On July 5, 2012, the Canadian Securities Administrators published final versions of Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Managers (MI 32-102) and Multilateral Policy 31-202 Registration Requirements for Investment Fund Managers (MP 31-202) relating to registration requirements and exemptions for investment managers headquartered in Canada (Canadian investment fund managers).
The final versions of MI 32-102 and MP 31-202 follow earlier proposals that were published in February 2012 and discussed in a February 17, 2012 Osler Update.
The Exemption-Based Jurisdictions will adopt MI 32-102. All other provinces and territories (the Policy-Based Jurisdictions), including New Brunswick, which in February had supported MI 32-102, will adopt MP 31-202. Regrettably, and despite the urgings of many of the commenters on the February proposals, including Osler, there will not be one harmonized approach in Canada to registration requirements and exemptions for Canadian investment fund managers.
Both MI 32-102 and MP 31-202 remain largely consistent with the versions published in February 2012.
In the Exemption-Based Jurisdictions, any Canadian investment fund manager of one or more investment funds will be required to register as a non-resident investment fund manager in each Exemption-Based Jurisdiction unless it does not have a place of business in the Exemption-Based Jurisdiction and (i) none of the investment funds has investors resident in the Exemption-Based Jurisdiction or (ii) it is eligible to rely on the “grandfathering” exemption in MI 32-102.
The “grandfathering” exemption from registration is available for a Canadian investment fund manager in instances where the manager (i) has no securityholders resident in an Exemption-Based Jurisdiction, and (ii) does not, after September 27, 2012, “actively solicit” residents in that jurisdiction.
Canadian investment fund managers who will need to register in an Exemption-Based Jurisdiction will have until December 31, 2012 to apply for registration as an investment fund manager.
A Canadian investment fund manager will only be required to register in a Policy-Based Jurisdiction if it directs or manages the business, operations or affairs of the investment fund in that jurisdiction, in a way that establishes a substantial connection to that jurisdiction. The revised MP 31-202 clarifies the concept of a connection to a jurisdiction. Specifically, under MP 31-202, solicitation of investors or the distribution of securities in a Policy-Based Jurisdiction will not give rise to investment fund manager registration, unless those activities are directed from within the jurisdiction and result in the person directing or managing the business operations or affairs of an investment fund in the jurisdiction.
MI 32-102 and MP 31-202 will come into force on September 28, 2012. However, there will be a three-month transition period for affected Canadian investment fund managers to seek registration in the Exemption-Based Jurisdictions if required.