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BULLETIN #0453-P
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Contact: Paige
Ward
BULLETIN #0453 – P
Director, Policy & Regulatory Affairs
November 2, 2010
Phone: 416-943-5838
E-mail: pward@mfda.ca

MFDA Bulletin

Policy

For Distribution to Relevant Parties within your Firm


Proposed Consequential Amendments to MFDA Rules Resulting from
National Instrument 31 – 103 Registration Requirements and Exemptions

The securities regulatory authorities in British Columbia, Alberta, Saskatchewan, Manitoba,
Ontario, New Brunswick and Nova Scotia (the “Recognizing Regulators”) have approved/not
objected to proposed amendments to MFDA Rules 1.2 (Individual Qualifications), 2.5
(Minimum Standards of Supervision) and 5.6 (Record Retention) and Policy No. 6 Information
Reporting Requirements
resulting from requirements established under National Instrument 31-
103 Registration Requirements and Exemptions (“NI 31-103”).

The proposed amendments are conforming and consequential in nature and are intended to
ensure that requirements under MFDA Rules and Policies are consistent with those under NI 31-
103.

The proposed amendments will be brought forward for ratification at the December 2010 Annual
General and Special Meeting of Members (“AGM”).

The amended Rules and Policy No. 6 are attached as Schedules “A” and “B”, respectively.

The proposed amendments may also be viewed at the BCSC website at:
http://www.bcsc.bc.ca/sros.asp?id=11128.

DOCs# 230016


Schedule “A”

1.2
INDIVIDUAL QUALIFICATIONS

1.2.1 (a)
Course Requirements. Each Approved Person who is a salesperson and who
trades or deals in securities for the purposes of any applicable legislation in respect of a
Member shall have successfully completed any one of the following courses:
(i) the Canadian Securities Course offered by the Canadian Securities
Institute;
(ii) the Canadian Investment Funds Course offered by the Investment Funds
Institute of Canada;
(iii) the Investment Funds in Canada Course offered by the Institute of
Canadian Bankers;
(iv) the Principles of Mutual Funds Course formerly offered by the Trust
Companies Institute; or
(v)
to the extent the Approved Person trades or deals in securities in the
Province of Quebec only, the courses entitled Placements des particuliers
(CEGEP) and Cours sur les fonds distincts et fonds communs de
placement offered by the Canadian Securities Institute.
1.2.1 Salespersons
(b)(a) Compliance with MFDA Requirements. Each Member shall ensure that any
Approved Person who conducts any business on behalf of the Member executes
and delivers to the Member an agreement in a form as prescribed from time to
time by the Corporation agreeing, among other things, to be subject to, comply
with and be bound by the By-laws and Rules.
(c)(b) Training and Supervision. Upon commencement of trading or dealing in
securities for the purposes of any applicable legislation on behalf of a Member, all
Approved Persons who are salespersons shall complete a training program within
90 days of such commencement and a concurrent six month supervision period in
accordance with such terms and conditions as may be prescribed from time to
time by the Corporation, unless he or she has completed a training program and
supervision period in accordance with this Rule with another Member or was
licensed or registered in the manner necessary, and is in good standing, under
applicable securities legislation to trade in mutual fund securities prior to the date
of this Rule becoming effective.
(d)(c) Dual Occupations. An Approved Person may have, and continue in, another
gainful occupation, provided that:
(i)
Permitted by legislation. The securities commission in the jurisdiction in
which the Approved Person carries on or proposes to carry on business
specifically permits him or her to devote less than his or her full time to
the business of the Member for which he or she acts on behalf of;
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(ii)
Not prohibited. The securities commission in the jurisdiction in which the
Approved Person carries on or proposes to carry on business does not
prohibit an Approved Person from engaging in such gainful occupation;
(iii)
Member approval. The Member for which the Approved Person carries
on business either as an employee or agent is aware and approves of the
Approved Person engaging in such other gainful occupation;
(iv)
Member procedures. Such Member establishes and maintains procedures
to ensure continuous service to clients and to address potential conflicts of
interest;
(v)
Conduct unbecoming. Any such gainful occupation of the Approved
Person must not be such as to bring the Corporation, its Members or the
mutual fund industry into disrepute;
(vi)
Disclosure. Clear disclosure is provided to clients that any activities
related to such other gainful occupation are not business of the Member
and are not the responsibility of the Member; and
(vii)
Financial planning. Any Approved Person that engages in financial
planning services otherwise than through or on behalf of a Member must:
(A)
Regulations – provide such services through another person that is
either regulated by a governmental authority or statutory agency or
subject to the rules and regulations of a widely-recognized
professional association;
(B)
Legislation – comply with the requirements of any applicable
legislation in connection with the services;
(C)
Access – ensure that, subject to any applicable legislation, the
Member and the Corporation have access to financial plans
prepared on behalf of the clients of the Member by its Approved
Persons; and
(D)
Proficiency – have satisfied any applicable proficiency
requirements by securities regulatory authorities having
jurisdiction.

(e)(d) Business Titles. No Approved Person shall hold him or herself out to the public
in any manner including, without limitation, by the use of any business name or
designation of qualifications or professional experience that deceives or misleads,
or could reasonably be expected to deceive or mislead, a client or any other
person as to the proficiency or qualifications of the Approved Person under the
Rules or any applicable legislation.
1.2.2 Branch Managers
(a)Proficiency Requirements. An individual may not be designated by the Member as a
branch manager pursuant to Rule 2.5.3(a) or an alternate branch manager pursuant
to Rule 2.5.3(c) unless the individual has:
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(i)been licensed or registered previously under applicable securities legislation as
a trading partner, director, officer or compliance officer of a mutual fund
dealer; or
(ii)has successfully completed any one of the following courses:
(A)
the Canadian Securities Course offered by the Canadian Securities
Institute,
(B)
the Canadian Investment Funds Course offered by the Investment
Funds Institute of Canada, or
(C)
the Investment Funds in Canada Course offered by the Institute of
Canadian Bankers

and, any one of the following courses:
(D)
the Branch Managers' Course offered by the Canadian Securities
Institute
(E)
the Mutual Fund Branch Managers' Course offered by the
Investment Funds Institute of Canada, or
(F)
the Branch Compliance Officers Course offered by the Institute of
Canadian Bankers.
(b)
Experience Requirements. In addition to the requirements set out in Rule
1.2.2(a), each branch manager, except alternate branch managers, in respect of a
Member shall:
(i)have acted as a salesperson, trading partner, director, officer or compliance
officer registered under the applicable securities legislation for a
minimum of two years; or
(ii)have a minimum of two years of equivalent experience to that of an individual
described in Rule 1.2.2(b)(i).
(c) Registration. Each Branch Manager, in addition to the requirements in Rule
1.2.2(a) shall be registered, licensed or approved as a branch manager under the
applicable securities legislation and comply with the requirements of such
legislation in connection therewith.
1.2.3 Trading Partners, Directors, Officers and Compliance Officers
(a)
Definition. In this Rule, "trading partner, director or officer" means each
partner, director or officer who is required to be registered and/or licensed under
applicable securities legislation.
(b) Course Requirements. Each trading partner, director, officer and designated
compliance officer of a Member shall have successfully completed any one of the
following courses:
(i)the Canadian Securities Course offered by the Canadian Securities Institute;
(ii)the Canadian Investment Funds Course offered by the Investment Funds
Institute of Canada; or
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(iii)the Investment Funds in Canada Course offered by the Institute of Canadian
Bankers;
and, any one of the following:
(iv)the Partners’, Directors’ and Senior Officers’ Qualifying Examination offered
by the Canadian Securities Institute; or
(v)the Mutual Fund Officers’, Partners’ and Directors’ Course offered by the
Investment Funds Institute of Canada.

(c)
Registration. Each trading partner, director, officer and compliance officer of a
Member shall be registered and/or licensed in the appropriate category under
applicable securities legislation and shall comply with the requirements of such
legislation in connection therewith.

1.2.4 Currency of Courses.

(a)
For the purposes of Rules 1.2.1(a), 1.2.2(a) or 1.2.3(b):
(i)the courses or examinations must have been successfully completed; or
(ii)the individual must have been registered/licensed under applicable securities
legislation in the equivalent category;
within three years of the relevant time for qualification or such longer period as
the Corporation may determine if it is satisfied based on the individual’s
experience that his or her knowledge and proficiency remains relevant and
current.

(b)
Notwithstanding subsection (a), if an individual completes a course for which
another course is a prerequisite, the course which is a prerequisite need not have
been completed within the three year period.
1.2.52 Reporting Requirements.

(a) Member Reporting. Every Member must report to the Corporation such
information, in a manner and within such period of time, as may be prescribed by
the Corporation from time to time relating to:
(i)

complaints, criminal, civil and other legal proceedings, regulatory
proceedings, arbitrations, contraventions and potential contraventions of
legal and regulatory requirements, disciplinary action by regulatory bodies
or by Members against Approved Persons, settlements with and
compensation paid to clients, registration or licensing by any regulatory
body, bankruptcies, insolvencies, garnishments and related events;
(ii)
investigations by the Member relating to any of the matters in sub-section
(i); and
(iii)
information relating to the business and operation of the Member and its
Approved Persons.
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(b) Approved Person Reporting. Every Approved Person must report to the
Member such information, in a manner and within such period of time, as may be
prescribed by the Corporation from time to time relating to complaints, criminal,
civil and other legal proceedings, regulatory proceedings, arbitrations,
contraventions and potential contraventions of legal and regulatory requirements,
disciplinary action by regulatory bodies, settlements with and compensation paid
to clients, registration or licensing by any regulatory body, bankruptcies,
insolvencies, garnishments and related events.

(c)
Failure to Report. A Member shall be liable for and pay to the Corporation
levies or assessments in the amounts prescribed from time to time by the
Corporation for the failure of the Member or Approved Person to report any
information required to be reported in the manner and within the period of time
prescribed by the Corporation.

2.5
MINIMUM STANDARDS OF SUPERVISION

2.5.1 Member Responsibilities. Each Member is responsible for establishing, implementing
and maintaining policies and procedures to ensure the handling of its business is in
accordance with the By-laws, Rules and Policies and with applicable securities
legislation.

2.5.2 Ultimate Designated Person

(a)
Designation. Each Member must designate an individual registered under
applicable securities legislation as an “ultimate designated person” who must be:

(i)
the chief executive officer or sole proprietor of the Member;
(ii)
an officer in charge of a division of the Member, if dealing in mutual
funds occurs only within that division; or
(iii)
an individual acting in a capacity similar to that of an officer described in
(i) or (ii).

(b)
Responsibilities. The ultimate designated person must:

(i)
supervise the activities of the Member that are directed towards ensuring
compliance with the By-laws, Rules and Policies and with applicable
securities legislation by the Member and its Approved Persons; and

(ii)
promote compliance with the By-laws, Rules and Policies and with
applicable securities legislation by the Member and its Approved Persons.
2.5.23 Chief Compliance Officer
(a)
Designation. Each Member must designate aan individual registered under
applicable securities legislation trading officer as a "chief compliance officer”
who must be:

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(i)
an officer or partner of the Member; or
(ii)
the sole proprietor of the Member.
" who shall be or report to a member of senior management such as the Member's
chief executive officer, chief operating officer or chief financial officer.
(b)
Responsibilities. The chief compliance officer must:
(i)
establish and maintain policies and procedures for assessing compliance
by the Member and its Approved Persons with the By-laws, Rules and
Policies and with applicable securities legislation;
(ii)
monitor and assess compliance by the Member and its Approved Persons
with the By-laws, Rules and Policies and with applicable securities
legislation;
(iii)
report to the ultimate designated person of the Member as soon as possible
if the chief compliance officer becomes aware of any circumstances
indicating that the Member, or any of its Approved Persons may be in
non-compliance with the By-laws, Rules and Policies and with applicable
securities legislation and any of the following apply:
(A)
the non-compliance reasonably creates a risk of harm to a client;
(B)
the non-compliance reasonably creates a risk of harm to the capital
markets;
(C)
the non-compliance is part of a pattern of non-compliance; and
(iv)
submit a report to the board of directors or partners, as frequently as
necessary and not less than annually, for the purpose of assessing
compliance by the Member and its Approved Persons with the By-laws,
Rules and Policies and with applicable securities legislation.
The compliance officer shall be responsible for monitoring adherence by the
Member and any person conducting business on account of the Member to the
By-laws, Rules and Policies, including, without limitation, standards of business
conduct under Rule 2 and applicable securities legislation requirements. The
compliance officer or the individual to whom the compliance officer reports is
required to report on the status of compliance at the Member to the board of
directors or partners of the Member as necessary, and at least on an annual basis.
It shall be the responsibility of the board of directors or partners of the Member to
act on the annual report and to rectify any compliance deficiencies noted in the
report.
(c)
Alternates. In the event that a chief compliance officer is temporarily absent or
unable to perform his or her responsibilities, a Member shall designate one or
more alternates who must be qualified as chief compliance officers pursuant to the
applicable securities legislationRule 1.2.3 and who shall carry out the
responsibilities of the chief compliance officer.
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2.5.4 Access to Board. The Member must permit its ultimate designated person and its chief
compliance officer to directly access the board of directors or partners of the Member at
such times as the ultimate designated person or the chief compliance officer may consider
necessary or advisable in view of his or her responsibilities.
2.5.35 Branch Manager
(a)
Designation. Each Member shall must designate an personindividual qualified as
a branch manager pursuant to paragraph (b) Rule 1.2.2 for each branch office (as
defined in By-law 1.1) of the Member. The Member is not required to designate a
branch manager for a sub-branch office who is normally present at the office,
provided that a branch manager who is not normally present at such sub-branch
office, or a trading partner, director or officer or a compliance officer designated
as the branch manager for such sub-branch office, supervises its business at the
sub-branch office in accordance with the By-laws and Rules.
(b)
Proficiency Requirements. An individual may not be designated by the Member
as a branch manager pursuant to paragraph (a) or an alternate branch manager
pursuant to paragraph (e) unless the individual has:

(i)
met the requirements for a salesperson as prescribed under applicable
securities legislation and has passed any one of the following
examinations:
(A)
the Branch Managers Course Exam offered by the CSI Global
Education Inc.;
(B)
the Mutual Fund Branch Managers’ Examination Course Exam
offered by the IFSE Institute; or
(C)
the Branch Compliance Officers Course Exam offered by the CSI
Global Education Inc.
(c)
Experience Requirements. In addition to the requirements set out in Rule
2.5.5(b), each branch manager, except alternate branch managers, in respect of a
Member shall:
(i)
have acted as a salesperson, trading partner, director, officer or
compliance officer registered under the applicable securities legislation for
a minimum of two years; or
(ii)
have a minimum of two years of equivalent experience to that of an
individual described in paragraph (i).
(d)
Responsibilities. It is the responsibility of aThe branch manager tomust:
(i)
supervise the activities of the Member at a branch or sub-branch that are
directed towards ensuring compliance with the By-laws, Rules and
Policies and with applicable securities legislation by the Member and its
Approved Personsensure that the business conducted on behalf of the
Member by an Approved Person and other employees and agents at the
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branch is in compliance with applicable securities legislation and the By-
laws and Rules; and
(ii)
supervise the opening of new accounts and trading activity at the branch
office.
(c)(e) Alternates. In the event that a branch manager is temporarily absent or unable to
perform his or her responsibilities, a Member shall designate one or more
alternate branch managers who must be qualified as branch managers pursuant to
paragraph (b)Rule 1.2.2(a) and who shall carry out the responsibilities of the
branch manager, but are not required to be normally present at the branch office.
2.5.6 Currency of Examination. For the purposes of the Rules, an individual is deemed to
have not passed an examination or successfully completed a program unless the
individual has done so within 36 months before the date the individual applied for
registration or such longer period as may be specified by and subject to relevant
requirements as the Corporation may determine if it is satisfied based on the individual’s
experience that his or her knowledge and proficiency remains relevant and current.
2.5.47 Maintenance of Supervisory Review Documentation. The Member must maintain
records of all compliance and supervisory activities undertaken by it and its partners,
directors, officers, compliance officers and branch managers pursuant to the By-laws and
Rules.

2.5.58 No Delegation. No Member or director, officer, partner, compliance officer, branch
manager or alternate branch manager shall be permitted to delegate any supervision or
compliance responsibility under the By-laws or Rules in respect of any business of the
Member, except as expressly permitted pursuant to the By-laws and Rules.

5.6
RECORD RETENTION

Each Member shall retain copies of the records and documentation referred to in this
Rule 5 for seven years from the date the record is created or such other time as may be
prescribed by the Corporation.

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Schedule “B”

MFDA POLICY NO. 6

INFORMATION REPORTING REQUIREMENTS


14.

Changes in Organizational Structure

14.1. Members must report to the MFDA any changes in a Member’s directors, chief executive
officer, ultimate designated person, chief compliance officer, chief financial officer, or
chief operating officer or individuals performing the functional equivalent of any of those
positionsdirectors, partners (in the case of a partnership), officers and compliance
officers.

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