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MFDA Policy No. 6

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Mar 17, 2016

Information Reporting Requirements

1.  Introduction

This Policy establishes minimum requirements concerning events that Approved Persons are required to report to Members and events that Members are required to report to the MFDA pursuant to Rule 1.4.

Part A of this Policy, entitled “Approved Person Reporting Requirements”, sets out details regarding the reporting of information under Rule 1.4(b) by Approved Persons.

Part B of this Policy, entitled “Electronic Reporting Requirements for Members”, sets out details regarding reporting of information under Rule 1.4(a)(i) and Rule 1.4(a)(ii) by Members. All reporting under Part B must be submitted through the electronic reporting system provided by the MFDA. The reporting of events that are required to be submitted electronically by any other means is a failure to report the event and a failure to comply with this Policy.

Part C of this Policy, entitled “Other Reporting Requirements for Members”, sets out details regarding reporting of information under Rule 1.4(a)(iii) by Members. All reporting under Part C must be submitted to the MFDA in writing.

In addition to these reporting requirements, MFDA Members are required to comply with other reporting requirements which may change from time to time, and which include but are not limited to:

  1. MFDA reporting requirements, some of which may also require MFDA approval:
    • By-law No.1 section 13.7 – Reorganizations, mergers and amalgamations;
    • By-law No. 1 section 13.9 – Changes in ownership and control;
    • Rule 1.1.6 – Introducing/Carrying dealer arrangements;
    • Rule 3.1.1 – Change in dealer level;
    • Rule 3.1.2 – Risk adjusted capital less than zero;
    • Rule 3.2.5 – Accelerated payment of long term debt; and
    • Rule 3.5 – Financial filing requirements
  2. reporting requirements under applicable provincial securities laws in connection with a Member’s mutual fund dealer registration.

2.  Definitions

“any jurisdiction” means any jurisdiction inside or outside of Canada.

“business day” means a day other than Saturday, Sunday or any officially recognized Federal or Provincial Statutory holiday.

“civil claim” includes civil claims pending before a court or tribunal and arbitration.

“client” means a person who is a client of the Member.

“compensation” means the payment of a sum of money, securities, reversal or inclusion of a securities transaction (whether the transaction has a realized or unrealized loss) or any other equivalent type of entry which is intended to compensate a client or offset an act of a Member or Approved Person. A correction of a client account or position as a result of good faith trading errors and omissions is not considered to be “compensation” for the purposes of this Policy.

 “event” means a matter that is reportable under this Policy by a Member or Approved Person.

“law” includes, but is not limited to, all legislation of any jurisdiction and includes any rules, policies, regulations, rulings or directives of any securities regulatory authority of any jurisdiction.

“member business” means all business activities conducted by and through the Member, whether securities related or otherwise.

“misrepresentation” means:

  1. an untrue statement of fact, either in whole or in part; or
  2. an omission to state a fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

 “regulatory body” means, but is not limited to, any regulatory or self-regulatory organization that grants persons or organizations the right to deal with the public in any capacity.

 “regulatory requirements” means, but is not limited to, the by-laws, rules, policies, regulations, rulings, orders, terms and conditions of registration, or agreements of any regulatory body in any jurisdiction.

“securities” includes exchange contracts, commodity futures contracts and commodity futures options.

 “service complaints” means:

  1. any complaint by a client which is founded on customer service issues and is not the subject of any securities law or regulatory requirements; or
  2. any complaint by a client as a result of a good faith trading error or omission.

3.  General Reporting Requirements

3.1.  Events regarding Members that must be reported shall not be limited solely to securities related business, but shall include all member business.

3.2.  Events regarding Approved Persons that are reported by Approved Persons to the Member shall not be limited solely to securities related business and member business, but shall include all business conducted by the Approved Person.

3.3.  The obligation to report an event under this Policy is limited to events of which a Member or Approved Person has become aware regardless of the means by which the Member or Approved Person became aware of the event. If the reporting timeframes have expired before the Member or Approved Person has become aware of the event, the event shall be reported immediately after the Member or Approved Person has become aware of such event.

3.4.  A Member is expected to be aware of events relating to Approved Persons by the receipt of reports from Approved Persons and by carrying out the Member’s supervisory, monitoring and review obligations over the conduct of its business.

3.5.  All requirements to report events regarding former Approved Persons are limited to events which occurred while the Approved Person was an Approved Person of the Member.

3.6.  A Member shall designate a compliance officer at its head office (or another person at head office) to whom reports made by Approved Persons, as required by section 4, shall be submitted.

3.7.  Documentation associated with each event required to be reported under this Policy shall be maintained for a minimum of 7 years from the resolution of the matter and made available to the MFDA upon request.

PART A
APPROVED PERSON REPORTING REQUIREMENTS

4.  Approved Person Reporting Requirements

4.1.  An Approved Person shall report the following events to his or her current Member in such detail as required by the Member, within 2 business days:

  1. the Approved Person is the subject of a client complaint in writing;
  2. the Approved Person is aware of a complaint from any person, whether in writing or any other form, and with respect to him or herself, or any other Approved Person, involving allegations of:
    1. theft, fraud, misappropriation, forgery, money laundering, market manipulation, insider trading, misrepresentation, or unauthorized trading;
    2. a breach of client confidentiality;
    3. engaging in securities related business outside of the Member;
    4. engaging in an undeclared outside activity ; or
    5. personal financial dealings with a client.
  3. whenever the Approved Person has reason to believe that he or she has or may have contravened, or is named as a defendant or respondent in any proceeding, in any jurisdiction, alleging the contravention of:
    1. any securities law; or
    2. any regulatory requirements.
  4. the Approved Person is charged with, convicted of, pleads guilty or no contest to, any criminal offence, in any jurisdiction;
  5. the Approved Person is named as a defendant in a civil claim, in any jurisdiction, relating to the handling of client accounts or trading or advising in securities;
  6. the Approved Person is denied registration or a license that allows the Approved Person to deal with the public in any capacity by any regulatory body, or has such registration or license cancelled, suspended or terminated, or made subject to terms and conditions;
  7. the Approved Person becomes bankrupt or suspends payment of debts generally or makes an arrangement with creditors or makes an assignment or is deemed insolvent;
  8. there are garnishments outstanding or rendered against the Approved Person.

PART B
ELECTRONIC REPORTING REQUIREMENTS FOR MEMBERS

5.  General Member Electronic Reporting Requirements

5.1.  Members shall report the following events to the MFDA, through an electronic reporting system provided by the MFDA, within 5 business days of the occurrence of the event, except for events reported under section 6.1(a) of this Policy, which must be reported to the MFDA within 20 business days.

6.  General Events to be Reported

6.1.  Members shall report to the MFDA:

  1. all client complaints in writing, against the Member or a current or former Approved Person, relating to member business, except service complaints;
  2. whenever a Member is aware, through a written or verbal complaint or otherwise, that the Member or any current or former Approved Person has or may have contravened any law or regulatory requirement, relating to:
    1. theft, fraud, misappropriation, forgery, money laundering, market manipulation, insider trading, misrepresentation, or unauthorized trading;
    2. a breach of client confidentiality;
    3. engaging in securities related business outside of the Member;
    4. engaging in an undeclared outside activity; or
    5. personal financial dealings with a client.
  3. whenever the Member, or a current or former Approved Person, is:
    1. charged with, convicted of, pleads guilty or no contest to, any criminal offence, in any jurisdiction;
    2. named as a defendant or respondent in, or is subject of, any proceeding or disciplinary action, in any jurisdiction, alleging contravention of any securities law;
    3. named as a defendant or respondent in, or is the subject of, any proceeding or disciplinary action, in any jurisdiction, alleging contravention of regulatory requirements;
    4. denied registration or a license that allows a person to deal with the public in any capacity by any regulatory body, or has such registration or license cancelled, suspended or terminated, or made subject to terms and conditions;
    5. named as a defendant in a civil claim, in any jurisdiction, relating to handling of client accounts or trading or advising in securities.
  4. whenever an Approved Person becomes bankrupt or suspends payment of debts generally or makes an arrangement with creditors or makes an assignment or is deemed insolvent;
  5. there are garnishments outstanding or rendered against the Member or an Approved Person.

7.  Reporting of Updates and Resolution of Events

7.1.  Members shall update event reports previously reported to reflect updates to, or the resolution of, any event that has been reported pursuant to section 6.1 of this Policy within 5 business days of the occurrence of the update or resolution and such update or resolution shall include but not be limited to:

  1. any judgments, awards, arbitration awards or orders and settlements in any jurisdiction;
  2. compensation paid to clients directly or indirectly, or any benefit received by clients from a Member or Approved Person directly or indirectly;
  3. any internal disciplinary action or sanction against an Approved Person by a Member;
  4. the termination of an Approved Person;
  5. the results of any internal investigation conducted.

8.  Other Events to be Reported

8.1.      For matters that are not the subject of an event report in section 6.1 of this Policy, the Member shall report to the MFDA:

  1. whenever the Member has initiated disciplinary action that involves suspension, demotion or the imposition of increased supervision on an Approved Person;
  2. whenever the Member has initiated disciplinary action that involves the withholding of commissions or the imposition of a financial penalty in excess of $1000;
  3. whenever an employment or agency relationship with an Approved Person is terminated and the Notice of Termination filed with the applicable securities commission discloses that the Approved Person was terminated for cause, or discloses information regarding internal discipline matters or restrictions for violations of regulatory requirements;
  4. whenever the Member or Approved Person has paid compensation to a client either directly or indirectly in an amount exceeding $15,000.

PART C
OTHER REPORTING REQUIREMENTS FOR MEMBERS

9.  Other Information Reporting Requirements for Member

9.1  Members shall report the events under Part C of this Policy to the MFDA, in writing, within 5 business days of the occurrence of the event, except for events reported under section 10 of this Policy, which must be reported to the MFDA immediately.

10.  Bankruptcy, Insolvency and Related Events

10.1.  Members must report to the MFDA whenever:

  1. the Member is declared bankrupt;
  2. the Member makes a voluntary assignment in bankruptcy;
  3. the Member makes a proposal under any legislation relating to bankruptcy or insolvency;
  4. the Member is subject to, or instituting any proceedings, arrangement or compromise with creditors;
  5. a receiver and/or manager assumes control of the Member’s assets.

11.  Change of Name

11.1.    Members must report to the MFDA any change with respect to:

  1. the legal name of the Member;
  2. the names under which the Member carries on business (trade or style names);
  3. trade, business or style names, other than that of the Member, used by Approved Persons. The name of the Approved Person, the trade or business name the Approved Person is using, and the Approved Person’s branch location must be provided.

12.  Change of Contact Information

12.1.  Members must notify the MFDA of any change in address for service or main telephone or fax number.

13.  Change in Member Registration or Licensing

13.1.  Members must report to the MFDA any changes in the following:

  1. type of registration or licensing with the relevant securities commission;
  2. jurisdictions in which any dealer business of the Member is conducted; and
  3. investment products traded or dealt in.

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 positions.

15.  Other Business Activities

15.1.  Members must report to the MFDA any business, other than the sale of investment products, which the Member engages in or proposes to engage in.

16.  Change of Auditor

16.1.  Members must report to the MFDA any change in a Member’s auditor and/or audit engagement partner. A new Letter of Acknowledgement (Schedule H.1 of the MFDA Membership Application Package) must be submitted to the MFDA.