Securities Law & Instruments

Headnote

 

Application under section 147 of the Securities Act (Ontario) for an exemption from the requirement of subsection 21.9(4) of the Securities Act whereas the MFDA is required to select a panel of auditing firms for its members and cause each member to appoint an auditor from the panel with the proviso that each appointed auditor has practiced as an auditor in the securities industry in Canada for at least five years.

 

Applicative Legislative Provisions

 

Securities Act, R.S.O. 1990, c. S.5, as am., s. 147.

 

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

(Act)

 

AND

 

IN THE MATTER OF

MUTUAL FUND DEALERS ASSOCIATION OF CANADA/

ASSOCIATION CANADIENNE DES COURTIERS DE FONDS MUTUELS

(MFDA)

 

EXEMPTION ORDER

(Section 147)

 

                WHEREAS the Commission recognized the MFDA as a self-regulatory organization for mutual fund dealers on February 6, 2001, subject to terms and conditions;

 

                AND WHEREAS the MFDA is required to select a panel of auditing firms for its members and cause each member to appoint an auditor from the panel selected by the SRO pursuant to section 21.9 of the Act;

 

                AND WHEREAS no person shall be appointed as an auditor to such a panel unless they have practised as an auditor in the securities industry in Canada for five years or more pursuant to subsection 21.9(4) of the Act;

 

                AND WHEREAS the MFDA requested in an application dated December 20, 2016 (Application) that an exemption be granted to the MFDA from the requirement of subsection 21.9(4) of the Act;

 

                AND WHEREAS the MFDA has represented to the Commission that:

 

1.             The operations of MFDA members are less complex and subject to less risk than those of IIROC member firms. For example, MFDA members deal in a more limited range of securities; do not engage in principal or proprietary trading activities; do not engage in underwriting; do not deal in derivatives; and do not engage in securities lending and repurchase arrangements, or use client free credits or allow clients to purchase securities on margin.

 

2.             The MFDA requires the auditor of a MFDA member to sign an Acknowledgement and Agreement to the MFDA. The Acknowledgement and Agreement requires the audit engagement partner to attest to the fact that he or she has read and understood certain sections of the MFDA’s Rules, Policies and Forms and agrees to comply with such Rules, Policies and Forms.

 

3.             The MFDA does not approve audit firms to act on behalf of MFDA members. The requirements of MFDA Rule 3.6.8 Qualification are specific to the individual engagement partner. The MFDA reviews the qualification of an audit engagement partner on a member-by-member basis, even if the audit engagement partner has previously signed an Acknowledgement and Agreement for another MFDA member. As a result, the acceptance by the MFDA of an audit engagement partner to sign an audited MFDA Form 1 does not mean that other partners of the same firm would automatically be accepted. Auditors are required to be in good standing with the Chartered Professional Accountants of Canada or another professional accounting body.

 

4.             MFDA staff assesses the quality and reliability of the work done by the MFDA member auditors on an ongoing basis through dialogue with the auditors in respect of the audited MFDA Form 1 and MFDA staff’s audit working paper reviews. In addition, MFDA staff communicates with MFDA member auditors generally by using auditor forums to present audit working paper findings and Bulletins that are directed to auditors. MFDA staff has also used Bulletins to respond to requests from auditors for guidance/clarification.

 

                AND WHEREAS based on the Application and the representations of the MFDA the Commission has determined that it is not prejudicial to the public interest to issue an order that provides such exemption;

 

                IT IS HEREBY ORDERED by the Commission pursuant to section 147 of the Act that the MFDA be exempted from the requirement of subsection 21.9(4) of the Act.

 

                PROVIDED THAT the MFDA shall cause each of its members that is a Level 4 Dealer as defined in MFDA Rule 3.1.1, as amended from time to time, to appoint an auditor that meets the requirement under subsection 21.9(4) of the Act.

 

                DATED December 23, 2016.

 

“AnneMarie Ryan”

Commissioner

 

“Janet Leiper”

Commissioner