As we discussed in our post of June 24, the CSA recently published proposed amendments to NI 31-103 Registration Requirements and Exemptions intended to "ensure that clients of all dealers and advisers (registrants)...receive clear and complete disclosure of all charges associated with the products and services they receive, and meaningful reporting on how their accounts perform."
While we discussed the changes in our earlier post, particular attention should be given to the proposals respecting performance reporting. Specifically, the amendments would require that registered firms include original cost information for each security position in a client's account statement. The CSA is also specifically requesting comments on whether the use of tax cost (book value) should be permitted as an alternative.
Proposed changes to the Companion Policy would also provide guidance with respect to calculating the market value of securities. On that point, the amendments provide that market value should be determined by reference to a quoted value on a recognized exchange or marketplace. If market value is not quoted on an exchange, it could be determined by reference to quotes that are available through brokers or, failing that, based on a valuation policy that is consistently applied and based on measures considered reasonable in the industry.
Where a market value of a security could not be determined, however, firms would have to disclose this in the account statement and exclude the security from the calculation of the total market value. According to its notice, the CSA is particularly interested in comments on the guidance related to the valuation of exempt or illiquid securities where there are no quoted values available.
Ultimately, the changes proposed by the CSA are operational in nature and could require that registrants make a substantial investment in time and resources to ensure compliance. As such, registrants should review the proposals carefully and consider providing comments to the CSA by the September 23 deadline.