CSA Staff Notice 31-326 Outside Business Activities July 15, 2011 This notice reminds registrants of their obligation to ensure outside business activities do not impair or impede the performance of their regulatory obligations, including compliance with the conflicts of interest provisions under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Registrants that are members of the Investment Industry Regulatory Organization of Canada (IIROC) or the Mutual Fund Dealers Association of Canada (MFDA) are reminded that the firm and the individuals they employ are also subject to IIROC and MFDA requirements that relate to outside business activities. National Instrument 33-109 Registration Information requires disclosure of all outside business activities. Staff of the Canadian Securities Administrators (CSA) will take into account issues that may arise in relation to an individual registrant’s outside business activities when assessing their initial application for registration, when there is a change in their registration and in considering continuing fitness for registration. In this evaluation, CSA staff consider a number of matters, including: whether the individual will have sufficient time to properly carry out their registerable activities, including remaining current on securities law and product knowledge whether the individual will be able to properly service clients what is the risk of client confusion and are there effective controls and supervision in place to manage the risk whether the outside business activity presents a conflict of interest for the individual, and whether that conflict of interest should be avoided or can be appropriately managed whether the outside business activity places the individual in a position of power or influence over clients or potential clients, in particular clients or potential clients that may be vulnerable whether the outside business activity provides the individual with access to privileged, confidential or insider information relevant to their registerable activities A registered firm is responsible for monitoring and supervising the individuals whose registration it sponsors. In relation to outside business activities, this includes: having appropriate policies and procedures to deal with outside business activities, including ensuring outside business activities do not: o involve activities that are inconsistent with securities legislation and IIROC and MFDA requirements; and o interfere with the individual’s ability to remain current on securities law and product knowledge
requiring individual registrants to disclose to their firm, and requiring the firm to review and approve, all outside business activities prior to the activities commencing ensuring the firm’s chief compliance officer is able to properly supervise and monitor the outside business activities maintaining records documenting its supervision of outside business activities and ensuring these records are available for review by regulators ensuring that potential conflicts of interest are identified and appropriate steps are taken to manage such conflicts (See section 13.4 of Companion Policy 31-103CP for further guidance.) ensuring outside business activities do not impair the ability to provide adequate client service, including, where necessary, having an alternate representative available for the client ensuring the outside business activity is consistent with the registrant’s duty to deal fairly, honestly and in good faith with its clients implementing risk management, including proper separation of the outside business activity and registerable activity preventing exposure of the firm to complaints and litigation assessing whether the individual’s lifestyle is commensurate with the firm’s knowledge of the individual’s business activities and staying alert to other indicators of possible fraudulent activity Failure to discharge these responsibilities may be relevant to the firm’s continued fitness for registration. Questions Please refer your questions to any of the following CSA staff: Levon Yon Manager, Registrant Regulation Alberta Securities Commission Tel: 403-355-4475 levon.yon@asc.ca Sophie Jean Analyste expert en réglementation-pratiques de distribution Autorité des marchés financiers Tel: 514-395-0337, ext. 4786 Toll-free: 1-877-525-0337 sophie.jean@lautorite.qc.ca 2
Karin R. Armstrong Registration Supervisor British Columbia Securities Commission Tel: 604-899-6692 Toll free: 1-800-373-6393 karmstrong@bcsc.bc.ca Isilda Tavares Registration Officer, Deputy Director Manitoba Securities Commission Tel: 204-945-2560 isilda.tavares@gov.mb.ca Jason L. Alcorn Legal Counsel New Brunswick Securities Commission Tel: 506-643-7857 jason.alcorn@nbsc-cvmnb.ca Craig Whalen Manager of Licensing, Registration and Compliance Financial Services Regulation Division Securities Commission of Newfoundland and Labrador Tel: 709-729-5661 cwhalen@gov.nl.ca Donn MacDougall Deputy Superintendent of Securities, Legal & Enforcement Department of Justice Government of the Northwest Territories Tel: 867-920-8984 donald_macdougall@gov.nt.ca Brian W. Murphy Deputy Director, Capital Markets Nova Scotia Securities Commission Tel: 902-424-4592 murphybw@gov.ns.ca Louis Arki Director, Legal Registries Department of Justice Government of Nunavut Tel: 867-975-6587 larki@gov.nu.ca 3
Donna Leitch Senior Registration Supervisor, Compliance and Registrant Regulation Ontario Securities Commission Tel: 416-593-8263 dleitch@osc.gov.on.ca Katharine Tummon Superintendent of Securities Prince Edward Island Securities Office Tel: 902-368-4542 kptummon@gov.pe.ca Curtis Brezinski Acting Deputy Director, Legal and Registration Saskatchewan Financial Services Commission Tel: 306-787-5876 curtis.brezinski@gov.sk.ca Fred Pretorius Superintendent of Securities Government of Yukon Tel: 876-667-5225 fred.pretorius@gov.yk.ca 4
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