Securities Law & Instruments

Headnote

The applicant and other IIROC members are temporarily exempted, until March 26, 2014, from the requirement in section 14.2(1) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to provide relationship disclosure information in respect of clients that were clients of the firm before March 26, 2013.


IN THE MATTER OF
NATIONAL INSTRUMENT 31-103
REGISTRATION REQUIREMENTS, EXEMPTIONS AND
ONGOING REGISTRANT OBLIGATIONS

AND

ONTARIO SECURITIES COMMISSION
RULE 13-502 FEES

AND

DESJARDINS SECURITIES INC. (the Lead Filer)
AND IIROC MEMBERS FIRMS
REGISTERED AS OF THE DATE OF THIS DECISION

DECISION


Interpretation

1. Unless otherwise defined in this decision or the context otherwise requires, terms used in this decision that are defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) or National Instrument 14-101 Definitions have the same meaning.

Background

2. Under section 14.2(1) [relationship disclosure information] of NI 31-103, a registered firm must deliver to a client all information that a reasonable investor would consider important about the client's relationship with the registrant.

3. Under section 16.14 of NI 31-103, section 14.2 of NI 31-103 did not apply until September 28, 2010 to persons or companies that were registered on September 28, 2009.

4. Under a decision granted to the Lead Filer on September 9, 2010, temporary relief from the application of section 14.2(1) of NI 31-103 was made available until September 28, 2011 to Investment Industry Regulatory Organization of Canada (IIROC) members that were registered on the date of the decision. The temporary relief was provided in anticipation of the finalization of the IIROC relationship disclosure information proposal (RDI Proposal).

5. Under a decision granted to the Lead Filer on September 20, 2011, further temporary relief from the application of section 14.2(1) of NI 31-103 was made available until December 31, 2013 to IIROC members that were registered on the date of the decision (the RDI Decision). It was anticipated that the IIROC RDI Proposal would be finalized and new IIROC member rules reflecting the IIROC RDI Proposal would be approved before the end of 2011 with provisions for their implementation in phases over a two-year transition period.

6. On March 26, 2012, the IIROC announced in IIROC Notice 12-0107 Client Relationship Model -- Implementation the implementation of, among other things, new IIROC Dealer Member Rule 3500 -- Relationship disclosure (the IIROC RDI Rule).

7. The IIROC RDI Rule sets out detailed requirements to assist registered firms who are IIROC members to comply with the general principle in section 14.2(1) of NI 31-103.

8. The implementation schedule for the IIROC RDI Rule provided that the provision of relationship disclosure information to: (i) new clients be given a one year transition period, with an effective implementation date of March 26, 2013, and (ii) existing clients be given a two year transition period, with an implementation date of March 26, 2014.

Application

9. The Lead Filer has applied to the Director, under section 15.1 of NI 31-103, for exemptions for itself and each registered firm that is a member of IIROC as of the date of this decision from section 14.2(1) of NI 31-103, subject to the conditions and restrictions set out in this decision.

10. The Lead Filer represents that if it is required to comply with section 14.2(1) of NI 31-103 on December 31, 2013, the date when the RDI Decision expires, it will be required to prepare detailed relationship disclosure information for its existing clients and may incur significant costs changing its relationship disclosure communications with existing clients when the IIROC RDI Rule is implemented.

11. The Lead Filer further represents that since the IIROC RDI Rule will come into effect on March 26, 2014 in respect of the provision of relationship disclosure information to existing clients, the cost that it will incur by having to comply with section 14.2(1) of NI 31-103 on December 31, 2013 in the interim is not justified.

12. Additionally, the Lead Filer has applied to the Director, under section 6.1 of Ontario Securities Commission Rule 13-502 Fees (Fee Rule), for an exemption from the requirement in section 4.1 to pay a fee for its filing of this exemption application on behalf of other IIROC members firms.

Decision

13. Section 14.2(1) of NI 31-103 does not apply to the Lead Filer or any registered firm that is a member of IIROC as of the date of this decision in respect of the provision of relationship disclosure information to their clients that were clients of the firm before March 26, 2013.

14. Pursuant to section 6.1 of the Fee Rule, the Lead Filer is exempt from the requirement in section 4.1 of the Fee Rule to pay an activity fee for its filing of this exemption application.

15. This decision comes into effect on December 31, 2013 and expires on March 26, 2014.

October 3, 2013

"Debra Foubert"
Director
Compliance and Registrant Regulation