Effective July 13, 2017, new standard form reports for certain supervisory terms and conditions (Supervisory Reports) are to be used by firms supervising individual registrants. The changes are set out in CSA Staff Notice 31-349 Change to Standard Form Reports for Close Supervision and Strict Supervision Terms and Conditions. Specifically, the new forms are to be used in completing monthly reports where an individual is under close supervision or strict supervision, as described below.
Reasons for the Change
The changes to the Supervisory Reports are designed to:
- Facilitate Staff’s assessment of the nature and quality of the enhanced supervisory activities being conducted by sponsoring firms.
- Permit Staff to determine the volume of supervised trading activity being undertaken by the individual subject to the supervisory terms and conditions.
The Supervisory Reports are intended to be used for terms and conditions imposed after the date of the Notice and do not modify or subtract from any other account supervisory rules imposed upon an individual or his or her sponsoring firm by an SRO. Copies of the Supervisory Reports can be found attached to the Notice.
Development of the Supervisory Reports
Terms and conditions may be imposed upon the registration of a registrant to address a regulatory concern relating to that firm or individual. Such concerns typically result from the past conduct of a registrant or from other factors that affect his or her suitability for registration.
In order to maintain flexibility in addressing the various regulatory concerns that may arise in relation to an individual registrant, there is no prescribed list of terms and conditions that may be imposed. However, over time, standard terms and conditions for a number of situations have been developed by CSA Staff, including for two distinct types of enhanced supervision - close supervision and strict supervision:
- Close supervision requires (among other things) the registrant’s sponsoring firm to review a registrant’s trades on a daily basis and to complete a monthly report which is to be made available for review by Staff upon request.
- Strict supervision requires that the registrant’s trades be pre-approved by the sponsoring firm and that the sponsoring firm complete and deliver a report to Staff on a monthly basis.