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Bulletin #0667-P

For further information, please contact:

Paige Ward
General Counsel, Corporate Secretary and Vice President, Policy
Policy
For Distribution to Relevant Parties within your Firm

Amendments to MFDA Rules

The MFDA held its 2015 Annual General and Special Meeting of Members (“AGM”) on December 2, 2015. At the AGM, Members approved certain public interest amendments to MFDA Rule 1.2 (Individual Qualifications), and housekeeping amendments to Rule 2.4.2 (Referral Arrangements), and Rule 5.3 (Client Reporting), as set out below.

1. Proposed Amendments to MFDA Rule 1.2 (Individual Qualifications)

The proposed amendments MFDA Rule 1.2 (Individual Qualifications) are intended to conform MFDA Rules to similar requirements under securities legislation by adopting changes made to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”), Form 33-109F4 Registration of Individuals and Review of Permitted Individuals (“Form 33-109F4”) and the Companion Policy to NI 31-103 (“31-103CP”), in respect of requirements pertaining to proficiency and outside activities.

Under proposed new MFDA Rule 1.2.3 (Education, Training and Experience), Approved Persons must not perform an activity that requires securities registration unless the Approved Person has the education, training and experience that a reasonable person would consider necessary to perform the activity competently. The adoption of a general proficiency principle within MFDA Rules is intended to address situations where additional education, training and proficiency may be appropriate (e.g. where Members and Approved Persons trade in investment products that have unique features, such as exchange-traded funds).

The proposed amendments to Rule 1.2 would conform to similar changes made under securities legislation by adopting a definition of “outside activity” that includes activities involving any officer, director and other equivalent positions and positions of influence. The proposed definition is consistent with similar changes adopted under Form 33-109F4 and 31-103CP. In addition, other amendments to Rule 1.2 have been proposed to clarify the application and scope of existing obligations under MFDA Rules in respect of outside activities.

The amendments are awaiting the approval of the Recognizing Regulators and will be effective on a date to be subsequently determined by the MFDA. To view the proposed amendments, please go to: https://mfda.ca/policy-and-regulation/proposed-regulation-consultations/

2. Amendments to MFDA Rule 2.4.2 (Referral Arrangements)

On September 28, 2009 NI 31-103 came into force. NI 31-103 introduced new requirements in the area of referral arrangements. Referral arrangement requirements under NI 31-103 superseded requirements under MFDA Rule 2.4.2. Changes were required to Rule 2.4.2 to ensure that it was consistent with similar requirements under NI 31-103. These changes are housekeeping in nature and directly adopt referral arrangement requirements under the Instrument. On March 19, 2015, the Recognizing Regulators published a Notice in which they approved/did not object to these housekeeping amendments to Rule 2.4.2.

The amendments to MFDA Rule 2.4.2 received Member ratification at the 2015 AGM. For more details, please refer to MFDA Bulletin #0637-P.

3. Amendments to MFDA Rule 5.3 (Client Reporting)

On May 21, 2015 the CSA issued Relief Orders that provide relief from certain provisions of NI 31-103 to non-SRO registrants under securities legislation, by allowing them more time to address implementation and technical issues related to certain requirements under the Instrument.

The housekeeping amendments to MFDA Rule 5.3 are intended to ensure that MFDA requirements are consistent with relief granted under the CSA Relief Orders. On June 25, 2015, the Recognizing Regulators published a Notice in which they approved/did not object to these housekeeping amendments. The amendments to Rule 5.3 became effective on June 29, 2015 and received Member ratification at the 2015 AGM.

For more details, please refer to MFDA Bulletin #0649-P.

 

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