On July 17, 2009, the Canadian Securities Administrators (the CSA) published in final form their reforms to the registration regime in National Instrument 31-103 – Registration Requirements and Exemptions (NI 31-103), along with certain consequential amendments to other securities laws (collectively, the new rules). Subject to ministerial approval requirements, NI 31-103 will come into force on September 28, 2009 (the effective date).
Did you know?
- NI 31-103 includes ultimate designated person (UDP) and chief compliance officer (CCO) as two new individual categories of registration for investment dealers and mutual fund dealers.
These and other important changes in the regulation of investment dealers and mutual fund dealers under NI 31-103 are discussed below in this issue.
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Registration of UDPs and CCOs
NI 31-103 requires firms to register a designated UDP and a designated CCO. The UDP's role is to supervise the activities of the firm that are directed toward ensuring compliance with securities legislation and promote compliance within the firm. NI 31-103 does not prescribe the form of compliance system to be implemented, however Companion Policy 31-103CP provides guidance on what the CSA consider elements of an effective compliance system. The designated UDP must generally be the chief executive officer or sole proprietor of the firm, or an officer in charge of a division of the registered firm, if the activity that requires the firm to register occurs only within the division. The UDP does not necessarily need to be someone who is involved in day-to-day compliance matters. There are no proficiency requirements for the UDP function.
The CCO is required to establish and maintain compliance policies and procedures, monitor and assess compliance, report non-compliance to the UDP and annually report on compliance matters to the firm's board of directors. The designated CCO must be an officer or partner or sole proprietor of the firm. Firms must designate one CCO, and large firms will need to apply for an exemption to designate more than one CCO, for example, where there are multiple operating divisions within a firm.
Proficiency Requirements for CCOs
The proficiency requirements specified for the CCO function are described below.
The CCO of an investment dealer is subject to minimum proficiency requirements established by the Investment Industry Regulatory Organization of Canada (IIROC).
Mutual Fund Dealers
The CCO of a mutual fund dealer must qualify under either of the following:
- the individual has passed
- the Canadian Investment Funds Exam, the Canadian Securities Course Exam or the Investment Funds in Canada Course Exam, and
- the PDO Exam or the Mutual Fund Dealers Compliance Exam; or
- the individual has met the requirements for CCOs of portfolio managers.