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MSN-0013

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Laura Milliken

Managing Director, Financial Compliance

(416) 943-5843

lmilliken@mfda.ca

MSN - 0013

Jul 12, 2002

(Updated Mar 4, 2013)

Undertaking Regarding Retractable Preferred Shares

MFDA Staff Notices are intended to assist Members and their Approved Persons in the interpretation, application of and compliance with requirements under MFDA By-laws and Rules. Notices make reference to these requirements and set out MFDA staff's interpretation of how to comply with these requirements. Notices may also include best practices or guidance.


The MFDA has received inquiries from Members regarding the classification of issued and outstanding retractable preferred shares for the purpose of calculating the risk adjusted capital (“RAC”) of the Member. The MFDA Form 1 (General Notes and Definitions) provides that the Member’s financial statements are to be prepared in accordance with International Financial Reporting Standards (“IFRS”), except as prescribed by the MFDA. In accordance with IFRS, where preferred shares are retractable or redeemable at the option of the holder, the MFDA will normally require these shares to be categorized as a current liability of the Member rather than equity for the purpose of calculating RAC.

In order to have retractable preferred shares considered equity rather than debt, the MFDA requires that Members provide the attached standard undertaking (Schedule “A”).


SCHEDULE A

UNDERTAKING

TO: MUTUAL FUND DEALERS ASSOCIATION OF CANADA (“MFDA”)

RE: ___________________________________________________

[Complete name of corporation (“Member”)]

The undersigned shareholder is the owner of the following shares in the capital of the Member:

Class Number Paid in Value

 

The shares described above and any other shares of the same class or series owned or held by the undersigned shall be considered “Shares” for the purposes of this Undertaking.

The undersigned undertakes that he/she/it shall not, without the prior written consent of the MFDA:

  1. exercise any right to redeem, retract or require the repurchase of all or any of the Shares;
  2. accept any redemption, retraction, repurchase or other proceeds or return of capital in any manner in respect of all or any of the Shares; or
  3. transfer all or any of the Shares to any other person.

This Undertaking shall be binding on the heirs, personal representatives, successors and assigns of the undersigned.

DATED:

 


[Name in Full]

[Signed]

[Position, if applicable]

 

 

 

 

 

The undersigned Member acknowledges this Undertaking and its terms and agrees that it shall not redeem, retract, repurchase or return any capital in respect of the Shares without the prior written consent of the MFDA.

DATED:

 


[Name in Full]

[Signed]

[Position, if applicable]

 

 

 

 

 

 

DM #329666