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Bulletin #0250-M

Membership Information
Member Regulation Notice MR-0058

Mutual Fund Dealers Association of Canada
Association canadienne des courtiers de fonds mutuels
121 King Street West, Suite 1000, Toronto, Ontario, M5H 3T9
TEL: 416-361-6332 FAX: 416-943-1218 WEBSITE: www.mfda.ca

Contact: Samantha
Duxbury
BULLETIN #0250 – M
Manager, Financial Compliance
March 14, 2007
Phone: 416-943-4662
E-mail: sduxbury@mfda.ca

MFDA Bulletin

Membership Information

For Distribution to Relevant Parties within your Firm

Member Regulation Notice MR-0058 (Acceptable Securities Locations)

The purpose of this Bulletin is to inform Members of steps taken by MFDA staff to facilitate the
process relating to the requirements outlined in Member Regulation Notice MR-0058,
Acceptable Securities Locations (“MR-0058”), issued on December 14, 2006.

Furthermore, Members requiring assistance obtaining executed custodial agreements with mutual
fund companies or other financial institutions holding securities or other investment products on
Members’ behalf are encouraged to contact MFDA staff and advise of the respective entities that
have not yet signed a compliant custodial agreement.

Members are reminded that it is their responsibility to comply with the requirements outlined in
MR-0058. More specifically, Members must ensure that effective July 1, 2007, all proprietary
and client assets held beyond their physical possession be held at “acceptable securities
locations” or alternatively, have sufficient regulatory capital to cover the margin implications
that will otherwise be applicable.

Requirements

MFDA Rules require Members holding proprietary or client securities or other investment
products beyond their physical possession to ensure the assets are held at an “acceptable
securities location”.
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MR-0058 requires Members to review the locations at which their assets are held and proactively
seek to ensure the applicable entities sign the prescribed “bare trustee” custodial agreement with
the MFDA (see Schedule “A” to MR-0058), or alternatively execute a custodial agreement with
the entity itself containing the provisions of Rule 3.3.3(b). Effective July 1, 2007, if a Member
holds securities or other investment products at an external location that does not qualify as an
acceptable securities location, the Member will be required to provide a capital charge on its
FQR equal to 100% of the market value of the securities or other products held at that external
location.

Action Taken and Proposed Next Steps

Attached, as Schedule “A”, is a letter that was sent by MFDA staff to approximately 170 mutual
fund companies. The letter was intended to request mutual fund companies to review the
requirements of MR-0058 as it relates to them and MFDA Members, and to submit the requested
documentation to the MFDA if considered applicable.

Members requiring assistance with obtaining prescribed “bare trustee” custodial agreements
from mutual fund companies or other financial institutions where assets are held on their behalf
are encouraged to submit contact information for these entities to the MFDA at
financialcompliance@mfda.ca. Upon receipt of such information, MFDA staff will forward the
letter, attached as Schedule “A”, directly to the entities identified by the Member.

(DOCS # 103871)

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SCHEDULE “A”

Mutual Fund Dealers Association of Canada
Association canadienne des courtiers de fonds mutuels
121 King Street West, Suite 1000, Toronto, Ontario, M5H 3T9
TEL: 416-361-6332 FAX: 416-943-1218 WEBSITE: www.mfda.ca

Dear Sir / Madam:

Important Notice Re: Custodial Services Provided to MFDA Members

Attached is Member Regulation Notice MR-0058, Acceptable Securities Location (“MR-0058”),
issued by the Mutual Fund Dealers Association of Canada (“MFDA”) on December 14, 2006. In
an effort to assist our Members with complying with the requirements set out in MR-0058, we
are sending you this letter to respectfully request your immediate attention to this Notice.

As you are likely aware, provincial securities legislation, with the exception of Quebec, generally
requires registered mutual fund dealers in Canada to be Members of the MFDA, the national
self-regulatory organization for mutual fund distributors. Members of the MFDA are required to
comply with the organization’s specified Rules, By-laws and Policies. MFDA Rules require
Members holding proprietary or client securities or other investment products beyond their
physical possession to ensure the assets are held at an Acceptable Securities Location (“ASL”).
In order to satisfy the requirements of an ASL, a written custodial agreement must be entered
into between the custodian and either the Member or the MFDA, containing the required
provisions specified by the MFDA.

MFDA Members are required to ensure that all mutual fund companies and financial institutions,
which hold proprietary and/or client assets on the Members’ behalf, execute a compliant
custodial agreement by June 30, 2007. In the event a compliant custodial agreement is not
executed by June 30, 2007, each Member will be required to report a capital charge on its
financial report submitted to the MFDA equal to 100% of the market value of all assets held
for the Member by that mutual fund company / financial institution. Any Member conducting
business with a mutual fund company or financial institution which has not executed a compliant
custodial agreement by June 30, 2007, and is not able to continue to satisfy the minimum capital
requirements of the MFDA, will be expected to cease trading in the mutual fund and/or other
asset
held by the respective entity.

Consequently, we respectfully request that you review the attached Notice and the prescribed
“bare trustee” custodial agreement for its applicability to your company. Where your firm holds
assets on behalf of MFDA Members, we would ask that you provide the following
documentation directly to the MFDA:

1. 2 signed copies of the prescribed “bare trustee” Custodial Agreement (not negotiable in
terms of amending the agreement). The standard prescribed agreement is found attached
to the Notice as Schedule “A”.
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2. A corporate resolution for signing authority.

We would greatly appreciate if you would consider this Notice and provide the MFDA with the
above items by April 16, 2007, if applicable. We request the submission of the documents by
this date so that we may review them and follow up with any additional requirements from your
firm or our Members directly.

Thank you in advance for your attention to this request. If you have any questions please contact
Samantha Duxbury, Manager Financial Compliance, at 416-943-4662 or me at 416-943-5843.

Sincerely,

Laura Milliken
Director, Financial Compliance

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