On July 17, 2009 the Canadian Securities Administrators (the “CSA”) published in final form National Instrument 31-103 Registration Requirements (the “Rule”) and Companion Policy 31-103CP Registration Requirements.
The Rule and related amendments to securities legislation, introduce a new requirement for investment fund managers to be registered (the “IFM Registration Requirement”). The CSA has stated that the purpose of this new category of registration is to “ensure that investment fund managers have sufficient proficiency, integrity and solvency (including prescribed capital), to adequately carry out their functions”.
An investment fund manager is defined as a person or company that directs the business, operations or affairs of a mutual fund or a non-redeemable investment fund. The investment fund manager category of registration is distinct from the adviser registration category that applies to the portfolio manager of an investment fund.
The IFM Registration Requirement applies to managers of all investment funds whether or not they are offered by way of prospectus. The requirement does not apply to a fund operated by a private investment club (subject to prescribed conditions).
The IFM Registration Requirement is not subject to a “business trigger”. If a firm engages in investment fund manager activities, it must register. Individuals carrying out activities on behalf of a registered investment fund manager are exempt from registration. However, an investment fund manager’s ultimate designated person and chief compliance officer must be registered.
A registered investment fund manager must deliver to the regulator audited annual financial statements as well as a description of any net asset value adjustment made to the investment fund by the investment fund manager during each quarter.
The record keeping, “know your client” and complaint handling requirements in the Rule do not apply to investment fund managers (instead, they apply to dealers and advisers).
The registration requirement will apply to new investment fund managers with a head office in Canada as of September 28, 2009. Existing investment fund managers with a head office in Canada will have a one year transition period to register in the jurisdiction where their head office is located. There is a two year exemption from the requirement to register in jurisdictions other than the head office jurisdiction. There is also a two year exemption from registration for existing and new investment fund managers with a head office outside of Canada.
The CSA states that it expects to publish a proposal for comment in the next year to explain circumstances under which an investment fund manager that does not have a Canadian head office will need to register, and in what additional jurisdictions an investment fund manager with a head office in Canada will need to register.