Under the order, the applicant and other mutual funds dealers are exempted from the requirement in paragraph 13.2(2)(b) of National Instrument 31-103 to establish whether its clients are insiders of issuers.
National Instrument 31-103 Registration Requirements and Exemptions, s. 13.2(2)(b).
February 26, 2010
IN THE MATTER OF
NATIONAL INSTRUMENT 31-103
REGISTRATION REQUIREMENTS AND
EXEMPTIONS ("NI 31-103" or the "Instrument")
SCOTIA SECURITIES INC. (the "Lead Filer") AND
OTHER MUTUAL FUND DEALERS REGISTERED AS OF
THE DATE OF THIS DECISION
Unless otherwise defined in this decision or the context otherwise requires, terms used in this decision that are defined in NI 31-103 or National Instrument 14-101 Definitions have the same meaning.
1. Paragraph 13.2(2)(b) of NI 31-103 provides that a registrant must take reasonable steps to establish whether a client is an insider of a reporting issuer or any other issuer whose securities are publicly traded.
2. The purpose of this requirement is to guard against abusive insider trading by, for example, allowing dealers to notify a client of the client's obligation to file an insider trade report.
3. If a registrant limits its trading with clients to mutual fund securities, only in very rare circumstances will a trade require the filing of an insider trade report.
1. The Lead Filer has applied to the Director, under section 15.1 of NI 31-103, for exemptions for itself and each mutual fund dealer registered as of the date of this decision (together with the Lead Filer, the Filers or, individually, a Filer) from paragraph 13.2(2)(b) of NI 31-103, subject to the conditions and restrictions set out in this decision.
2. The Lead Filer represents that compliance with paragraph 13.2(2)(b) of NI 31-103 presents significant costs that are not justified when trading with a client is limited to certain securities.
The decision of the Director is that each Filer is exempt from paragraph 13.2(2)(b) of NI 31-103 so long as the Filer is not registered in any other category specified in section 7.1 of NI 31-103.