On July 13, 2017, the Canadian Securities Administrators published CSA Staff Notice 33-320 The Requirement for True and Complete Applications for Registration, reminding stakeholders of the consequences of submitting false or misleading applications for registration. The Notice also provides guidance with respect to the completion of the application form. The CSA suggest that individual applicants carefully read the Notice and consider whether they are in full compliance with the obligation to provide true and complete information in their registration applications. Firms are also encouraged to assess their policies with respect to applications that they sponsor.
When is an Application False or Misleading?
False or misleading information in an application for registration raises concerns about an applicant’s integrity – one of the three criteria used by the CSA to determine an applicant’s suitability for registration. A registration application may be false or misleading, the CSA notes, when it:
- Includes information that is untrue;
- Omits relevant information;
- Provides vague information; or
- Mischaracterizes information.
Information provided on the application form or in materials provided in connection with the application, including correspondence or statements made during interviews with CSA Staff, may also cause an application to be false or misleading. That an applicant was careless or misunderstood the application form is not an adequate excuse for making a false or misleading statement.
Where it appears that a firm has been complicit in an applicant’s delivery of a false or misleading application, or has otherwise facilitated such an application through carelessness, the CSA may investigate the firm’s conduct and take regulatory action against the firm.
Ongoing Disclosure Obligations
Governed by National Instrument 33-109 Registration Information, applications for individual registration are submitted through the National Registration Database on Form 33-109F4 Registration of Individuals and Review of Permitted Individuals. Once an individual becomes registered, the disclosure obligation does not stop. Registrants are required to update the information included in their Form 33-109F4 by delivering a Form 33-109F5 Change of Registration Information in compliance with NI 33-109. Failure to do so is a breach of securities legislation and may also impugn the registrant’s suitability.
Consequences of Non-Disclosure
The Notice indicates that detrimental information included in an application will not automatically result in the refusal of the application or negatively affect the individual’s registration status. However, failure to disclose detrimental information is concerning to Staff and will likely result in further investigation. Ultimately, this could lead to a recommendation that the application be refused and, at very least, will mean that the application will take longer to review.
“Golden Rules” and Guidance
CSA Staff note that applicants should err on the side of disclosure when completing an application, always bearing in mind the following “golden rules”:
- Read the application form carefully.
- Complete the application form truthfully and with candour.
The Notice includes guidance with respect to frequent issues of non-disclosure, including that:
- Applicants should disclose business and employment activities, including those for which they were not compensated but otherwise had the appearance of business activities.
- Stating that an individual has left a job “to pursue other opportunities” where the applicant was actually fired or asked to resign is considered by Staff to be a misleading answer.
- Outstanding criminal charges are to be disclosed even if the applicant believes that he or she is innocent of such charges.
The guidance in the Notice should be considered as generally applicable to all registration-related documents that are to be delivered to the CSA under applicable securities laws. For further information, please see CSA Staff Notice 33-320 The Requirement for True and Complete Applications for Registration (July 13, 2017).