On May 21, 2015, the CSA published CSA Staff Notice 31-341 – Omnibus/Blanket Orders Exempting Registrants from Certain CRM2 Provisions of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. The Staff Notice advises that, in response to concerns and related requests for relief formally raised by industry participants, all CSA members have issued parallel orders providing relief from certain provisions of NI 31-103. The CSA Relief Orders will take effect on July 15, 2015.
Impact on MFDA Members
To ensure that MFDA requirements are consistent with relief being granted under the CSA Relief Orders, MFDA staff will be bringing forward certain proposed changes to the MFDA Board of Directors at their meeting on June 4, 2015. These changes will include: proposed housekeeping amendments to MFDA Rule 5.3 (Client Reporting) and MFDA Policy No. 7 (Performance Reporting) that are intended to adopt the terms of the relief set out in the CSA Relief Orders; and a proposed extension of the transition period applicable to new account statement requirements under Rule 5.3. The following is a summary of key changes being proposed:
- Rule 5.3 – Extension of Transition Period: new requirements under Rule 5.3 come into effect on July 15, 2015. Consistent with relief being granted under the CSA Relief Orders, Members will be given more time to address implementation and technical issues related to such requirements. Specifically, Members will be permitted to meet new requirements under Rule 5.3 by delivering account statements for the period ending December 31, 2015 (i.e. reporting on transactions from October – December, 2015) instead of the period that includes July 15, 2015. Additional details in respect of these changes are set out in Appendix “A” to this Bulletin;
- Policy No. 7: the CSA Relief Orders provide relief from certain requirements related to the investment performance report. Specifically, firms reporting on a calendar year basis in 2016 will not be required to include comparative date from 2015 in their investment performance reports. Appropriate housekeeping amendments will be made to Policy No. 7 so that this relief in respect of the investment performance report will also be available to MFDA Members that report on a calendar year basis in 2016.
The following is a summary of changes that are being made in respect of MFDA Rule 5.3 (Client Reporting) to ensure that MFDA requirements are consistent with relief being granted under the CSA Relief Orders.
Definitions – Rule 5.3(1)
This new section sets out definitions that must be complied with for the purpose of meeting client reporting requirements under Rule 5.3. Members will be permitted to satisfy requirements under Rule 5.3(1) by delivering a first account statement to clients for the period ending December 31, 2015. Such requirements include, in particular, adoption of the following:
- Definition of “book cost” – Rule 5.3(1)(a);
- Definition / Determination of “cost” – Rule 5.3(1)(c);
- Definition of “investment” – Rule 5.3(1)(d);
- Definition of “market value” of a security as revised under MFDA Form 1 Financial Questionnaire and Report – Rule 5.3(1)(f);
- Definition of “original cost” – Rule 5.3(1)(h);
Content of Account Statement – Rule 5.3.2
The following new requirements under Rule 5.3.2 may be satisfied by delivering a first account statement to clients for the period ending December 31, 2015:
- Inclusion of “book cost” or “original cost” definition on account statement – Rule 5.3.2(a)(vi);
- Market value and cost reporting requirements – Rule 5.3.2(c);
- Requirement for account statements to include prescribed disclosure respecting MFDA IPC Coverage – Rule 5.3.2(e).