Compliance
Member Regulation Notice MR-0051 (Capital Provisions for Unresolved Differences in Nominee Name Assets)
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: Laura
Milliken
BULLETIN #0263 – C
Director, Financial Compliance
June 4, 2007
Phone: 416-943-5843
E-mail: [email protected]
MFDA Bulletin
Compliance
For Distribution to Relevant Parties within your Firm
Member Regulation Notice MR-0051 (Capital Provisions for Unresolved
Differences in Nominee Name Assets)
The purpose of this Bulletin is to remind Members that hold client securities and other
investment products in nominee name of the requirements outlined in Member Regulation Notice
MR-0051, Capital Provisions for Unresolved Differences in Nominee Name Assets, issued on
December 22, 2005. These requirements apply to all Members holding client assets in nominee
name and include all Members holding client assets in their capacity as agent for the trustee of
self-directed registered plans.
MFDA Staff Findings
During the second round of on-site financial compliance examinations of Level 4 Members,
MFDA staff continued to identify deficiencies by Members relating to the requirement to
reconcile all nominee name assets on at least a monthly basis to third party documentation.
While Members appeared to be adequately complying with these requirements for mutual funds
transacted through FundSERV, reconciliations may not have been performed on investment
products distributed outside of FundSERV, such as Guaranteed Investment Certificates
(“GICs”), Limited Partnerships (“LPs”), Labour Sponsored Investment Funds (“LSIFs”) and
some hedge funds.
Requirements
MFDA Internal Control Policy Statement 4, Cash and Securities, requires the Member to
produce a report from its trading system of client securities owned by clients but registered in the
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name of, or held by, the Member that require segregation and then reconcile the report to third
party information to identify deficiencies. If third party documentation is not obtained and/or
reconciliations of client securities positions are not being done on a monthly basis the Member is
required to take a margin provision on its regulatory capital equal to 100% of the market
value of such securities or other investment products held on behalf of clients plus the
applicable margin rates related to the securities, in accordance with the Notes and
Instructions to Statement B line 12 of the Form 1 Financial Questionnaire and Report (“FQR”).
(DOCS # 109735)
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