Historically, foreign advisers relied on the registration exemption in section 194.2 of the Regulation Respecting Securities (Quebec) (the 194.2 Exemption) to enter into sub-advisory arrangements with Quebec registered dealers and advisers. As previously noted, in connection with the coming into force of National Instrument 31-103 Registration Requirements and Exemptions (31-103) the 194.2 Exemption was repealed effective December 28, 2009. 31-103 does not provide for a sub-adviser exemption from the adviser registration requirement, although, it was included in previous proposals for 31-103. The CSA have indicated that they plan to consider further a sub-adviser exemption for inclusion in 31-103. To accommodate this regulatory gap, the Autorité des marchés financiers (AMF) issued a decision, effective December 28, 2009, which exempts foreign sub-advisers from the requirement to register, provided certain conditions are met.

  1. the obligations and duties of the adviser are set out in a written agreement with the registrant;
  2. the registrant contractually agrees with its clients on whose behalf the investment advice or portfolio management services are to be provided to be responsible for any loss that arises out of the failure of the person or company so acting as an adviser to comply with the following obligations:
    1. to exercise its powers and functions honestly, in good faith and in the best interests of the registrant and each client of the registrant for whose benefit the advice is or portfolio management services are provided;
    2. to act with the degree of care, diligence and skill that a reasonably prudent person would exercise in similar circumstances;
  3. the registrant cannot be relieved by its clients from its responsibilities for loss under paragraph 2;
  4. the person so acting as an adviser, if resident of a jurisdiction, is registered as an adviser in that jurisdiction.

In Ontario the sub-adviser exemption under section 7.3 of OSC Rule 35-502 Non-Resident Advisers remains available and the CSA have stated that discretionary relief on a similar basis will be granted in other jurisdictions.