meet all necessary temporary exemption to allow for proficiency requirements within the the registrant to satisfy the new prescribed six month period. principal regulator’s fit and proper requirements on a case-by-case basis. To grant this relief, regulators could take into consideration the period of time during which the registrant has been registered. However, the CSA is of the view that a lengthier general temporary exemption could increase the risk of jurisdiction-shopping.
APPENDIX B Comment Table National Policy 31-201 National Registration System Commentors Canadian Bankers Association Mutual Fund Dealers Association of Canada Royal Bank of Canada Edward Jones National Bank of Canada Investment Funds Institute of Canada Wayne A. Robinson Fidelity Investments Canada Limited Investment Dealers Association of Canada Category Comment 1. 31-201 In general, NRS is General endorsed by commentors as there Comment is a consensus that there numerous shortcomings with current regulatory regime. CSA is encouraged to do whatever it can in order to make the system as streamlined and efficient possible. 2. 31-201 It was submitted that to the extent General that the proposal Comment unnecessary elements of regulation or provincial discretion, that such items be limited removed so that NRS may be a true “one stop shop” for firms carrying on business across Canada. 3. 31-201 The effectiveness of NRS General adviser registration was questioned Comment – as there are significant differences Adviser in the proficiency requirements for Registration such category of registration maintained by different jurisdictions. Response strongly N/A are the The as The CSA’s goal with regard to NRS retains is not to harmonize legislation, but local rather to quickly implement a centralized registration process or (i.e. an industry participant dealing with only one regulator). Harmonization will be achieved through other efforts. The CSA is of the view that it is important to implement NRS even if harmonization is not yet reached, as NRS has benefits of its own. for The effectiveness of NRS should not be questioned for adviser registration as members of the CSA are aware of these differences in fit and proper requirements and do not expect to opt out of NRS on the basis of such differences.
- 2 - Category Comment 4. 31-201 The industry has seen General savings with NRD. In fact, some Comment – costs have actually increased. It is Fees hoped that registration fees will be reduced by non-principal regulators. 5. 31-201 It has been submitted that General benefits are restricted Comment registration and not individuals seeking registration in additional jurisdictions. In addition, already registered in Canada would gain no advantage by using the NRS, with the exception of filing amendments. 6. 31-201 In order to reduce General resulting from delays in processing Comment – transfers, regulators should permit individual registrants to commence Registration working, perhaps on a conditional Transfers approval basis, as soon as they are notified of the termination by the originating firm and transfer to the receiving firm. Response no cost The CSA is of the view that most of the cost savings from NRD and the proposed NRS come from a reduction of time and effort spent on registration. The fee covers a registrant’s access to the market and is not simply based on the cost of processing registrations. At this time, the CSA is unable to confirm whether a reduction of registration fees is foreseeable. the The purpose of NRS is to allow to firm individual and firm registrants to deal only with one regulator and to only satisfy one set of fit and proper firms requirements. This should greatly facilitate an individual filer’s registration. Further, the CSA is of the view that registered firms will also benefit from NRS when seeking registration in additional jurisdictions or in connection with the firm’s role in the registration of its individuals. hardship Changes in the registration transfer process are not part of the NRS project. As regulators are of the view that it is important to know why an individual is transferring firms, they are not ready to grant immediate conditional approvals to a transfer upon notice of the termination.
- 3 - Category Comment 7. 31-201 The opting out process could entail General that a jurisdiction may never be the Comment – non-principal regulator. It would also mean that within the same Opt out firm, individuals may not be subject to the same requirements for any particular application, and would not know what requirements are in advance. out is expected to happen on an Accordingly, they would adhere to the most stringent registration criteria, and the most demanding jurisdiction would be the principal regulator in all cases. 8. 31-201 Clarification is requested General respect to individuals who reside in Comment Ottawa but work in Hull. Since the principal regulator would Québec, would such individuals be required to be registered in Ontario as well? 9. 31-201 Having firms and each Applicable individual registrants tied to their requirement respective “home jurisdiction” s problematic. This is of particular concern for members who operate a centralized registration function. same jurisdiction as the individual’s Having to deal with local variations will cause inefficiencies. submitted that it would preferable for individuals to adhere to the firm’s principal jurisdiction. Response In the absence of a full delegation system, the ability to opt out is necessary, as regulators must meet the requirements of their securities legislation to make a decision in connection with an application. thus None of the regulators intends to the opt out on a regular basis. Opting exceptional basis, as is the case with the MRRS under NP 12-201 and NP 43-201. It is true that within the same firm, individuals who work in different jurisdictions will have different fit and proper requirements applicable to them. However, the CSA does not believe that individuals will adhere to the most stringent criteria. National firms should adapt their registration procedure to advise their individuals as to which set of requirements is applicable to them. with If the individuals are doing business with clients in Ontario, then the answer is yes. Otherwise, no. be Residency alone does not create a requirement to register. NRS does not change any obligation to register. of their The CSA chose a client-centered perspective for NRS instead of a is firm-oriented approach. An individual is likely to do more business with clients residing in the working office than clients of other It is jurisdictions. Therefore, pending be harmoni-zation of legislation, it is important that such individuals satisfy the requirements of their jurisdiction. Moreover, if individuals were to adhere to the requirements of the firm’s principal jurisdiction, changing firms could result in a change in the individual’s fit and proper requirements.
- 4 - Category Comment 10. 31-201 The usefulness of Form 31-201F2 Change of (now Form 31-101F2) is questioned Factors since this information would used to submitted through the NRD. In Determine addition, clarification is requested Significant as to whether the requirement to file Connection a Form 31-201F2 (now Form 31- with a 101F2) presupposes the filing of a Jurisdiction Form 31-201F1 (now Form 101F1) for each individual. If not, it is difficult to understand why such form must be filed upon change in registration when one required upon registration. On the other hand, if a Form 31-201F1 (now Form 31-101F1) is required, this would represent an important additional burden. 11. 31-201 In some instances, such as section Materials to 4.2(3), NRS appears to duplicate be Filed work rather than streamline process. Response Both Forms 31-101F1 and 31-101F2 must only be filed by firm be filers. A firm will be required to file a Form 31-101F1 upon its first use of NRS and upon seeking registration in any additional jurisdictions (the latter being a new requirement). A Form 31-101F2 Notice of Change is 31- only required to be filed by firm filers when the factors used in the determination of the jurisdiction with which a firm has the most is not significant connection change. This is required, as regulators need to be notified when such factors change as it could result in a change of principal regulator. This should occur only on limited occasions. The CSA agrees that the requirement to file the letter the contemplated by section 4.2(3) creates an additional requirement. As this letter is not necessary, a revision to section 4.2(3) is made to remove the requirement.
- 5 - Category Comment 12. 31-201 Part 5 and Part 6 set out the Review and process, and time frames for the review of the file. It was noted that Determinati there are two separate on waiting periods built into the review process, and that they should be shortened: 1) Under sections 5.2 and 6.1, the principal regulator must business days, after the receipt of the submission under NRS, in order for the non-principal regulators to advise they have completed their own review and/or to provide any material information they may have with respect to the filer, that was not disclosed in the materials. Under 6.1, the principal regulator cannot arrive at a decision until after this 5-business day period ends. 2) The second waiting period, as listed in 6.3(1), occurs after the principal regulator has forwarded its proposed decision to the principal regulators. The principal regulator must wait a maximum of 5 business days for each principal regulator to advise as to whether it has opted in or opted out. 13. 31-201 It is suggested that when Review regulator has a concern with an Process application, it should notify registrant and / or firm within 24 hours of receipt of the application, if it believes that the registration application review process require more time. Response A revision will be made in section 5.2 and section 6.1 to remove the first five-day waiting period. A 5-day principal regulator will not have to wait until the end of a five-day period before making its determination on the registration wait 5 being sought. The second five-day waiting period is a maximum period and in general non-principal regulators will not use the full five days. As a result, the CSA does not anticipate that processing registrations under NRS will be lengthier than under the current system. non-non-a Normal service standards will apply under NRS. Members of the CSA the will advise filers diligently of any concerns they may have in connection with an application. However, members of the CSA will cannot commit to any time constraints, as concerns in connection with an application can arise at any time.
- 6 - Category Comment 14. 31-201 Although NRS does contain short Review and deadlines, the CSA is encouraged Determinati to consider amending the policy to on create strong incentives individual jurisdictions to those requirements. It is suggested that the failure to meet deadlines imposed by the policy disentitle that regulator from the opportunity to provide comments or “opt out”. Silence would interpreted as consent regulator who has not responded by the deadline would be deemed to “opt in”. 15. 31-201 Greater clarity is requested Review and concerning the length of time it may Determinati take between the date at which the on filing of materials is undertaken and the date at which an document is issued. 16. 31-201 There is a concern that applications Review and submitted to principal regulators Determinati through NRS would be processed on before non-NRS applications due to the five business day opt-in / opt- out response deadline. 17. 31-201 One commentor does not support Local that the proposed rules Terms and permit the non-principal regulator to Conditions opt-in to the principal regulator’s decision, but to impose local terms and conditions upon a registration. Not Where a non-principal regulator wishes to deviate from the terms and conditions imposed principal regulator, the non-principal regulator should be required to opt-out. 18. 31-201 It is suggested that hearings be Opportunity conducted with the concerned to be Heard regulators all together so as to avoid duplication of procedures and additional delays in registration. Response Most regulators are required by law to make a decision in connection with a registration. As a for consequence, such regulators’ meet silence cannot be deemed to mean that the regulator is opting into NRS. However, changes are made should to the policy whereby “silence will equal opt-in” for the regulators in the Yukon Territory, the Northwest be Territories and Nunavut. and a Normal service standards will apply under NRS. No indication of length of time may be given as this varies greatly depending upon the type of NRS application and how well it has been prepared. The CSA does not anticipate any increase in length of time as a result of using NRS. NRS should not, as a whole, create more work for regulators. The CSA does not anticipate that non-NRS applications would be processed after NRS applications. As conduct rules apply locally, it is would important to allow local regulators to impose local terms and conditions with regard to such conduct rules, where necessary. allowing the non-principal regulators to do so would create more opt-outs and reduce the by the efficiency of the system. It is the intent of members of the CSA to hold joint hearings, whenever feasible. However, this cannot be imposed through the Policy.
- 7 - Category Comment Response 19. 31-201 The availability of an opt-out As stated above, it is unavoidable Opt out provision is a serious detriment to to have an opt-out provision in the the ability of NI 31-101 and NP 31- context of a registration system 201 to achieve their stated goals. based on mutual reliance instead of delegation. As mentioned, opting out will be the exception, not the rule. 20. 31-201 When read together subsections After review of this issue, the CSA Renewal of 9.1(1) and 9.1(2) are confusing has decided that renewals will not Registration particularly if the renewal be processed through NRS, as requirements of the principal there is practically no benefit in regulator are to be followed, and doing so. Part 9 of the Policy this regulator has no renewal (which is renumbered as requirements. It would be unclear section 6.6) provides further what requirements are to be guidance. In short, a filer will have followed. It is also unclear as to to renew its registration in whether additional documents accordance with the requirements, typically required by certain non- if any, of the legislation of all principal regulators further to jurisdictions in which it is registered. renewals should be submitted. The exemption from local filing requirements will not apply in connection with renewals and renewal fees will still have to be submitted through NRD. The exemption from fit and proper requirements will continue in effect at the time of renewals. 21. 31-201 It was submitted that it might be The Autorité des marchés NRD – desirable to wait until Québec can financiers is currently working on its Québec technically participate in the project integration into the National before implementing it. Registration Database (NRD). Contrary to what has been previously published, the Autorité des marchés financiers now expects to be part of NRD by the time that NRS is implemented. Part 9 (previously Part 10) of the Policy is amended to reflect this. Should the Autorité des marchés financiers not have integrated NRD by the time the NRS is effective, guidance will be provided with regards to applications involving Québec.
- 8 - Category Comment Response 22. 31-201 The role of the IDA in applications The IDA has been recognized as an Québec - involving Québec should be SRO by the Autorité des marchés IDA clarified. financiers in July 2004 and was further delegated the power to register representatives the same month. In addition to the IDA, the Montreal Exchange is also a recognized SRO in the province of Québec authorized, through delegation of powers, to register representatives. Consequently, unless further changes occur prior to the coming in force of the Instrument, both the Montreal Exchange and the IDA will be processing registration of representatives.
APPENDIX C Summary of Changes to the Proposed Instrument/Policy This Appendix briefly summarizes the changes made in the Instrument and in the Policy since they were published. The CSA made changes to respond to comments received from industry participants and following the CSA members’ staff review. The Instrument Part 1 – Definitions • The definition of filing requirements was changed to include requirements applicable to applicants and to exclude any requirement in connection with a renewal of registration. • The definitions of filing requirements and notice requirements were reworded to clarify CSA’s intent which is that filing and notice requirements only relate to a filer’s fit and proper requirements. • The term registrant was replaced with the term registered filer, as the term registrant is defined differently in securities legislation. • We removed the definition of regulator, as this term is defined in National Instrument 14-101 and as we no longer needed to specifically refer to SROs. • The definition of securities legislation was amended to include the Act respecting the Agence nationale d’encadrement du secteur financier (Québec). We also added a reference to the regulations under that act and under the Act respecting the distribution of financial products and services (Québec) and the blanket rulings and orders issued by the securities regulatory authority. We also amended the definition to exclude any regulation adopted by or for SROs. • We removed the definition of securities regulatory authority for the same reason that we removed the definition of regulator. • We added a definition for the term sponsored individual in order to clearly establish which individuals are associated with a firm. Part 2 – Application • We redrafted sections 2.1 and 2.2 to be clearer, but have not made any material changes to the application of NRS or the eligibility criteria. • We made the filing of Forms 31-101F1 and 31-101F2 requirements under the Instrument instead of the Policy. We also now require that a new completed Form 31-101F1 be submitted when a registered firm is seeking registration in further jurisdictions.
- 2 - Part 3 – Local Exemptions • We redrafted Section 3.1 to be clearer, but have not made any noteworthy changes other than as relates making liability insurance in Québec a conduct rule (see below under The Policy – Part 1). For a firm filer submitting an application as a mutual fund dealer with Québec as its principal regulator, the fit and proper, filing and notice requirement exemptions are conditional on that firm filer maintaining insurance or bonding in non-principal jurisdictions. Form 31-101F1 • This Form was moved from the Policy to the Instrument. We also modified the way that firm filers disclose their reasons for determining the principal regulator by having the firm filers provide a description of these reasons instead of checking boxes. • We removed the disclosure regarding notice of collection and use of personal information, as it was not necessary, but have added a submission to jurisdiction. • We added a submission to jurisdiction, which is an existing requirement for every jurisdiction. Form 31-101F2 • This Form was also moved from the Policy to the Instrument and the disclosure regarding notice of collection and use of personal information was removed. The Policy Part 1 – Definitions and Interpretation • The definition of conduct rules was changed to include rules relating to membership with SROs. As well, the requirement to maintain liability insurance for mutual fund dealers registered in Québec is now considered a conduct rule. Therefore, all mutual fund dealers and their sponsored individuals registered in Québec will have to maintain liability insurance in Québec. • Consequential amendments were made to the interpretation of the term fit and proper requirements. Part 2 – Overview and Application • Sections 2.1 and 2.2 were redrafted to provide a better description of NRS, although no substantive changes were made. • In Section 2.2, we added a clarification to the effect that the CSA does not consider a requirement applicable if a blanket ruling or order providing for general relief from this requirement was issued by the filer’s principal regulator.
- 3 - Part 4 – Filing Materials under NRS • We removed the requirement for firm filers to file, with each non-principal regulator, a letter describing the nature of their application and identifying the jurisdictions with which it is submitted. We also clarified that supporting materials for an application are not required to be sent to non-principal regulators. • In Section 4.3, we added a requirement to file a new completed Form 31-101F1 when seeking registration in further jurisdictions. Part 5 – Review of Materials • We removed reference to the review that is made by non-principal regulators, as this reference related to internal relationships between regulators. Part 6 – Registration • We modified Section 6.1 to remove the requirement for the principal regulator to wait until the end of a five business-day period before making its determination on an application. • As the regulators of the Yukon Territory, the Northwest Territories and Nunavut can automatically opt into NRS with respect to any particular application without sending a confirmation to the principal regulator, we did not subject these regulators to the rule that non-principal regulators must confirm to the principal regulator whether they are opting into NRS for an application or whether they are opting out. A consequential amendment to Section 8.1 was also made. • We added a new Section 6.6 on renewals to explain that NRS no longer covers renewals of registrations as the CSA is of the view that processing renewals through NRS did not increase efficiency. Filers will have to meet the renewal requirements, if any, of each jurisdiction in which they are registered. Part 9 – Renewals of Registration was consequently removed. Part 9 – Transition • Section 9.1 was amended to reflect the fact that Québec anticipates being part of the National Registration Database prior to or concurrently with the implementation of NRS. Forms 31-201F1 and 31-201F2 • These forms were moved to the Instrument.
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