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Bulletin #0017-P

Policy
CSA Staff Joint Notice Concerning National Instrument 23-101

Mutual Fund Dealers Association of Canada
Association canadienne des courtiers de fonds mutuels
121 King Street West, Suite 1600, Toronto, Ontario, M5H 3T9
TEL: 416-361-6332 FAX: 416-943-1218 WEBSITE: www.mfda.ca


Contact:
Greg Ljubic
BULLETIN #0017–P
Director, Policy
May 1, 2003
Phone: 416-943-5836
E-mail: gljubic@mfda.ca

MFDA Bulletin

Policy

For Distribution to Relevant Parties within your Firm

CSA Staff Joint Notice Concerning National Instrument 23-101

A Joint Notice entitled "Electronic Audit Trails" was published by staff of the Canadian
Securities Administrators, Market Regulation Services Inc., Bourse de Montreal Inc. and the
Investment Dealers Association of Canada on March 28, 2003. A copy of the Joint Notice may
be obtained from the Ontario Securities Commission website: www.osc.gov.on.ca.

The Joint Notice relates to National Instrument 23-101 Trading Rules (NI 23-101). A copy of NI
23-101 may be obtained from the Ontario Securities Commission website: www.osc.gov.on.ca

The Joint Notice reminds dealers, including mutual fund dealers, that Part 11 of NI 23-101
requires dealers to maintain certain records relating to orders and trades. Dealers are required to
maintain detailed records respecting: receipt or origination of an order; transmission of an order;
variation or correction or cancellation of an order; and execution of an order. Part 11 of NI 23-
101 requires that as of December 31, 2003, these records must be maintained in electronic form.
Further, the national instrument requires that if a dealer receives a request for these records from
a “regulation services provider” – such as the MFDA – then such records must be transmitted to
the regulation services provider in electronic form.

NI 23-101 does not impose an obligation on MFDA Members to transmit their mutual fund
orders electronically to fund companies.

MFDA Members should note that a number of the record-keeping requirements set out in NI 23-
101 are already contained in MFDA Rules. Also, a number of the detailed record-keeping
requirements set out in NI 23-101 do not apply to the business and operations of mutual fund
dealers (such as the requirements in NI 23-101 to record whether an order is a short sale order or
whether it is a jitney or whether it is an intentional cross). However, MFDA Members should be
aware that there are additional particulars that are expressly set out in Part 11 of NI 23-101 that
are not expressly set out in MFDA Rules. For example, NI 23-101 requires dealers to record:
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an “order identifier” upon receipt or origination of each order;

a “dealer identifier” upon receipt or origination of each order;

the currency for each order;
– the date and time each order is transmitted (whether done through FundServ or
manually);
– whether an order was varied/corrected/cancelled on instructions of the client or the
dealer; and
– in the case of a variation/correction/cancellation, a change in the base-line information
required to be recorded on receipt of each order.

MFDA Members are encouraged to review the detailed record-keeping requirements for all
orders and trades set out in Part 11 of NI 23-101 and to ensure that their internal control systems
and processes are adequate to comply with the legal requirements.

END.

(doc. #14524)
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