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).

New Registration Requirement for Investment Fund Managers

NI 31-103 introduces “investment fund manager” (IFM) as a new category of registration. All provinces and territories across Canada have amended their securities legislation to require a firm or individual that manages an investment fund to register in this new category.

Did You Know?

  • The IFM registration requirement gives the regulators much wider power to regulate the Canadian investment fund industry.

These and other important changes in the regulation of the investment fund sector under NI 31-103 are discussed below in this issue.

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New Powers for Securities Regulators

Under the current regime, the regulators under securities legislation are largely limited to investment fund rules in regulating conduct in the Canadian investment fund industry. Frequently, that means waiting for a breach of the investment fund rules before action can be taken.

Under the new rules, investment fund managers will be subject to the same “fit and proper” standard by which registered dealers and advisers are measured, while the investment funds they manage will continue to be subject to the applicable investment fund rules. The addition of the IFM registration requirement will give the regulators wider powers in regulating this sector, allowing the regulators to exercise the considerable authority they have over registrants. For example, the regulators can impose a broad range of terms and conditions on the IFM’s registration at any point in time, including terms and conditions which might materially impact its business.

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.