MI 11-102 and NP 11-203 -- Relief from requirement to obtain information required by section 13.2(3)(b)(i) of NI 31-103 -- Mutual fund dealers already subject to federal legislation requiring information concerning holders of 25% of voting securities of corporate clients, unnecessary to obtain information concerning holders of 10% of voting securities when trading limited to mutual funds.
Applicable Legislative Provisions
NI 31-103 Registration Requirements and Exemptions, ss. 13.2(3)(b)(i), 15.1.
November 2, 2010
IN THE MATTER OF
NATIONAL INSTRUMENT 31-103 REGISTRATION
REQUIREMENTS AND EXEMPTIONS
("NI 31-103" or the "Instrument")
IN THE MATTER OF
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
As part of the know your client requirements, section 13.2(3)(b)(i) of NI 31-103 requires a registrant (other than an investment fund manager) to establish the identity of any individual who owns or exercises control or direction over more than 10% of the voting rights attached to the outstanding voting securities of a corporation that is a client.
The costs incurred by mutual fund dealers in order to comply with section 13.2(3)(b)(i) of NI 31-103 exceed the benefit because mutual fund dealers:
(a) trade primarily in securities of mutual funds that are bound by certain restrictions on investments; and
(b) comply with the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), in order to obtain certain information about all persons who own or control 25% or more of the shares of a corporation that is a client.
1. Section 13.2(3)(b)(i) of NI 31-103 does not apply to a registrant that is a mutual fund dealer in respect of a client that is a corporation, provided that the mutual fund dealer:
(a) is not registered in any other category of registration other than as a mutual fund dealer or as both a mutual fund dealer and an investment fund manager; and
(b) complies with the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) requiring the identification of any person who owns or controls 25% or more of the shares of a corporation that is a client.
2. This order comes into effect on November 5, 2010.