As of June 6, 2022, amendments to National Instrument 33-109 Registration Information (“NI 33-109“) and to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 33-101“) (the “Amendments“) come into force. These Amendments are relevant to all registration categories. Registrants will be required to update their internal policies and practices to comply with the Amendments. This article summarizes the Amendments and serves as a reminder about the upcoming changes.
- Updating the activities that must be reported by Individual Registrants where such activities are carried on outside of their sponsoring firms (“Outside Activities“).
- Individual Registrants must report any non-securities licensing, including their license numbers.
- A corporate group with more than one registrant can appoint a representative (the “Authorized Affiliate“) to make certain filings on behalf of the corporate group. The Authorized Affiliate must provide the full name and National Registration Database (“NRD“) number of every corporation on behalf of which they are filing.
- The deadlines to report changes in registration information have been changed from 10 and 30 days to 15 and 30 days.
- Bankruptcies affecting Individual Registrants or entities with which Individual Registrants were partners, officers, directors or major shareholders must be reported no matter how long ago they occurred.
The Canadian Securities Administrators (“CSA“) first published the Amendments on December 16, 2021. On March 3, 2022, the CSA announced the Amendments would come into force on June 6, 2022. The CSA introduced the Amendments with three goals in mind:
- To modernize the registration information requirements;
- To clarify Outside Activity reporting; and
- To update filing deadlines.
The following provides a description of each category of the Amendments.
I. Outside Activity Reporting
The Amendments introduce a new reporting framework for activities carried on by Individual Registrants outside of their sponsoring firms. If the Outside Activity falls into any one of the following five categories, it must be reported within 30 days:
- Activities with or for another registered entity;
- Activities for an entity that receives compensation from a registered firm;
- Activities that raise money for an entity through the issuance or promotion of securities or derivatives;
- Activities that are finance or finance-related services; and
- Activities that are a position of influence (e.g., medical doctor, religious leader, or notary).
Position of Influence
All registered individuals must report their position of influence, whether or not compensation is received. A position of influence is a position that:
- Is not with a sponsoring firm; and
- A reasonable person would consider the individual to have influence over another individual due to the nature of the position or the training or specialized knowledge required for the position.
The Amendments also provide that a registered firm must not knowingly permit a registered individual of the firm who is in a position of influence to purchase or sell securities or derivatives for, or recommend the purchase, sale or holding of securities or derivatives to,
- an individual who (i) has a relationship with the registered individual arising from the position of influence, and (ii) to a reasonable person, would be considered to be susceptible to the registered individual’s influence, or
- a spouse, parent, sibling, grandparent or child of an individual referred to in paragraph (a).
II. Multiple Affiliate Filings
The Amendments impose a new rule to reduce multiple filings of the same information by corporate groups. Registered firms with the same principal regulator can delegate to one of those firms (the “Authorized Affiliate“) the requirement to notify the securities regulatory authority of changes in certain registration information.
The registered firms in the corporate group must provide a certificate (the “Certificate“) indicating that they are relying on the Authorized Affiliate to provide updated information. The Certificate must be filed with the firm’s principal regulator and executed by an officer or partner of the firm. The Certificate must confirm that the relying firm has delegated the duty to notify the regulator of the change to the Authorized Affiliate. The Certificate must also state the full legal name and NRD number of the registered firm and the Authorized Affiliate.
Registered firms can only delegate registration information changes to an Authorized Affiliate if the changes relate to one of the following items of Form 33-109F6 Firm Registration:
- Item 3.12 [Ownership Chart];
- Item 4.1 [Securities registration];
- Item 4.3 [Membership of exchange or SRO];
- Item 4.5 [Refusal of registration, licensing or membership];
- Item 4.6 [Registration for other financial products];
- Part 7 [Regulatory action];
- Part 8 [Legal action].
III. Extending Deadlines
The Amendments have changed reporting deadlines from 10 and 30 days to 15 and 30 days. For registered firms, all items must be reported within 15 days except for the following items, which must be reported within 30 days of the change:
- Part 3 [Business history and structure];
- Item 4.1 [Securities registration];
- Item 5.12 [Auditor];
- Item 6.1 [Client assets];
- Item 6.2 [Conflicts of interest].
For Individual Registrants, all items must be reported within 15 days except for the following items, which must be reported within 30 days of the change:
- Item 2.1 [Current and previous residential addresses];
- Item 2.2 [Mailing address];
- Item 4 [Citizenship];
- Item 10 [Reportable activities];
- Item 11 [Previous employment and other activities].
IV. Other Key Changes in the Amendments
The word “Termination” has been changed to “Cessation”. This change emphasizes when Form 33-109F1 Notice of Individual Resignation or Permitted Individual Status (“Form 33-109F1“) is required. Form 33-109F1 is required when an Individual Registrant ceases to perform registered activities and not merely when the individual terminates their employment. Item 12 of Form 33-109F4 Registration of Individuals and Review of Permitted Individuals (“Form 33-109F4“) requires individuals to indicate the date they ceased to perform activities for the firm they resigned or were terminated from. This may not be the same date as the termination date of the individual’s employment.
The Amendments introduce new reporting requirements for education and experience during the registration process. Education is only required to be reported when it is necessary for registration categories or self-regulatory organization (“SRO“) approval categories that are being applied for. The CSA will assess whether an individual has gained relevant securities experience on a case-by-case basis.
Individual Registrants must report whether they have resigned or been terminated when, at the time of their resignation or termination, there existed allegations that the individual contravened any statutes or failed to meet standards of conduct (the “Allegations“). If the Allegations existed when the individual left a sponsoring firm, the individual may not use Form 33-109F7 Reinstatement of Registration of Individuals and Permitted Individuals (“Form 33-109F7“). If the individual cannot use Form 33-109F7, then the individual must complete Form 33-109F4 by making the NRD submission entitled “Reactivation of Registration”.
The Amendments introduce a requirement to report the business titles and professional designations that Individual Registrants use or will use once registered. The purpose of this requirement is to implement the CSA’s oversight for the new prohibition, in NI 31-103 introduced as part of the Client Focused Reforms, on registrants holding out their services in a way that could deceive or mislead as to their proficiency, experience or qualifications; their relationship with the registrant; or the products or services provided.
What Registrants Must Do by June 6, 2022
The Amendments provide a transition period and take effect on June 6, 2022.
As a result of the Amendments two new questions have been added to your NRD form. Since these are new questions current registrants will have the words “there is no response to this question” inserted in NRD. All Individual Registrants or Permitted Individuals are required to update their NRD information for any item where it states “there is no response to this question” by the earlier of: the date the Individual Registrant reports a change to their registration information, and June 6, 2023. Individual Registrants may already see “there is no response to this question” in their NRD responses due to prior amendments in 2009 and 2015.
The actions that a registrant will need to take vary depending on the specific situation of each registered firm or individual. Broadly speaking, the Amendments will likely require changes to the registrant’s reporting practices, record-keeping protocols, and compliance training. The exact changes depend on the registrant’s current policies and procedures.
Please reach out to us to find out what steps your firm may need to take to comply with the amended rules.
This publication is intended for general information purposes only and should not be relied upon as legal advice.