Earlier this month staff of the Canadian Securities Administrators (CSA) released a Notice discussing “serious concerns” in the area of managing conflicts of interest that arise when firms registered solely as exempt market dealers, distribute securities of related or connected issuers with common mind and management (described as “captive dealers”). The Notice sets out:
- staff’s views for addressing the conflicts of interest that arise from the captive dealer business model, including commentary on when to avoid, disclose or control the conflict(s)
- “acceptable” and “unacceptable” practices for addressing conflicts of interest
- what firms proposing to be captive dealers can expect when applying for registration
- what captive dealers can expect when staff perform compliance reviews
Interestingly, staff states that “[a]lthough we intend this notice… to provide guidance to captive dealers, it may be useful for other registrants too.” Accordingly, portfolio managers that distribute their own pooled funds would also be wise to review the commentary in the Notice.