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).
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- An adviser that also manages an investment fund, for example a pooled fund, may have to be registered as a portfolio manager (PM) and investment fund manager (IFM).
These and other important changes in the regulation of registered advisers under NI 31-103 are discussed below in this issue.
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Investment Fund Manager Registration Requirement
One of the basic principles of the new rules is generally that a person or company that acts as an IFM is required to be registered as an IFM.
Securities legislation in various Canadian jurisdictions defines “investment fund manager” to mean a person or company that directs the business, operations or affairs of an investment fund. This is the administrative aspect of managing an investment fund, which is distinct from the management of the investment portfolio of an investment fund.
There are no material exemptions from the requirement to register as an IFM and existing managers of investment funds who often act as an investment adviser for the investment fund (and would be registered as an adviser), would need to also register in the investment fund manager category.
Key for the IFM registration requirement is the meaning of “investment fund”, since it is only managers of investment funds that must register. Investment fund status is not limited to conventional mutual funds. For example, a commodity pool is an investment fund for IFM registration purposes. Similarly, investment fund status does not turn on whether a fund is a reporting issuer under securities legislation. For example, a typical pooled fund is an investment fund and triggers the IFM registration requirement under the new rules.
In each case, the facts will be key in assessing the impact of the new registration regime in NI 31-103 for any investment fund.
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.