It is anticipated that National Instrument 31-103 – Registration Requirements and Exemptions (the New Rules) will be published in final form July 17, 2009 and will take effect September 28, 2009 (the Effective Date). In connection with the introduction of the New Rules, the Canadian Securities Administrators (the CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have both recently published guidance regarding the transition to the new regime. The new Canadian regime will change the categories of registration, when registration is required and the proficiency and other requirements applicable to registrants and will affect not only current registrants, but also other entities not currently required to be registered.
The guidance is set out in CSA Staff Notice 31-311 (the CSA Notice) and IIROC Notice 09-0190 (the IIROC Notice). The CSA Notice and the IIROC Notice reflect how CSA and IIROC staff forsee the procedural transition to the New Rules. The CSA Notice reflects staff's recommendations to the securities regulatory authorities and ministries regarding transition to the New Rules. The substantive registration requirements will be set out in the New Rules. The following is a brief summary of the guidance issued by the CSA and IIROC.
National Registration Database Freeze
In order to convert existing categories of registration to the new categories of registration and to introduce new registration forms, the National Registration Database (NRD) will be shut from 5:00 p.m. (Eastern Time) on September 25, 2009 to 11:59 p.m. (Eastern Time) on October 12, 2009 (the Freeze Period). During the Freeze Period, authorized firm representatives will be unable to create new submissions to NRD but will have read-only access of the database. During the Freeze Period firms will be required to submit paper versions of re-instatements, termination notices where dismissal was for cause and notice of changes to civil, criminal and financial information but no fees will be payable. Any such filings made during the Freeze Period would then need to be re-filed electronically with the relevant fee payment after the termination of the Freeze Period but no later than November 10, 2009. All other notices that would otherwise be required to be filed during the Freeze Period must be submitted electronically no later than November 24, 2009.
Applications under the Current Regime
Staff of the CSA have indicated they will use their best efforts to process applications made under the current registration regime before the Effective Date of the New Rules. However, if an application (including an NRD submission) is submitted but not approved before the Effective Date, it will be withdrawn and a new application will need to be made under the New Rules. To increase the likelihood of receiving approval for such applications, the CSA staff has suggested certain timelines for making applications. Firm applications which were submitted by June 26, 2009 will increase the likelihood of such applications being approved prior to the Effective Date. Applications for individual registration with an adviser should be made by July 15, 2009 and for individual registration with an existing firm in any category other than an adviser by August 15, 2009.
Appendix "B" to the CSA Notice sets out staff's detailed proposals regarding the timelines for implementation of the requirements set out in the New Rules. The purpose of such timelines is to provide firms and individuals with the necessary time to adapt to and comply with the new requirements. For persons registered under the existing rules on the Effective Date, staff is recommending varying transition periods of between 3 and 24 months to satisfy certain capital, insurance, proficiency and other requirements. Firms and individuals not currently registered under the existing rules who will be required to be registered under the New Rules must meet the requirements when they register. Staff is proposing certain transition periods for persons active in the exempt market prior to the Effective Date and for certain investment fund managers. For example, firms active in the exempt market prior to the Effective Date will need to apply for registration as an exempt market dealer within 12 months of the Effective Date. Limited market dealers registered in Ontario or Newfoundland will be automatically converted to exempt market dealers.
Conversion of old categories of registration to new categories
Appendix "A" to the CSA Notice sets out how existing categories of registration will be converted. Certain limited categories, such as securities issuers or international dealers, are not anticipated to be included in the New Rules and therefore such registrations will cease to exist. International dealers will be permitted to carry on business under an exemption in the New Rules, subject to making a prescribed filing within one month of the Effective Date.
The IIROC notice provides advanced guidance on the transitioning of existing IIROC approved persons to the new categories. For approved categories, while the IIROC rules affecting the amendments have yet to be adopted, the IIROC Notice sets out that the existing categories of approved persons will be reduced to 11 categories of registration and provides further for the automatic conversion of existing categories into new categories. A chart setting out the conversion of existing approved persons is available in the IIROC Notice.