On November 19, 2020, the MFDA published two types of CFR conforming changes to MFDA regulatory instruments: Housekeeping Rule amendments, and Public Comment Rule proposals. Each type of change was published in a separate Publication Notice (see Bulletin #0843-P).
The Publication Notice which addressed our Public Comment Rule Proposals included CFR conforming changes to guidance set out under MFDA Staff Notices (MSN), with the exception of MSN-0069 (Suitability). We indicated that similar changes were under development for MSN-0069, and that, once completed, such changes would be published for comment. MFDA staff, working in conjunction with CSA staff, have completed their review, and the CFR conforming changes to MSN-0069 are now being published for comment.
Attached as Appendix “A” to this Bulletin is a blackline of MSN-0069, which shows all changes made to the original version. A summary of these changes is set out below.
Summary of Changes
The concepts set out under MSN-0069 reflect the MFDA’s regulatory experience and understanding as to the fundamental considerations involved in meeting suitability requirements. As a result, CFR guidance in the area of suitability has been merged with existing concepts under MSN-0069, in an effort to ensure that MFDA guidance in this area continues to reasonably reflect the understanding of the MFDA and the business/business models of MFDA Members, while being consistent with similar guidance under securities legislation.
In addition, we note the following changes:
- “Securities” vs. “Investment Products”: requirements and guidance under NI 31-103 / 31-103CP, including the CFR changes, apply to “securities”. MFDA requirements and guidance apply in respect of all business conducted through the facilities of the Member (i.e. this includes business in securities, and non-securities related investment products). As a result, and as appropriate, in making conforming amendments to MFDA regulatory instruments, including MSN-0069, we have adopted the term “investment products”, in place of “securities”;
- Rule References: changes update Rule references, and revise the wording of the Notice to reflect amendments made to Rules 2.2.1 (Know-Your-Client), 2.2.4 (Updating Client Information), 2.2.5 (Know-Your-Product), and 2.2.6 (Suitability Determination). In certain areas, existing text has been relocated to different sections of the Notice;
- Know-Your-Product: content respecting Know-Your-Product considerations has been removed from MSN-0069, and is addressed under MSN-0048 (Know-Your-Product), as revised (revisions to MSN-0048 were published on November 19, 2020, along with all other Public Comment Rule proposals);
- Content from Compliance Bulletins: MSN-0069 incorporated content from previously issued Compliance Bulletins (e.g. commentary on Use of Weighted Average of Fund Risk Ratings, Additional Concerns Regarding Trade Supervision and Suitability Assessments, Additional Concerns Regarding Supervision of Leveraging, Common Misconceptions, etc.). The Bulletins from which this information was taken continue to be accessible on the MFDA website. As a result, we have removed this content from MSN-0069, in an effort to make the Notice more readable, and to keep its length reasonable;
- Appendix 1 (Example of KYC Information), and Appendix 2 (Suitability Review): These appendices were developed and included in MSN-0069 at a time when MFDA requirements were relatively new to Members and Approved Persons. MFDA requirements are now, generally, well understood by both Members and Approved Persons. As a result, again in the interests of keeping the Notice readable, and of a reasonable length, we have deleted these appendices.
The CFR conforming changes to MSN-0069 are being published for a 60-day comment period. Please submit your comments in writing on or before August 20, 2021. All comment letters received will be published to the MFDA website unless MFDA staff receives a request from the commenter asking that their letter not be made public. Comments should be addressed to the attention of:
General Counsel, Corporate Secretary and Vice-President, Policy