On October 25, 2018, the Canadian Securities Administrators (CSA) published CSA Notice and Request for Comment Proposed Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations – Custody Related Amendments (The Proposed Custody Amendments).  All comments on the Proposed Custody Amendments must be submitted by December 24, 2018.

The Proposed Custody Amendments are being published for comment as the result of recent changes to the custody-related amendments of National Instrument 81-102 Investment Funds (NI 81-102). This was part of a larger “Modernization of Investment Fund Product Regulation – Alternative Funds” project (the NI 81-102 Amendments). The NI 81-102 Amendments describe the current relief granted regarding the use of cleared derivatives by investment funds under NI 81-102.  Section 6.8 of NI 81-102 was also amended to allow these investment funds to deal with futures commission merchants and clearing corporations in accordance with the rules of those organizations for cleared over-the-counter derivatives. The NI 81-102 Amendments in their final form were published on October 4, 2018.

The goal of the Proposed Custody Amendments is to give all clients and investment

funds of registered firms the same ability to deposit assets with certain dealers of cleared over-the-counter derivatives. Without the Proposed Custody Amendments, this option would only be available to investment funds that fall under NI 81-102.

Generally, this is a summary of the Proposed Custody Amendments:

  • Subsection 14.6.1(1) being amended to add the following two definitions: “cleared specified derivative” and “regulated clearing agency;”
  • Subsection 14.6.1(2) is being expanded to permit clients or investment funds of a registered firm to deposit cash or securities with members of regulated clearing agencies in respect of certain prescribed margin transactions outside of Canada; and,
  • Subsection 14.6.1(2) is also being expanded to include an additional type of permitted margin transaction, namely, transactions involving cleared specified derivatives.

The Proposed Custody Amendments to National Instrument 31-103 are available for download from the websites of the participating jurisdictions.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.