On July 17, 2009 the Canadian Securities Administrators (the “CSA”) published in final form National Instrument 31-103 Registration Requirements and Exemptions (the “Rule”), its related companion policy (the “CP”) and other related rules and amendments.

International Dealers

Currently, non-Canadian dealers are permitted to engage in trading activities in all provinces other than Ontario and Newfoundland & Labrador provided that they are acting in reliance on an applicable registration exemption, including dealing solely with accredited investors. In Ontario and Newfoundland & Labrador, non-Canadian dealers must be registered as an international dealer or limited market dealer in order to engage in trading activities with residents of these provinces.

Upon the coming into force of the Rule, the international dealer registration category and accredited investor registration exemption will be repealed and any non-Canadian dealer intending to engage in trading activities with Canadian residents will either need to register in the applicable province as an exempt market dealer or investment dealer or will need to rely upon the newly created international dealer exemption (the “ID Exemption”).

The ID Exemption will allow a non-Canadian person or company who is appropriately registered as a dealer in its home jurisdiction, to offer foreign securities (with a few limited exemptions for certain specific domestic securities) to a specified group of Canadian “permitted clients” (including governments, financial institutions, institutional investors, pension funds and ultra-high net worth individuals).

Prior to trading in Canada pursuant to the ID Exemption, the non-Canadian dealer must first deliver a submission to jurisdiction and appointment of agent for service form to the securities regulatory authority in each province where it intends to engage in trading and securities marketing activities. It will also need to provide written notice to clients of, among other things, the fact that it is not registered in Canada.

International Advisers

Currently, non-Canadian investment advisers and portfolio managers are required to register as an adviser in Canada when advising Canadian-resident clients; subject only to a few limited exemptions, including in some provinces where the adviser is acting as sub-adviser to a Canadian registered adviser or has less than five clients across Canada. In Ontario, for instance, registration as an “international adviser” permits non-Canadian investment advisers to provide advice to a prescribed groups of institutions.

Similar to the ID Exemption described above, the Rule introduces a new international adviser exemption (the “IA Exemption”) that will permit a non-Canadian investment adviser who is appropriately registered, or operates under an exemption from registration, in its home jurisdiction, to act as an adviser to a specified group of “permitted clients” primarily in respect of foreign securities and incidentally in respect of the securities of Canadian issuers.

A non-Canadian investment adviser will only be permitted to act as an adviser in Canada in reliance on the IA Exemption in circumstances where less than 10% of the aggregate consolidated gross revenues of such non-Canadian investment adviser and its affiliates and affiliated partnerships is derived from Canadian advising and portfolio management activities.

Prior to advising Canadian clients pursuant to the IA Exemption, the non-Canadian investment adviser must first deliver a submission to jurisdiction and appointment of agent for service form to the securities regulatory authority in each province where its clients reside. It will also need to provide written notice to clients of, among other things, the fact that it is not registered in Canada.

Look-Through Registration Interpretation Abandoned

In Ontario, the regulator has historically interpreted the current rules to require a non-Canadian investment adviser managing a non-Canadian investment fund to register as a portfolio manager or international adviser in Ontario in circumstances where an Ontario-resident invests in such non-Canadian investment fund. This “look through” registration requirement will be abandoned upon the coming into force of the Rule.

General Partners of Non-Canadian Private Equity, Venture Capital and Hedge Funds

We are routinely asked whether there are any issues if the general partner or manager of private equity, venture capital or hedge fund seeks capital from Canadian institutional investors through various marketing and solicitation activities without the use of a placement agent. While the new Rule makes clear the ability of foreign-registered placement agents to undertake marketing and solicitation activities in Canada, it offers little clarity in respect of the activities of these other fund representatives. Careful consideration will still need to be given as to whether such non-registered fund representatives are engaging in the business of trading or advising in securities in Canada as registration may be required. There will be much more certainty and much less risk for funds who market their fund securities in Canada through a placement agent who can rely upon the ID Exemption.

Transition and Ongoing Requirements

The registration of non-Canadian dealers currently registered as international dealers in Ontario and Newfoundland & Labrador, is revoked when the Rule comes into force. Those persons, or companies, may rely on the ID Exemption as of that date, but will have until October 28, 2009 to submit the required submission to jurisdiction and appointment of agent for service form with the applicable regulators and give the required notice to clients. Alternatively, they could seek registration as an exempt market dealer, or investment dealer.

Non-Canadian investment advisers will have more time to ensure compliance with the new Rule. Persons registered in Ontario as an “international adviser” and in Alberta as a “portfolio manager and investment counsel (foreign)” have 12 months to determine whether they will continue their operations under the IA Exemption or register as a Canadian portfolio manager. On September 28, 2010, their registrations will be revoked. In other jurisdictions, although there is no category of “international adviser”, non-Canadian investment advisers may have been registered as portfolio managers with terms and conditions restricting their activities similar to the restrictions imposed on firms that are registered in the category of international adviser in Ontario. The CSA has stated that these firms should consider using the international adviser registration exemption in NI 31-103 and surrender their registration in these jurisdictions.

Firms relying on the ID and IA Exemptions will be required to provide annual notices to the securities regulators confirming their intention to continue to rely upon the exemptions.