CANADA: Amendments proposed to regulatory framework for investment fund managers

Wednesday August 24 2016

The Canadian Securities Administrators (CSA) are seeking comments on proposals to amend the current regulatory framework for dealers, advisers and investment fund managers. The amendments range from technical adjustments to more substantive matters.

The proposed amendments include proposals to enhance custody requirements applicable to registered firms that are not members of the Investment Industry Regulatory Organization of Canada (IIROC) or the Mutual Fund Dealers Association of Canada (MFDA) (collectively, Non-SRO Firms) in order to:

• address potential intermediary risks when Non-SRO Firms are involved in the custody of client assets;
• enhance the protection of client assets; and
• codify existing custodial best practices of Non-SRO Firms.

The Custody Amendments include proposals to:

• require registered firms to ensure that, in certain circumstances, a “qualified custodian” is used to hold securities and cash of a client or an investment fund;;
• with some exceptions, prohibit self-custody by registered firms and prohibit the use of a custodian that is not functionally independent of the registered firm;
• require registered firms to confirm how the securities and cash of a client or an investment fund are being held by a qualified custodian;
• require registered firms to disclose to clients where and how client assets are held or accessed; and
• amend Part 9, Appendix G and Appendix H of NI 31-103 in order to exclude IIROC and MFDA members from these custodial requirements on the condition that they comply with the corresponding IIROC or MFDA provisions applicable to them.

The comment period will end on 5^th October 2016.

Click on the above link for further information.