Contact: Aamir Mirza
BULLETIN #0388 – P
Senior Legal and Policy Counsel
July 9, 2009
For Distribution to Relevant Parties within your Firm
Withdrawal of Proposed Amendments to MFDA Rules 1.1.7 (Business
Names, Styles, Etc.) and 2.6 (Borrowing for Securities Purchases) and
section 25.4 (Other Instruments) of MFDA By-law No. 1
The MFDA is withdrawing proposed amendments to MFDA Rules 1.1.7(d) (Business Names,
Styles, Etc.) and 2.6 (Borrowing for Securities Purchases) and section 25.4 (Other Instruments)
of MFDA By-law No. 1.
MFDA Rule 1.1.7(d) (Business Names, Styles, Etc.)
MFDA staff proposed a housekeeping amendment to MFDA Rule 1.1.7(d) in response to
Member requests to provide further clarification with respect to which trade names the MFDA
requires notification of under the Rule. The proposed amendment was intended to clarify that the
existing requirement in Rule 1.1.7(d) to notify the MFDA, prior to the use of any business, style
or trade names other than the Member’s legal name, applied to the use of any such name by
Approved Persons in connection with the business of the Member as well as business carried on
by Approved Persons outside of the Member. The proposed amendments were approved by the
Recognizing Jurisdictions on September 26, 2008.
Following approval by the Recognizing Jurisdictions, MFDA staff received comments indicating
that some Members interpreted the amendment as requiring pre-approval by the MFDA of all
trade names used by Members and their Approved Persons and suggested that the amendment
would result in the MFDA or Members regulating the outside business activity of Approved
Persons. In response, MFDA staff issued Bulletin #0344-P, in which staff explained that the
amendment did not result in any change to the current Rule and re-emphasized that the primary
purpose of the notification requirement under Rule 1.1.7 was to ensure that the MFDA remained
aware of what trade names were being used by Approved Persons and for what purpose.
Nevertheless, as there continued to be a misinterpretation of the purpose of the proposed
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amendment, it was withdrawn from consideration at the Annual General and Special Meeting of
Members (“AGM”) on December 4, 2008.
In order to provide Members with the clarification initially requested, the MFDA has determined
that it is more appropriate to bring forward the proposed amendment to Rule 1.1.7 along with
related amendments currently under consideration in respect of Rule 1.2.1 (d) regarding dual
Accordingly, MFDA staff advises that it is withdrawing the proposed housekeeping amendment
to Rule 1.1.7.
MFDA Rule 2.6 (Borrowing for Securities Purchases)
Proposed amendments to MFDA Rule 2.6 were published for comment on October 3, 2008 and
approved by MFDA Members at the AGM on December 4, 2008. The proposed amendments
were drafted to: (i) eliminate the requirement for a risk disclosure document to be provided on
the opening of a new account; and (ii) continue to require that such disclosure be provided when
an Approved Person makes a recommendation to invest using borrowed funds or otherwise
becomes aware of a client borrowing monies to invest with the exception of borrowing to invest
in an RRSP. The elimination of the requirement for risk disclosure to be provided at account
opening was, at the time, consistent with proposed National Instrument 31-103 published by the
provincial securities regulatory authorities. Further, the MFDA’s existing risk disclosure
document is complicated and not entirely relevant to the risk of borrowing to invest in an RRSP.
However, staff of the Recognizing Jurisdictions has advised that they are not supportive of the
elimination of the requirements to provide disclosure at account opening or when borrowing to
invest in RRSPs and are not prepared to recommend the proposed amendments for approval to
their respective Commissions.
As a consequence, the MFDA is withdrawing the proposed amendments at this time.
Section 25.4 (Other Instruments) of MFDA By-law No. 1
Proposed amendments to section 25.4 of MFDA By-law No. 1 were approved by the MFDA
Board of Directors on May 22, 2008 and published for comment on June 13, 2008. The proposed
amendments were intended to clarify the regulatory effect of Policy instruments, specifying that
“Policies” would be binding on Members and Approved Persons according to their terms, and to
clarify the types of instruments that may be considered “Policies”.
The proposed amendments were intended to apply only to “Policies” with prescriptive intent.
However, comments received indicated that Members misunderstood the proposed amendments,
believing that all instruments falling within the definition of “Policies” (i.e. those with and
without prescriptive intent) were to be made binding according to their terms.
In light of the concern and confusion, the MFDA has determined that it will not proceed with the
proposed amendments at this time.
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