The Canadian Securities Administrators (CSA), along with its participating jurisdictions, have published Amendments to NI-31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations, and to its allied companion policy, CP-31-103 (together, the Amendments).
The Amendments once adopted will require registrants to address material conflicts of interest in the best interest of their clients and put clients’ interests first when determining the suitability of investments. They introduce new obligations on registered individuals and firms (registrants) and codify best practices when considering the suitability of clients for investments. The Amendments introduce a Know Your Product (KYP) provision and will strengthen existing Know Your Client (KYC), Conflict of Interest, and Relationship Disclosure Information (RDI) provisions.
• The new KYP provisions set out obligations for both firms and registered individuals regarding suitability determination and conflict of interest requirements;
• The amended KYC requirements will support the enhanced suitability determination requirements;
• The amended Conflict of Interest provisions will support the new obligation of registrants to address conflicts in the best interests of their clients, with requirements regarding the disclosure of material conflicts;
• The amendments to the RDI provisions will require registrants to inform clients regarding potentially significant costs, restrictions, and limitations regarding the product or service being offered; and,
• The Amendments also feature new provisions including those regarding misleading communications and additions to internal controls that require firms to provide training to their registered individuals.
These new and strengthened provisions set out the expectations of the regulators regarding the fundamental obligations of registrants towards investors. They are designed to work together throughout the client-registrant relationship and act as an extension of the registrants to deal fairly, honestly, and in good faith with clients.
The Amendments and their attendant provisions will become effective December 31, 2019, subject to ministerial approval. There will be a phased transition period, with the changes relating to conflicts of interest and the associated relationship disclosure provisions taking effect on December 31, 2020, and the remaining changes taking effect on December 31, 2021.
Amendments to NI-31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations, and to Companion Policy CP-31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations, is 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.