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?
- The revenue limit from Canadian activities for international advisers relying on the new international adviser exemption has been reduced to 10% from 25%.
These and other important changes in the regulation of international advisers under NI 31-103 are discussed below in this issue.
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International Adviser Exemption
To rely on the international adviser exemption, the non-Canadian adviser must be registered, or operate under an exemption from registration, under the securities legislation of the foreign jurisdiction in which its head office or principal place of business is located in a category of registration that permits the adviser to carry on the activities in that jurisdiction that registration as an adviser would permit it to carry on in Canada. The non-Canadian adviser must also be engaged in the business of an adviser in that foreign jurisdiction. Moreover, during its most recently completed financial year, no more than 10% (under the current requirements for registration as an international adviser, the revenue limit is 25%) of the aggregate consolidated gross revenue of the international adviser, its affiliates and affiliated partnerships for any fiscal year may be derived from portfolio management activities in Canada. Aggregated consolidated gross revenue does not include the gross revenue of an affiliate of the international adviser if the affiliate is registered in a jurisdiction in Canada.
This revenue limit from Canadian activities is a significant reduction; non-Canadian advisers will have to assess whether they can meet this lower threshold under the international adviser exemption. If this threshold is too low, the non-Canadian adviser may be required to register as a “portfolio manager”.
Other Registration Reforms
NI 31-103 and the new rules include other significant changes to registration requirements for dealers, advisers and investment fund managers in Canada.