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BULLETIN #0729-P
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Aamir Mirza

Senior Legal and Policy Counsel

(416) 945-5128

amirza@mfda.ca

BULLETIN #0729-P

05 September, 2017

Policy

For Distribution to Relevant Parties within your Firm

Publication of Final Form Amendments to NI 31-103

On July 27, 2017, the CSA published, in final form, certain amendments to National Instrument 31-103 – Registration Requirements, Exemptions, and Ongoing Registrant Obligations (“NI 31-103”), and related Instruments.

The NI 31-103 amendments: address requirements in respect of relationship disclosure; make permanent certain relief set out under CSA Staff Notice 31-341 – Omnibus/Blanket Orders Exempting Registrants from Certain CRM2 Provisions of National Instrument 31-103; clarify existing requirements under the Instrument, and deal with other housekeeping matters. The NI 31-103 amendments are expected to come into force on December 4, 2017. The changes to NI 31-103, and other Instruments, may be viewed at:

http://www.osc.gov.on.ca/documents/en/Securities-Category3/20170727_31-103_supp-proposed-amendments.pdf

The MFDA will be bringing forward appropriate Rule/Policy amendments to ensure that requirements under MFDA regulatory instruments are consistent with those under securities legislation. Members are reminded that they must ensure they are in compliance with requirements under securities legislation when these amendments come into force.

Summary of Forthcoming Changes to MFDA Regulatory Instruments:

New Requirements

  • Relationship Disclosure (Rule 2.2.5): new provisions, which address the custody of client assets, will be directly adopted from NI 31-103, so as to make requirements under Rule 2.2.5 consistent with those under sections 14.2(2)(a.1), and (a.2) of the Instrument. These new provisions will require: disclosure of where and the manner in which client assets are held; a description of the risks and benefits to the client arising from the assets being held at that location and in that manner; a description of the manner in which the client’s assets are accessible by the Member; and a description of the risks and benefits to the client arising from having access to the assets in that manner. Members will be able to satisfy the new disclosure requirements by amending their relationship disclosure documents to include a general statement regarding the custody of client assets;
  • Content of Account Statement – Market Value and Cost Reporting, Cost of Each Investment Position (Rule 5.3.2(c)(ii)(C)): the Rule will be amended to require account statement disclosure which indicates when market value is being used to determine the cost of an investment position. These changes will be based on similar revisions made under NI 31-103, section 14.14.2(2.1), and will also formalize guidance previously provided under the MFDA’s CRM2 Implementation Guide and Tips, respecting account statement disclosure that may be used when market value is used to calculate position cost information (see Bulletin #0657-C, published on September 14, 2015).

Consequential/Housekeeping Amendments

  • Client Reporting – Definitions (Rule 5.3(1)(j)): the definition of “similar clients”, which was adopted into MFDA Rules on a transitional basis, will be deleted;
  • Content of Account Statement – Market Value and Cost Reporting, How Investments are Held (Rule 5.3.2(c)(ii)(H)): the Rule will be amended to permit more general disclosure in respect of the party that holds or controls each investment. This change will be adopted directly from NI 31-103, section 14.14.1(2)(f), and is consistent with guidance previously provided to Members, respecting the permissibility of more general disclosure (see Bulletin #0689-P, published on May 13, 2016);
  • Performance Reporting (Policy No. 7): there are no material changes to existing performance reporting requirements, as set out under NI 31-103, section 14.19. Requirements under section 14.19 of the Instrument have been reordered. Appropriate amendments will be made to Policy No. 7 to reflect such changes.

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