Securities Law & Instruments

 



NOTICE OF PROPOSED CHANGES TO PROPOSED RULE 31-502

 

PROFICIENCY REQUIREMENTS FOR REGISTRANTS AND
COMPANION POLICY 31-502CP, AND REVOCATION OF REGULATIONS

 

Substance and Purpose of Proposed Rule

On August 30, 1996, the Ontario Securities Commission published proposed Rule 31-502 and proposed CompanionPolicy 31-502CP together with a notice of a proposed rescission of certain policies of the Commission relating toproficiency requirements for registrants. The Commission republished proposed Rule 31-502 and the proposedCompanion Policy together with a notice of a proposed rescission of certain policies of the Commission and proposedrevocations of and amendments to Regulations on January 23, 1998. The second publication related to proposedchanges to the proposed Rule that arose from further consideration of the proposed Rule by the Commission (the "FirstProposed Changes"). On August 21, 1998 the Commission republished proposed Rule 31-502 and the proposedCompanion Policy together with a Notice of a proposed rescission of certain policies of the Commission and proposedrevocations of and amendments to regulations. The third publication related to proposed changes (the "SecondProposed Changes") to the proposed Rule arising from comments received on the proposed Rule and furtherconsideration of the proposed Rule by the Commission. The Commission adopted the Rule on October 16, 1998 andsent the Rule to the Minister of Finance for approval pursuant to section 143.3 of the Securities Act (Ontario) (the "Act")on October 13, 1998. As indicated in Notice of the Minister of Finance Request for Further Consideration publishedDecember 18, 1998 (the "Minister's Notice") the proposed Rule was returned to the Commission for furtherconsideration.

In the Minister's Notice the Commission advised that it intended to amend the Rule to remove the notion of restrictedlicenses for mutual fund salespersons within full service dealers. It further advised that persons who had beenregistered on that restricted basis would be able to retain those licenses while they maintained registration with theircurrent firms. Further, the Commission advised that in order not to prejudice certain full service dealers who had actedon the proposed Rule in their hiring practices, with the consent of the Commission, those dealers would be permittedto maintain restricted registration for those salespersons for a period of nine months from the registration in therestricted capacity. The Commission has considered its position further and has determined to permit restrictedregistrations on an ongoing basis provided that a restricted registration does not last more than nine months. TheCommission will also restrict the number of restricted representatives within a particular dealer. In addition, a newcourse has been instituted for branch managers who supervise person who trade in options contracts. The proposedRule provides for a thirty month period in which current branch managers who supervise person who trade in optionsto complete the course. Finally, the Commission has reduced the period during which a person can apply forregistration based on having completed the course requirements in the past from five years to three years. This Noticerelates to the proposed changes outlined in this paragraph (the "Third Proposed Changes") to the proposed Rule arisingfrom the further consideration by the Commission as requested by the Minister.

The Commission has recommended the Third Proposed Changes relating to restricted registrations as a result ofconcerns by the Canadian Securities Administrators (the "CSA") of the effect of permitting restricted mutual fundlicences for full service dealers on the viability of the proposed self regulatory organization for the mutual fundcommunity and recognition by the Commission that there is a legitimate business reason for allowing restricted licensesfor specified periods. The concern expressed by the CSA related to reduced membership in the proposed mutual fundself regulatory organization by significant mutual fund organizations who might choose to integrate their mutual fundbusiness into their full service operations rather than maintain their current structure of stand alone business entities.The business reasons for having restricted licenses in place for a period of time relate to training periods forsalespersons who move from mutual fund dealers to full service dealers.

The Commission outlined the current requirements under securities legislation, securities directions and administrativepractice in the Notice accompanying the proposed Rule published on January 23, 1998 and these are not repeated inthis Notice.

Through the proposed Rule, the Commission will update, amplify and consolidate the proficiency requirements andcodify certain related administrative practices of Staff for various categories of registration. The proposed Rule updatesthe proficiency requirements for dealers and advisers currently set out in sections 124 and 125 of the Regulation bycodifying Staff's administrative practice of accepting certain alternative courses. The proposed Rule also adopts severalof the proficiency requirements imposed by The Toronto Stock Exchange and Investment Dealers Association ofCanada (the "IDA") and applies these higher standards to securities dealers. The Commission has agreed to acceptthe Professional Financial Planning Course as part of the proficiency for sales persons of brokers, investment dealersand securities dealers in order to harmonize with the requirements of the IDA. The Commission is, however, of the viewthat the course is not sufficient for registrants holding themselves out as financial planners. The issue of regulation offinancial planners is currently under consideration by the Canadian Securities Administrators. The proposed Ruleestablishes proficiency requirements for officers and partners of portfolio managers generally so as to avoid the needto register them as both a portfolio manager and an investment counsel in order to rely on subsection 101(2) of theRegulation. The proposed Rule also incorporates the proficiency requirements for "associate" officers and "associate"partners of portfolio managers and investment counsel, mutual fund dealers trading in LSIF securities and salespersonsof scholarship plan dealers.

The First Proposed Changes to the proposed Rule proposed requiring that persons designated as compliance officersunder Rule 31-505 Conditions of Registration must be registered and, therefore, in addition to having completed thePartners', Directors' and Senior Officers' Examination, must have completed the Canadian Securities Course.

The First Proposed Changes also proposed recognizing the course conducted by the Institute of Canadian Bankers andentitled Branch Compliance Officer Course as sufficient for the purpose of registration of a mutual fund branchmanager. Finally, the First Proposed Changes proposed permitting registration for salespersons of brokers, investmentdealers and securities dealers restricted to the sale of mutual fund securities with the same proficiency as mutual fundsalespersons and the designation of branch managers with mutual fund branch manager proficiency to supervise suchrestricted salespersons.

The Second Proposed Changes were intended to update the names of course materials designated within the proposedRule to the current set of names. In addition, the proposed proficiency requirements were amended to reflect the currentrequirements under the IDA by-laws that have been approved by the Commission. The Second Proposed Changes alsochanged the time limit during which proficiency will be considered to be acceptable even though the applicant has eithernot been in the industry recently or has satisfied the proficiency requirements some time in the past. The SecondProposed Changes required that the applicant must have been registered sometime within the three years prior to theapplication date. The prior draft required that the applicant have been in the industry for forty-eight of the prior sixtymonths. The Commission determined that that was unnecessarily restrictive and that the approach taken by the IDAas reflected in the Second Proposed Changes was preferable.

The Second Proposed Changes introduced reduced proficiency for registrants who do not provide advice. This is inline with the current position of the IDA and provides that salespersons who take unsolicited orders and who do notprovide advice in the context of a trade are not required to maintain the same level of proficiency as salespersons whodeal with the public on an advice giving basis.

The Second Proposed Changes also expanded the First Proposed Changes in relation to full service dealerrepresentatives who were restricted to the sale of mutual funds having a lesser proficiency than those who engage infull service activities. The expansion of the concept related to officers and partners in addition to salespersons andbranch managers as was proposed in the First Proposed Changes.

The Second Proposed Changes also provided a transition period of thirty months for the proposed increase inproficiency in the First Proposed Changes for branch managers.

The Second Proposed Changes reduced the proficiency requirements for securities advisers on the basis that Staffpractice has been to provide exemptions to these proficiency requirements on a fairly consistent basis. The SecondProposed Changes adopted the status quo in respect of the proficiency imposed at the Staff level.

The Second Proposed Changes also adopted the IDA approach with respect to the registration of partners and officersof portfolio managers and investment counsel. This is also applied in the "junior" category which has been renamedas an "associate" category.

The Third Proposed Changes permit the initiative of the First Proposed Changes on a restricted basis in that restrictedregistration of salespersons to mutual fund sales within full service dealers under a mutual fund proficiency regime willbe permitted but only for a period of nine months for each individual registrant. Further, the Third Proposed Changesrestrict the number of restricted representatives whose registration is restricted to the sale of mutual funds within aparticular dealer. In addition, the Third Proposed Changes remove the Second Proposed Changes which permitted thesupervision of mutual fund sales restricted salespersons by mutual fund restricted branch managers, officers andpartners having mutual fund proficiency. However, the registration of those salespersons who were registered asrestricted representatives will continue unless the salesperson transfers to another full service dealer. Since the Ruleis not effective until its effective date under the Act and proficiency is addressed at the time of initial registration, it isnot necessary to provide for specific grandparenting of those restricted salespersons who obtained their licenses priorto December 31, 1998.

The Third Proposed Changes also require branch managers to complete a new course that has been instituted forbranch managers who supervise persons who trade in options contracts. The proposal Rule provides that currentbranch managers who supervise persons who trade in options are not required to complete the course. Finally, theCommission has reduced the period during which a person can apply for registration based on having completed thecourse requirements in the past from five years to three years.

There are several proposed changes to the proposed Companion Policy which are of a drafting nature only.

Summary of Proposed Rule and Companion Policy

The proposed Rule is divided into five parts. Part 1 of the proposed Rule contains defined terms for the Rule and aninterpretive section regarding the time limit for the completion of courses and previous registrations set out in Parts 2and 3 of the proposed Rule.

Part 2 of the proposed Rule sets out the proficiency requirements for dealers, their salespersons, partners, officers,compliance officers and branch managers. This Part also includes a section setting out the proficiency requirementsfor trading in LSIF securities by mutual fund dealers and their salespersons.

Part 3 of the proposed Rule sets out the proficiency requirements for advisers and their partners, officers, complianceofficers and branch managers. This Part also includes a section setting out the proficiency requirements for associatepartners and associate officers of investment counsel and portfolio managers.

The First Proposed Changes to the proposed Rule proposed requiring that persons designated as compliance officersunder Rule 31-505 Conditions of Registration must be registered and, therefore, in addition to having completed thePartners', Directors' and Senior Officers' Examination, have completed the Canadian Securities Course.

The First Proposed Changes also proposed recognizing the course conducted by the Institute of Canadian Bankers andentitled Branch Compliance Officer Course as sufficient for the purpose of registration of a mutual fund branchmanager. Finally, the First Proposed Changes proposed permitting registration for salespersons of brokers, investmentdealers and securities dealers restricted to the sale of mutual fund securities with proficiency the same as mutual fundsalespersons and the designation of branch managers with mutual fund branch manager proficiency to supervise suchrestricted salespersons.

In addition, the First Proposed Changes provided for the deletion of the reference to the revocation of the deemed ruleIn the Matter of Trading in Securities of Labour Sponsored Investment Fund Corporations (1994), 17 OSCB 5505,subsequently a rule, (the "Deemed Rule") which expired on December 31, 1998.

The Second Proposed Changes were intended to update the names of course materials designated within the proposedRule to the current set of names. In addition, the proposed proficiency requirements were amended to reflect the currentrequirements under the IDA by-laws that have been approved by the Commission. The Second Proposed Changes alsochanged the time limit during which proficiency will be considered to be acceptable even though the applicant has eithernot been in the industry recently or has taken the proficiency sometime in the past. The Second Proposed Changesrequired that the applicant must have been registered sometime within the three years prior to the application date.The prior draft required that the applicant have been in the industry for forty-eight of the prior sixty months. TheCommission determined that that was unnecessarily restrictive and that the approach taken by the IDA as reflected inthe Second Proposed Changes was preferable.

The Second Proposed Changes introduced reduced proficiency for registrants who do not provide advice. This is inline with the current position of the IDA and provides that salespersons who take unsolicited orders and who do notprovide advice in the context of a trade are not required to maintain the same level of proficiency as salespersons whodeal with the public on an advice giving basis.

The Second Proposed Changes also expanded the First Proposed Changes in relation to full service dealerrepresentatives who are restricted to the sale of mutual funds having a lesser proficiency than those who engage in fullservice activities. The expansion of the concept related to officers and partners in addition to salespersons and branchmanagers as was proposed in the First Proposed Changes.

The Second Proposed Changes also provided a transition period of thirty months for the proposed increase inproficiency in the First Proposed Changes for branch managers.

The Second Proposed Changes reduced the proficiency requirements for securities advisers on the basis that Staffpractice has been to provide exemptions to these proficiency requirements on a fairly consistent basis. The SecondProposed Changes adopted the status quo in respect of the proficiency imposed at the Staff level.

The Second Proposed Changes also adopted the IDA approach with respect to the registration of partners and officersof portfolio managers and investment counsellors. This is also applied in the "junior" category which has been renamedas an "associate" category.

The Third Proposed Changes permit the initiative of the First Proposed Changes on a restricted basis in that restrictedregistration of salespersons to mutual fund sales within full service dealers under a mutual fund proficiency regime willbe permitted but only for a period of nine months for each individual registrant. Further, the Third Proposed Changesrestrict the number of restricted representatives within a particular dealer. In addition, the Third Proposed Changesremove the Second Proposed Changes which permitted the supervision of mutual fund sales restricted salespersonsby mutual fund restricted branch managers, officers and partners having mutual fund proficiency. Since the Rule isnot effective until its effective date under the Act and proficiency is addressed at the time of initial registration, it doesnot provide for grandparenting of those restricted salespersons who obtained their licenses prior to December 31, 1998.Rather, these registrants will retain their registration unless they transfer to another dealer.

The Third Proposed Changes also require branch managers to complete a new course that has been instituted forbranch managers who supervise persons who trade in options contracts. The proposed Rule provides that currentbranch managers who supervise persons who trade in options are not required to complete the course. Finally, theCommission has reduced the period during which a person can apply for registration based on having completed thecourse requirements in the past from five years to three years.

Related Instruments

The proposed Rule is related to proposed Companion Policy 31-502CP. The proposed Rule is related to Rule 31-504Applications for Registration, which establishes requirements relating to proof of satisfaction of proficiencyrequirements, and Rule 31-505 Conditions of Registration, which establishes the requirements for dealers and advisersto designate compliance officers and branch managers.

The proposed Rule is also related to Rule 91-502 Trades in Recognized Options, which establishes proficiencyrequirements for trading or advising in recognized options, as defined in that rule.

Summary of Written Comments Received by the Commission

The Commission received seven comments on the second publication of the proposed Rule. The commentators were:

(i) the Investment Dealers Association of Canada;

(ii) the Canadian Securities Institute;

(iii) the Canadian Bankers Association;

(iv) CIBC Investor Services;

(v) Berkshire Investment Group Inc.;

(vi) Osler, Hoskin & Harcourt; and

(vii) the Investment Funds Institute of Canada.

The commentators were generally positive with respect to the proposed Rule and the First Proposed Changes.Generally speaking the concept of increasing proficiency was acknowledged as a necessary and positive step. Mostof the commentators pointed out that some of the courses referred to in the Rule had been renamed. The Commissionis proposing amending the proposed Rule to reflect these changes. Several commentators suggested changes toproficiency requirements for various categories of registrants and various positions within registrants. The Commissionhas adopted those comments which it believes are appropriate including the following:

(i) Providing for reduced proficiency for salespersons who do not advise or deal only with non-retailclients;

(ii) Revising the experience requirements for partners and officers of advisers;

(iii) Increasing the portfolio size in respect of experience for partners and officers of advisers;

(iv) Providing alternate proficiency for partners, officers, branch managers, compliance officers andsalespersons to include the U.S. Series 7 Examination and the New Entrants Examination;

(v) Providing a transition period for branch managers to obtain the new proficiency requirements; and

(vi) Harmonizing certain proficiency requirements with proficiency requirements of the IDA.

Some of the revisions to proficiency which have not been adopted by the Commission are as follows:

(i) Some commentators suggested that the Canadian Investment Management Program and theCanadian Financial Analysts Examination Program are equivalent courses.

The Commission does not agree with that position and has not amended the rule to reflect thatcomment.

(ii) One commentator was concerned that the non-resident adviser regime under Ontario securities lawswas not included in the proposed Rule.

The Commission is dealing with non-resident advisers and other non-resident issues as a separatematter. The Rule does provide for proficiency, subject to alternate proficiency in Ontario securitieslaw.

(iii) A commentator was concerned that the Canadian Branch Managers Qualifying Examination, whichincludes options, was inappropriate for all branch managers as a proficiency threshold. The view wasthat part 1 of the Canadian Branch Managers Qualifying Examination would be sufficient for allbranch managers who do not trade in options.

The Commission has now reflected this change in the proposed Rule as the course has beenredesigned to deal with this issue.

(iv) One commentator suggested that since the IDA is proposing changes to its proficiency requirementthat the Commission update the Rule to take into account any other proposed changes in proficiency.

The Commission will do so as part of a Rule amendment when and if the proposed changes inproficiency are approved by the Commission as part of a Rule amendment.

(v) One commentator suggested that the Commission retain as much flexibility as possible in the Rulein order not to have to amend the Rule as proficiency items are changed.

The Commission is of the view that the specificity of the proficiency requirements is important froma regulatory perspective and it should continue to deal with new proficiency requirements as theycome forward through the Rule amendment process.

(vi) Some commentators suggested alternative proficiency requirements for various categories ofregistration.

The Commission has determined that the proficiency requirements set forth in the Rule are theappropriate proficiency and will consider other proficiency regimes on a case-by-case application.

The Commission also received the following comments:

(i) One commentator was concerned that non-trading partners, directors and officers would not continueto be approved without having completed the proficiency requirements necessary to be registered asa partner, director or officer.

The Rule does not change the current regime of the Commission which is consistent with IDAapproach on this matter.

(ii) There was a concern that the exemption authority in the Rule would not be available for self-regulatory organizations to which registration functions were delegated by the Commission.

Section 21.5 of the Act deals with the ability of the Commission to assign the powers and duties ofthe Commission under the Act and the regulations (including the rules) to self-regulatoryorganizations.

(iii) One commentator suggested that the structure relating to the functions of the compliance officer arenot in accordance with industry practice.

The Commission has amended the Rule to reflect industry practice.

Regulations to be Revoked

Subsections 101(2), 124(5), 125(2) and section 236 of the Regulation are proposed to be revoked by the Commissionon the basis that they will directly conflict with the proposed Rule.

The Commission proposes to revoke subsections 124(1) to 124(4), 124(6), 125(1) and 125(3) of the Regulation as theywill be replaced by the provisions of the proposed Rule that update and consolidate the proficiency requirements relatedto certain dealer and adviser registrations.

The Commission proposes to revoke section 126 of the Regulation on the basis that it will be replaced by the provisionin the proposed Rule that provides discretion to the Director to grant exemptions to the Rule.

The Commission also proposes to revoke certain definitions in section 96 of the Regulation and the definition of LabourSponsored Investment Fund Course in section 234 of the Regulation on the basis that the definitions will be replacedby definitions in the proposed Rule.

Finally, the Commission proposes to amend subsection 130(1) of the Regulation to remove the inconsistency betweensubsection 130(1) of the Regulation and subsection 2.1(1) of the proposed Rule regarding the duration of certainrenewals of registration. Subsection 2.1(2) of the proposed Rule provides that in certain circumstances, a registrationwill be suspended 30 months from the date the registration was granted, despite any renewals in the interim.

The Deemed Rule expired on December 31, 1998.

Comments

Interested parties are invited to make written submissions with respect to the proposed changes to the proposed Rule.Submissions received by October 18, 1999 will be considered.

Submissions should be made in duplicate to:

Daniel P. Iggers, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario M5H 3S8

 

A diskette containing the submissions (in DOS for Windows format, preferably WordPerfect) should also be submitted.As the Act requires that a summary of written comments received during the comment period be published,confidentiality of submissions cannot be maintained.

Questions may be referred to:

Dirk de Lint
Legal Counsel, Registration
Ontario Securities Commission
(416) 593-8090

 

Proposed Rule

The text of the proposed Rule including the proposed changes follows.

DATED: September 17, 1999.

 


 

ONTARIO SECURITIES COMMISSION RULE 31-502

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

 

TABLE OF CONTENTS

 

PART 1 DEFINITIONS AND INTERPRETATION

1.1 Definitions

1.2 Time Limits on Completion of Courses and Previous Registrations

PART 2 PROFICIENCY REQUIREMENTS FOR DEALERS

2.1 Salespersons of Brokers, Investment Dealers and Securities Dealers

2.2 Salespersons of Mutual Fund Dealers

2.3 Salespersons of Scholarship Plan Dealers

2.4 Brokers, Investment Dealers, Securities Dealers and their Partners, Officers, Branch Managers andCompliance Officers

2.5 Mutual Fund Dealers and their Partners, Officers, Branch Managers and Compliance Officers

2.6 Trading in LSIF Securities by Mutual Fund Dealers

PART 3 PROFICIENCY REQUIREMENTS FOR ADVISERS

3.1 Securities Advisers and their Partners, Officers, Branch Managers and Compliance Officers

3.2 Investment Counsel and Portfolio Managers and their Partners, Officers, Branch Managers andCompliance Officers

PART 4 EXEMPTION

4.1 Exemption

 


 

ONTARIO SECURITIES COMMISSION RULE 31-502

 

 

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

 

PART 1 DEFINITIONS AND INTERPRETATION

1.1 Definitions - In this Rule

"Branch Compliance Officer Course" means the course prepared and conducted by the Institute of CanadianBankers and so named on the effective date and every successor to that course that does not narrow thescope of the significant subject matter of the course;

"Branch Managers Course" means the course prepared and conducted by the Canadian Securities Instituteand so named on the effective date, every predecessor to that course and every successor to that coursethat does not narrow the scope of the significant subject matter of the course;(1)

"Canadian Investment Funds Course" means the course prepared and conducted by the Education Divisionof The Investment Funds Institute of Canada and so named on the effective date, every predecessor to thatcourse and every successor to that course that does not narrow the scope of the significant subject matterof the course;

"Canadian Investment Management Program" means the program prepared and conducted by the CanadianSecurities Institute and so named on the effective date, every predecessor to that program and everysuccessor to that program that does not narrow the scope of the significant subject matter of the program;

"Canadian Securities Course" means the course prepared and conducted by the Canadian SecuritiesInstitute and so named on the effective date, every predecessor to that course and every successor to thatcourse that does not narrow the scope of the significant subject matter of the course;

"Chartered Financial Analyst Examination Program" means the program prepared and conducted by theAssociation for Investment Management and Research and so named on the effective date, everypredecessor to that program and every successor to that program that does not narrow the scope of thesignificant subject matter of the program;

"Conduct and Practices Course" means the course prepared and conducted by the Canadian SecuritiesInstitute and so named on the effective date, every predecessor to that course and every successor to thatcourse that does not narrow the scope of the significant subject matter of the course;

"effective date" means the date on which this Rule comes into force;

"Investment Funds in Canada Course" means the course prepared and conducted by the Institute ofCanadian Bankers and so named on the effective date, every predecessor to that course and everysuccessor to that course that does not narrow the scope of the significant subject matter of the course;

"LSIF course" means a course designated by the Commission as an LSIF course that provides instructionabout LSIFs and their securities that is relevant to a person engaged in trading in the securities of LSIFs;

"Mutual Fund Branch Managers' Course" means the course prepared and conducted by the EducationDivision of The Investment Funds Institute of Canada and named the "Branch Managers' Course" on theeffective date, every predecessor to that course and every successor to that course that does not narrowthe scope of the significant subject matter of the course;

"Mutual Fund Officers', Partners' and Directors' Course" means the course prepared and conducted by theEducation Division of The Investment Funds Institute of Canada and named the "Officers', Partners' andDirectors' Course" on the effective date, every predecessor to that course and every successor to that coursethat does not narrow the scope of the significant subject matter of the course;

"New Entrants Examination" means an examination prepared and conducted by the Canadian SecuritiesInstitute for new entrants to the securities industry and so named on the effective date, every predecessorto that examination and every successor to that examination that does not narrow the scope of thesignificant subject matter of the examination;

"Options Supervisors Course" means the course prepared and conducted to the Canadian SecuritiesInstitute and so named on the effective date, every predecessor to that course and every successor to thatcourse that does not narrow the scope of the significant subject matter of the course;

"Partners', Directors' and Senior Officers' Qualifying Examination" means the examination prepared andconducted by the Canadian Securities Institute and so named on the effective date, every predecessor tothat examination and every successor to that examination that does not narrow the scope of the significantsubject matter of the examination;

"Professional Financial Planning Course" means the course prepared and conducted by the CanadianSecurities Institute and so named on the effective date and every predecessor to that course and everysuccessor to that course that does not narrow the scope of the significant subject matter of the course;

"restricted representative" means a salesperson, partner or officer of a broker, investment dealer orsecurities dealer whose registration is restricted to

(a) the sale of mutual fund securities, or

(b) accepting unsolicited trade orders from clients provided no advice is provided to clients on the tradeorder;

"scholarship plan dealers' course" means a course designated by the Commission as a scholarship plandealers' course that provides instruction about scholarship plans and their securities that is relevant to aperson engaged in trading in the securities of scholarship plans; and

"U.S. Series 7 Examination" means the examination prepared and conducted by securities regulators in theUnited States of America and so named on the effective date and every predecessor to that examinationand every successor to that examination that does not narrow the scope of the significant subject matterof the examination.

1.2 Time Limits on Completion of Courses and Previous Registrations

(1) For the purposes of satisfying Parts 2 and 3, except subsection 2.1(2), an applicant for registrationor reinstatement of registration must have completed a specified course or examination not morethan three years before the date of the applicant's application for registration or reinstatement ofregistration, or have been previously registered in the relevant category at any time during the three-year period immediately before the date of the applicant's application for registration or reinstatementof registration.

(2) Despite subsection (1), if a person or company completes, within the three-year period referred to insubsection (1), a specified course or examination for which another specified course or examinationis a prerequisite, the specified course or examination that is the prerequisite need not have beencompleted during the three-year period.

PART 2 PROFICIENCY REQUIREMENTS FOR DEALERS

2.1 Salespersons of Brokers, Investment Dealers and Securities Dealers

(1) Except as provided in Ontario securities law, an individual shall not be granted registration as asalesperson of a broker, investment dealer or securities dealer unless the individual has

(a) been granted registration previously as a salesperson, partner or officer of a broker orinvestment dealer, other than as a restricted representative,(2) or as a broker or investmentdealer;

(b) been granted registration after the effective date as a salesperson, partner or officer of asecurities dealer, other than as a restricted representative,(3) or as a securities dealer;

(c) completed either

(i) each of

(A) the Canadian Securities Course, and

(B) the Conduct and Practices Course or the Partners', Directors' and SeniorOfficers' Qualifying Examination; or

(ii) the New Entrants Examination and the U.S. Series 7 Examination; or

(d) been granted registration as such by his or her principal regulator, as that term is definedin National Instrument 31-101 Mutual Reliance Review System for Registration, and thatregistration has not been suspended or terminated.

(2) A registration as a salesperson of a broker, investment dealer or securities dealer granted after theeffective date is suspended on the last day of the thirtieth month(4) after the date the registration wasgranted, despite any renewals in the interim, unless the salesperson has

(a) completed the Professional Financial Planning Course or the first course of the CanadianInvestment Management Program before the registration was granted; or

(b) before the end of the thirty-month period

(i) completed the Professional Financial Planning Course or the first course of theCanadian Investment Management Program, and

(ii) delivered a notice to the Director disclosing the completion of the proficiency in theform required by Ontario securities law for changes to registration information.

(3) Despite subsection (1), an individual that does not meet the requirements for registration set out inthat subsection may be granted registration as a salesperson of a broker, investment dealer orsecurities dealer if(5)

(a) the registration is restricted to the sale of mutual fund securities;

(b) the individual has

(i) been granted registration previously as a salesperson, partner or officer of amutual fund dealer or as a mutual fund dealer, or

(ii) completed any one of the Canadian Securities Course, the Canadian InvestmentFunds Course or the Investment Funds in Canada Course; and

(c) at the date the registration for the individual is granted, the broker, investment dealer orsecurities dealer that is sponsoring the application has registered with it not more than thelesser of

(i) 100 restricted representatives whose registration is restricted to the sale of mutualfunds; and

(ii) that number of restricted representatives whose registration is restricted to the saleof mutual funds equal to 5% of the total number of representatives registered withthe broker, investment dealer or securities dealer.

(4) Subsection (2) does not apply to a restricted representative.

(5) Despite subsection (2), a registration as a salesperson of a broker, investment dealer or securitiesdealer that was a restricted registration is suspended on the last day of the thirtieth month after thedate that the restrictions on the registration were removed, despite any renewals in the interim, unlessthe salesperson has met the requirements of paragraphs 2(a) and 2(b).(6)

(6) The registration of an individual as a salesperson under subsection (3) expires on the date that is 270days after the date that registration was granted, despite any renewals in the interim, unless thesalesperson has completed each of

(a) the Canadian Securities Course; and

(b) the Conduct and Practices Course or the Partners' Directors' and Senior Officers' QualifyingExamination.

2.2 Salespersons of Mutual Fund Dealers - An individual shall not be granted registration as a salespersonof a mutual fund dealer unless the individual has

(a) been granted registration previously as a salesperson, partner or officer of a broker, investmentdealer, securities dealer or mutual fund dealer or as a broker, investment dealer, securities dealer ormutual fund dealer; or

(b) completed any one of the Canadian Securities Course, the Canadian Investment Funds Course orthe Investment Funds in Canada Course.

2.3 Salespersons of Scholarship Plan Dealers - An individual shall not be granted registration as asalesperson of a scholarship plan dealer unless the individual has

(a) been granted registration previously as a salesperson of a scholarship plan dealer; or

(b) completed a scholarship plan dealers' course.

2.4 Brokers, Investment Dealers, Securities Dealers and their Partners, Officers, Branch Managers andCompliance Officers

(1) An individual shall not be granted registration as a broker, investment dealer or securities dealer oras a partner or officer of a broker, investment dealer or securities dealer or be designated as thecompliance officer under section 1.3 of Rule 31-505 Conditions of Registration by a broker,investment dealer or securities dealer unless the individual has

(a) been granted registration previously as a partner or officer of a broker or investment dealeror as a broker or investment dealer;

(b) been granted registration after the effective date as a partner or officer of a securities dealeror as a securities dealer;

(c) completed the Partners', Directors' and Senior Officers' Qualifying Examination and

(i) the Canadian Securities Course, or

(ii) the New Entrants Examination and the U.S. Series 7 Examination; or

(d) been granted registration as such by his or her principal regulator, as that term is definedin National Instrument 31-101 National Registration System, and that registration has notbeen suspended or terminated.

(2) An individual shall not be designated as a branch manager under section 1.4 of Rule 31-505 Conditions of Registration by a broker, investment dealer or securities dealer unless theindividual has completed

(a) the Canadian Securities Course and the Branch Managers Course; and

(b) either the Conduct and Practices Course or the Partners', Directors' and Senior Officers'Qualifying Examination; and

(c) if the individual is responsible for supervising persons who trade in options, the OptionsSupervisors Course.

(3) Despite paragraph (2)(a), an individual that is designated as branch manager on the effective datemay continue to be so designated until the last day of the thirtieth month(7) after the effective datewithout successfully completing the Canadian Securities Course or the Branch Managers Course.

(4) Despite paragraph (2)(c), an individual that is designated as branch manager on the effective datemay continue to be so designated without successfully completing the Options Supervisors Course.

2.5 Mutual Fund Dealers and their Partners, Officers, Branch Managers and Compliance Officers

(1) An individual shall not be granted registration as a mutual fund dealer or as a partner or officer of amutual fund dealer or designated as the compliance officer under section 1.3 of Rule 31-505Conditions of Registration by a mutual fund dealer unless the individual has

(a) been granted registration previously as a partner or officer of a broker, investment dealer,securities dealer or mutual fund dealer or as a broker, investment dealer, securities dealeror mutual fund dealer; or

(b) completed

(i) any one of the Canadian Securities Course, the Canadian Investment FundsCourse or the Investment Funds in Canada Course, and

(ii) either the Partners', Directors' and Senior Officers' Qualifying Examination or theMutual Fund Officers', Partners' and Directors' Course.

(2) An individual shall not be designated as a branch manager under section 1.4 of Rule 31-505 Conditions of Registration by a mutual fund dealer unless the individual has

(a) been granted registration previously as a partner or officer of a broker, investment dealer,securities dealer or mutual fund dealer or as a broker, investment dealer, securities dealeror mutual fund dealer; or

(b) completed

(i) any one of the Canadian Securities Course, the Canadian Investment FundsCourse or the Investment Funds in Canada Course, and

(ii) any one of the Branch Managers Course, the Mutual Fund Branch Managers'Course or the Branch Compliance Officer Course.

2.6 Trading in LSIF Securities by Mutual Fund Dealers

(1) A mutual fund dealer shall not trade in the securities of an LSIF unless

(a) the trade is made through one of its registered salespersons, partners or officers whosatisfies the proficiency requirements in subsection (2);

(b) the mutual fund dealer has delivered a notice to the Director stating the names of each ofits registered salespersons, partners and officers who will be trading in the securities of anLSIF and the date on which the applicable course referred to in subsection (2) wascompleted by each individual; and

(c) within ninety days after the mutual fund dealer's financial year end, the mutual fund dealerdelivers a notice to the Director stating the names of each of its registered salespersons,partners and officers who will be trading in the securities of an LSIF and the date on whichthe applicable course was completed by each individual.

(2) A registered salesperson, partner or officer of a mutual fund dealer shall not trade in the securitiesof an LSIF on behalf of a mutual fund dealer unless the salesperson, partner or officer has completed

(a) an LSIF course;

(b) the Canadian Securities Course on or after October 25, 1993; or

(c) the Canadian Securities Course before October 25, 1993 and has been registered andemployed as a registrant at any time during the three year period immediately before thetrade.

PART 3 PROFICIENCY REQUIREMENTS FOR ADVISERS

3.1 Securities Advisers and their Partners, Officers, Branch Managers and Compliance Officers

(1) An individual shall not be granted registration as a securities adviser or a partner or officer of asecurities adviser unless

(a) the individual has been granted registration previously as a partner or officer or an associatepartner or associate officer of a securities adviser, investment counsel or portfolio manageror as a securities adviser, investment counsel or portfolio manager;

(b) the individual has

(i) completed the Canadian Investment Management Program or the first year of theCanadian Financial Analyst Examination Program, and

(ii) established that the individual performed research involving the financial analysisof investments for at least two years under the supervision of a registered adviser;or

(c) the individual has been granted registration as such by his or her principal regulator, as thatterm is defined in National Instrument 31-101 Mutual Reliance Review System forRegistration, and that registration has not been suspended or terminated.

(2) An individual shall not be designated by a securities adviser as the compliance officer under section1.3 of Rule 31-505 Conditions of Registration or as a branch manager under section 1.4 of Rule 31-505 Conditions of Registration unless the individual has been granted registration previously as apartner or officer of a securities adviser, investment counsel or portfolio manager.

3.2 Investment Counsel and Portfolio Managers and their Partners, Officers, Branch Managers andCompliance Officers

(1) An individual shall not be granted registration as an investment counsel or portfolio manager or asa partner or officer of an investment counsel or portfolio manager unless the individual

(a) has been granted registration previously as a partner or officer of an investment counsel orportfolio manager or as an investment counsel or portfolio manager, other than in relianceon section 3.3 or under a registration subject to terms and conditions requiring theindividual's advising activities to be supervised;

(b) has

(i) completed either

(A) the Canadian Investment Management Program and the first year of theChartered Financial Analysts Examination Program; or

(B) the Chartered Financial Analyst Examination Program, and

(ii) established that the individual has been employed for five years performingresearch involving the financial analysis of investments, and that three of the fiveyears have been under the supervision of a registered adviser having theresponsibility on a discretionary basis for the management or supervision ofinvestment portfolios having an aggregate value of not less than $5,000,000;

(c) has established that

(i) the individual has

(A) had three years experience as an associate partner or associate officerof an investment counsel or portfolio manager;

(B) had three years experience as a registered salesperson of a broker,investment dealer or securities dealer and two years experience as anassociate partner or associate officer of an investment counsel orportfolio manager;

(C) had three years experience as a research analyst for a broker orinvestment dealer and two years experience as an associate partner orassociate officer of an investment counsel or portfolio manger; or

(D) been responsible for the management or supervision of investmentportfolios on a discretionary basis having an aggregate value of not lessthan $5,000,000 for a period of five years while employed by a Canadianfinancial institution or a pension fund; and

(ii) the individual has, at the time of application for registration, and has had for aperiod of one year prior to the time of application, under his or her directadministration on a discretionary basis investment portfolios having an aggregatevalue of not less than $5,000,000; or

(d) has been granted registration as such by his or her principal regulator, as that term isdefined in National Instrument 31-101 Mutual Reliance Review System for Registration, andthat registration has not been suspended or terminated.

(2) An individual shall not be designated by an investment counsel or portfolio manager as thecompliance officer under section 1.3 of Rule 31-505 Conditions of Registration or as a branchmanager under section 1.4 of Rule 31-505 Conditions of Registration unless the individual has beengranted registration previously as a partner or officer of an investment counsel or portfolio manager,other than in reliance on section 3.3 or under a registration subject to terms and conditions requiringthe individual's advising activities to be supervised, or as an investment counsel or portfolio manager.

3.3 Associate Partners and Associate Officers of Investment Counsel and Portfolio Managers

(1) An individual may be granted registration as an associate partner or associate officer of aninvestment counsel or portfolio manager if the individual has

(a) completed

(i) Parts I and II of the Canadian Investment Management Program and the first yearof the Chartered Financial Analyst Examination Program, or

(ii) the Chartered Financial Analyst Examination Program; and

(b) been employed for

(i) two years performing research involving the financial analysis of investments, or

(ii) two years as a registered salesperson of a broker, investment dealer or securitiesdealer.

(2) An individual who is registered as an associate partner or associate officer of an investment counselor portfolio manager shall not give advice unless the advice has been approved by a designatedregistered partner or officer of the investment counsel or portfolio manager that employs theindividual.

(3) An investment counsel or portfolio manager that employs an associate partner or associate officershall designate a partner or officer that is not an associate partner or associate officer to approveadvice given by an associate partner or associate officer.

(4) The designated partner or officer described in subsection (3) shall be employed at the same locationas the associate partner or associate officer whose advice must be approved.

PART 4 EXEMPTION

4.1 Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to suchconditions or restrictions as may be imposed in the exemption.

 


 

ONTARIO SECURITIES COMMISSION COMPANION POLICY 31-502CP

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

PART 1 PROFICIENCY REQUIREMENTS FOR REGISTRANTS

1.1 Alternative Qualifications for LSIF Salespersons - The Director will consider granting an exemption tosection 2.6 of Rule 31-502 Proficiency Requirements for Registrants (the "Rule") to any person or companyif the Director is satisfied that to do so would not be prejudicial to the public interest, having regard to thespirit and intent of the Community Small Business Investment Funds Act.

1.2 Alternative Qualifications - The Director will consider granting an exemption to any of sections 2.1 to 2.5and 3.1 to 3.3 of the Rule to any person or company if the Director is satisfied that the person or companyhas qualifications or experience that are equivalent to, or more appropriate in the circumstances than, thequalifications or experience required under the section.

1.3 Supervision by Non-Registered Advisers - For the purposes of establishing experience that is equivalentto, or more appropriate in the circumstances than, the experience under the supervision of a registeredadviser in paragraph 3.1(1)(b) and subparagraph 3.2(1)(b)(iii) of the Rule, the Director will consider, amongother relevant factors, experience under the supervision of

(a) an unregistered investment manager of a Canadian financial institution;

(b) an adviser that is registered in a jurisdiction other than Ontario or a foreign jurisdiction; or

(c) an adviser that is not required to be registered under the laws of the jurisdiction or foreign jurisdictionin which the adviser carries on business.

 


 

 

ONTARIO SECURITIES COMMISSION STAFF NOTICE 31-702 OF

 

ONTARIO SECURITIES COMMISSION DESIGNATION OF

 

COURSES UNDER RULE 31-502

 

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

 

PART 1 INTERPRETATION

1.1 Interpretation - In this Designation, terms defined in Rule 31-502 Proficiency Requirements forRegistrants (the "Rule") have the respective meanings ascribed to them in that Rule.

PART 2 DESIGNATIONS

2.1 LSIF Courses

(1) The course, which, at the effective date of the Rule, is entitled "Labour SponsoredInvestment Funds" prepared and conducted by the Investment Funds Institute of Canadaand every successor to that course that does not narrow the significant subject matter of thecourse is designated by the Commission as an LSIF course under the Rule.

(2) The course, which, at the effective date of the Rule, is entitled "Labour SponsoredInvestment Funds" prepared and previously conducted by Steven G. Kelman and AssociatesLimited ("Kelman")(the "Kelman Course") is designated by the Commission as an LSIFcourse under the Rule for registrants who completed the course prior to December 1, 1998.

2.2 Scholarship Plan Dealers' Courses

(1) The scholarship plan dealers' courses prepared and conducted by each of ScholarshipConsultants of North America, C.S.T. Consultants Inc., Canadian American Financial Corp.(Canada) Limited, Global Educational Marketing Corporation and Education Fund ServicesInc. as they exist on the effective date, every predecessor of one of those courses and everysuccessor to one of those courses that does not narrow the scope of the significant subjectmatter of the course, are designated by the Commission as scholarship plan dealers'courses under Rule 31-502 Proficiency Requirements for Registrants.

(2) If the Commission is of the view that it is in the public interest to terminate any of thedesignations in subsection (1), it may do so after giving the affected party the opportunityto be heard.

1 Formerly known as the Canadian Branch Managers Qualifying Examination.

2 This language is intended to prevent transfers of licenses of restricted representatives.

3 This language is intended to prevent transfers of licenses of restricted representatives.

4 Revised to provide more certainty as to the date of suspension.

5 The revisions reflect the stated intent of the Commission to amend the proposed Rule as set out in the Noticeof Minister of Finance Request for Further Consideration of Rule 31-502 Proficiency Requirements forRegistrants published at (1998) 21 OSCB 7709.

6 This section is new and is intended to ensure that salespersons whose registration is amended from restrictedto unrestricted are only required to obtain the appropriate proficiency after the restrictions on registration areremoved.

7 Revised to provide more certainty as to the date of suspension.