Appendix “A” Comment Table Multilateral Instrument 31-102 National Registration Database
Commentators Scotiabank Wealth Management Group Investment Funds Institute of Canada Manulife Securities International Ltd. Royal Bank of Canada and affiliates Dundee Private Investors The Toronto Dominion Bank Canadian Bankers Association Dundee Securities Corporation Edward Jones BMO Nesbitt Burns Berkshire Investment Group Inc. Credit Suisse First Boston Canada Inc. National Bank Financial Mutual Fund Dealers Compliance Officers Forum McCarthy Tϑtrault
Category Comment 1. 31-102 If the fees are being applied to pay the costs of Fees developing NRD, then such fees should be substantially reduced after a prescribed period of time.
Page 1
Response The CSA anticipates that once the costs of developing NRD have been paid NRD fees will be set at an amount that will cover the costs of maintaining and upgrading the system. At this time the CSA is unable to confirm whether this will result in a reduction in the NRD fees.
Category Comment 2. 31-102 The submission fees and filer fees for individual Fees non-resident filings and non-registered individuals should be reduced to reflect the value for the responsible dealer. NRD can recover the costs through enrolment fees based on the number of registered individuals under the dealer’s sponsorship
3. 31-102 The Notice to Multilateral Instrument 31-102 Fees explains that a firm will be required to pay, in addition to the fees currently prescribed under securities legislation, $75 for each individual who is applying for registration in a single jurisdiction and $50 for each additional jurisdiction for which an individual has applied to register. Currently, new registrants are charged approximately $250 annually in each province in which they are registered. The $75 submission fee should be a one-
Page 2
Response The CSA is of the view that the NRD fees charged in respect of non-resident individuals should be roughly equivalent to fees charged in respect of resident registered individuals because the benefits to industry of making submissions for these individuals through NRD should be equivalent. The benefits of making NRD submissions for non-registered individuals should be equivalent to the benefits of making NRD submissions for registered individuals.
The enrolment fee is a one-time fee that is charged when a firm enrols to use NRD. The other NRD fees (i.e., the submission fee and the annual NRD fee) are intended to reflect a firm’s use of the system. If only the enrolment fee were charged, NRD fees would not reflect a firm’s changing size and consequently the changing use the firm would make of NRD. Charging an annual fee for each individual will help ensure that the development costs of NRD are paid within a reasonable period of time. The CSA is of view that the benefits to industry of NRD exceed the proposed costs of the system.
Category Comment time fee and not charged annually as a filer fee on top of the standard $250 registration fee. To do otherwise, represents almost a 35% increase in these fees. 4. 31-102 Why are the fees for registered individuals and non- Fees registered individuals different? 5. 31-102 The $50 NRD fee charged for each additional Fees jurisdiction in which an individual is registered is onerous.
6. 31-102 Firms should not be charged for individuals who Fees are terminated within four weeks after the December 15 th annual renewal payment date. Advanced notice to regulators of such terminations is not practical because a dealer generally is not aware that an individual is leaving the firm until they have left.
Page 3
Response The CSA is reconsidering whether fees for registered and non-registered individuals should be different. If the proposed fees (set out in the December 14, 2001 notice) change, the CSA will publish a notice describing the new proposed fees. The CSA is of the view that fees should be greater in respect of individuals submitting information to multiple jurisdictions since NRD will benefit these individuals more than individuals who are only submitting information to a single regulator. The CSA is of view that the benefits to be derived by individuals submitting materials to multiple regulators exceed the proposed fees to those individuals.
The annual fee payment date will be moved to December 31. Those jurisdictions that will maintain a renewal system will have an annual renewal date of December 31. Given that fee payment and renewal will occur on the same date, refunds will not be given for individuals who leave a firm after the renewal date. Because there is no “renewal date” under a permanent registration system (only a suspension date if fees are
Category Comment 7. 31-102 Despite the benefits listed in the OSC’s Fees economist’s report, there are concerns that the benefits and value to industry do not justify the cost of NRD, especially since the costs are being borne by industry. The operational efficiencies that will be derived from NRD do not warrant the registration fee increases imposed on industry by NRD. 8. 31-102 The cost of NRD should be borne by the regulators Fees because it will be used by them to execute their obligations and systematize their procedures. Rather than imposing NRD fees in addition to existing registration fees, the existing registration fees should be used to pay the costs of NRD. Since NRD is aimed at upgrading the technology and processes of the regulators, the cost of NRD should be first paid from the savings gained by regulators before levying fees upon industry to recover the cost of NRD.
Industry should not have to pay the cost of NRD. The regulators should use the registration fees to
Page 4
Response not paid), the CSA disagree that a jurisdiction that has implemented a permanent registration system should refund a firm if individuals leave the firm after the annual fee payment date but before the suspension date. The CSA has reviewed the survey conducted by the Chief Economist’s Office of the Ontario Securities Commission and is of view that the benefits to industry of NRD exceed the proposed costs of the system. To submit and maintain current and accurate registration information is the obligation of registrants. Given the benefits that industry is expected to derive from such functionality as the electronic filing and storage of registration information, the CSA is of the view that the proposed NRD fees are reasonable. Only after NRD is operational will the CSA be able to determine whether savings derived from the system will permit the reduction of regulatory fees.
Category Comment pay for it since the establishment and maintenance of NRD is for the fulfilment of the regulators’ obligations. 9. 31-102 In Part 1.1, the inclusions of definitions of “NRD number” and “NRD Account” (in order to identify the account designated under Part 3.2 (c)) would be helpful. In addition, the words “through NRD” in Parts 5.1 (1), 5.2 (1) and 5.3 (1) should be replaced with “from the filer’s NRD Account”. 10. 31-102 In Part 4.2 (b) (ii) replace “any” with “a” 11. 31-102 In Part 4.4 (2) reference is made to “any change to the contact information previously submitted” while in Part 4.3 reference is made to “of a change to the information” as triggering an obligation to provide a completed Form 31-102F3 and Form 31- 102F1 respectively. Was it intended to differentiate between information and contact information? If so, what information on Form 31-102F3 is “contact information”? 12. 31-102 Consider making reference to Form 33-109F5 with the other listed forms in Section 2.1 or exclude it by specific reference.
Page 5
Response Staff have added definitions for these terms to MI 31-102. Staff did not make the second requested change as, in the opinion of Staff, the provision is clear. Staff did, however change (2) of these provisions to reference the firm filer’s NRD account Subsection 4.2(b)(ii) of MI 31-102 stipulates that in order to use NRD a firm filer must deliver to the NRD administrator “any Form 31-102F2 completed under section 4.2”. MI 31-102 does not stipulate that “a Form 31-102F2” be delivered to the NRD administrator as such a form will not always be required before a firm filer can use NRD. “Information” as referenced in subsection 4.3 includes any information on the Form 31-102F1 save for the legal name of the firm and NRD account information. “Contact information” as referenced in subsection 4.4(2) means item 2 of the Form 31-102F3. This form instructs a firm to complete items 1, 2 and 4 if a change to contact information in item 2 occurs. Subsection 2.1 only references submissions that are to be made electronically through NRD. Changes to an individual’s registration information
Category Comment Response previously submitted on Form 33-109F4 will be made directly to the Form 33-109F4 electronically through NRD. This submission type is referenced in item number 4 of subsection 2.1 of MI 31-102. A Form 33-109F5 will only be used
13. 31-102 Please clarify whether it is the intent of Section 8.7 that firm filers provide notices in regards to changes to Form 4 information that occurred after August 31, 2002, no earlier than October 28, 2002 (presupposing a September 1, 2002 enforcement date). 14. 31-102 The actual time needed to prepare submissions in Page 6
a) when an individual filer is required (either under the transition process or the temporary hardship exemption) to notify the securities regulatory authorities or regulators of a change in paper format or b) when a firm filer is required to notify the securities regulatory authorities or regulators of a change to its Form 3 information. Currently, November 25, 2002 is the proposed NRD launch date. A firm’s NRD access date will not be earlier than the NRD launch date. As such, the earliest NRD access date would be November 25, 2002. Any changes to Form 33-109F4 information by registered individuals (and non-registered individuals) would not have to be submitted electronically through NRD any earlier than 15 days after the firm’s NRD access date. Please note, however, that pursuant to MI 33-109 a paper filing (a Form 33-109F5) would have to have been made within five business days of most changes to an individual’s Form 4 information during this interim period. Staff agree that 10 business days will be a reasonable
Category Comment Temporary NRD format as required by the hardship exemption Hardship provisions will depend upon the nature of the Exemption technical difficulties encountered and the size of the submission that has to be recreated. Since the securities regulatory authorities will already have all of the relevant information in paper format, the time limit should be “as soon as practicable,” or alternatively, no later than 10 business days after the unanticipated technical difficulties have been resolved. The proposed 3 business day limit is too short. 15. 31-102 Termination The procedures for terminating an employee in one province and in all jurisdictions should be clearly listed so dealers are certain what procedures they must follow.
Page 7
Response amount of time to update the NRD record after the temporary hardship exemption has been employed. MI 31-102 has been amended accordingly. If further time is required in extraordinary circumstances, an NRD filer may make an application under section 7.1 of MI 31-102. The concept of "terminating" an individual’s employment is distinct from the concepts of "surrendering" or "changing" an individual's individual category. If an individual's employment is terminated then the firm will submit a 33-109F1 Notice of Termination electronically through NRD. A Notice of Termination terminates an individual's employment with a firm in all jurisdictions. If an individual wishes to surrender or change his or her individual category, he or she will submit a Form 33-109F2 Change of Individual Categories electronically through NRD. An individual may change his or her individual category on a jurisdiction by jurisdiction basis. For example, if an individual is registered in both Alberta and Ontario, the individual may surrender his or her Alberta registration using a Form 33-109F2 Change of Individual Categories while remaining an
Category Comment Response Ontario registrant. However, if the individual files a 33-109F1 Notice of Termination, he or she will cease being employed with his or her firm in Alberta and Ontario and the individual’s registration in both jurisdictions will be suspended.
The procedures for when and how to submit a Notice of Termination and a Change of Individual Categories electronically through NRD are clearly set out in MI 33-109 and the user interface on the NRD system.
It should be noted that there may be some confusion between terminations of employment and changes of individual categories because presently, a Uniform Termination Notice is used to notify regulators of both terminations of employment and surrenders or changes to individual categories.
16. 31-102 With respect of Section 8.6 and 8.9 it should be Transition possible to make the necessary changes to NRD in instances when the firm filer has submitted an application in writing prior to the data transfer date.
Page 8
Please note that individual categories include registration categories and categories of non-registered individuals. If an individual’s application for registration or application to change or surrender a registration category has been approved by the data transfer date, that individual’s updated record will be on the relevant securities regulatory authorities’ legacy systems. Information must be on one or more legacy system to form part of the data transfer.
Category Comment 17. 31-102 Requiring each individual to complete an updated Transition F4 is an unfair regulatory burden that will be costly and time consuming. It will be even more burdensome for larger dealers to accomplish this within a 12-month period. Dealers should have to only review the tombstone information for accuracy and the Regulators should input the required F4 information for existing registrants because they already have the information on file. One firm estimates that it will have to hire 5 additional people and spend $266,000 to comply with the proposed transition rules for all F4s to be updated within 12 months. The regulators should bear the burden and cost of transferring all F4 data to NRD. If the regulators transfer the F4 information to NRD, then Dealers could possibly undertake a review to verify the accuracy of certain data transferred by the securities regulatory authorities. The scope of this Page 9
Response If an application is not approved prior to the data transfer date, NRD must be updated directly by the individual upon receipt of confirmation of approval of the change or surrender. This “update” will take the form of Form 33-109F4 completion. The securities regulatory authorities will make every effort to ensure that as many pending applications are processed as possible prior to the data transfer date. It is in the best interests of all parties to include as much information as is possible in the data transfer. NRD is designed to be a complete database of individual registration information rather than a simple information delivery system. NRD was designed as such to bring maximum benefits to industry and the participating CSA. A few of the benefits of a complete database to industry include: 1. Easy access by firms, directly through an AFR, to the information the securities regulatory authorities hold on firms’ registered individuals and non-registered individuals in each relevant jurisdiction. Firms can easily ensure that their records are up to date and accurate. 2. Easy access by firms’ registered and non-registered individuals, directly through an AFR, to the Form 33-109F4 information of those individuals. This access makes it easy for individuals to confirm that they have met their registration information
Category Comment review would be limited to important and relevant data and exclude non-material historical data, such as the requirement in Item 2 of Form 33-109F4 to provide a 10 year residential history. If it is decided that the firms and individuals are required to complete the transfer of F4 information to NRD, then it is suggested that: • only new individual registrants and existing ones that transfer their registration be required to submit new F4s; • F4 information for existing registrants need only be updated as material changes occur in the information and therefore their records will be updated on a “as need basis”; • the transfer of the information be scheduled for after the RRSP contribution season; • there be no transition quotas as set out in s.8.5 of 31-102, only a deadline date that takes into account the resource demands of the larger firms to comply with the requirement; • NRD fees be waived or reduced to offset the Page 10
Response requirements under MI 33-109. 3. Easy access by firms, directly through an AFR, to the Form 33-109F4 information of potential transferee registrants (with the permission of those registrants). 4. Easy access by the relevant securities authorities to information about registrants and non-registrants thereby streamlining the approval process for transfer and change of category applications. Ultimately, this will result in quicker turnaround of these applications. The participating CSA have determined that the database should be populated directly by firms for a number of reasons. Most importantly, compliance audits of firms have indicated that the securities regulatory authorities do not have completely up to date records of firms’ registered and non-registered individuals. A number of individuals have been remiss in complying with their statutory obligations to inform the relevant securities authorities of changes to their registration information. In other instances, the record of which registered individuals and non-registered individuals are associated with which firm is incorrect. Ultimately, Form 33-109F4 completion by firms in NRD will give firms and individuals the opportunity to ensure compliance with their obligations.
Category Comment costs to the firms of getting new F4s from existing registered individuals; • the monthly quotas for the 12 month transition schedule take into consideration the size of the dealer. For example, a firm with more than 500 reps should have a range requirement between 5%-10%. A merger and acquisition should not be counted as part of the 12 month completion schedule; and • full F4s only be required from individuals requesting registration approval. Existing individual registrants should at most only have to complete items 1 –7, and 9 of F4
The CSA are cognizant of the fact that database population by firms is not an insignificant undertaking. As such, the initial draft of the rule staggered the database population period over a ten month timeframe. After considering industry comments and further analysing system capacity, the participating CSA have agreed to lengthen the timeframe for database population. The rule has been
Page 11
Response Please note that the securities regulatory authorities do not have complete Form 4 information for registrants that obtained registration using the old abbreviated Form 4A. As the securities regulatory authorities are self-funding entities, the cost of populating the database will be borne by industry in any event. Form 33-109F4 completion by firms gives each firm the ability to control their proportionate amount of any costs associated with populating the database. Some commentators have asked whether an NRD fee reduction or waiver would accompany Form 33-109F4 completion by firms. Please note that there will be no submission fees for Form 33-109F4 completion for current registered and non-registered individuals for the sole purpose of populating the database. The NRD set-up and user fees do not relate to Form 33-109F4 completion.
Category Comment Response revised such that firms will be required to input Form 33-109F4 information for various triggering events only (e.g., transfer applications) for the first year after the launch date. Over the next two years, firms will be required to input Form 33-109F4 information for 5% (rather than the current 10%) of their registered and non-registered individuals each month starting the second month after the implementation of NRD. Please note, however, that there will be no Form 33-109F4 completion requirements for the months of January and February. The CSA are sympathetic to the concern that firms will not be able to meet the Form 33-109F4 completion obligations during the peak of the RRSP season. Ultimately, the database population will be complete within three years of the launch of NRD rather than within 12 months.
18. 31-102 Large firms anticipate having many pending Transition applications for registration that are not included in Staff will endeavour to process as many applications the Data Transfer. Therefore, it will be extremely for registration prior to the data transfer date so as to difficult for such firms to have the pending minimize any potential backlog of applications. applicants complete F4s within 15 days of having Staff agree, however, that a 30 business day period access to NRD. It is suggested that a minimum of would be reasonable in the circumstances. MI 31-102 30 days or staggered submission times based on has been amended accordingly. firm size would be more appropriate. 19. 31-102 Please consider developing a process to ensure that Transition the registration data is accurate and up to date prior The CSA’s NRD Transition Committee is concerned to the population of the database with tombstone about how to best ensure the accuracy of the tombstone information. As such, they are considering Page 12
Category Comment information. Alternatively, please consider a post- implementation phase that would allow for corrections to be made to the records of the securities regulators without triggering unwarranted fees.
Otherwise, firms will be required on a no-cost basis to input a Form 33-109F4 for each registrant. Firms should elect to input a Form 33-109F4 for any individuals about whom they are concerned in the first 5% tranche.
20. 31-102 The information requirements for existing NRD is designed to be a complete database of Transition registered individuals should be abbreviated information. As such, the system is not designed for because they are already registered and are not partial Form 33-109F4 completion. reapplying for approval and thus have no need to provide information such as their residential and employment history. 21. 31-102 Having only a short period, 15 business days after Transition NRD access date, to confirm the accuracy of NRD Staff agree that a 30 business day period would be s.8.4 information for all business locations will have reasonable in the circumstances. MI 31-102 has been consequences on operational effectiveness. For amended accordingly. example, one firm has over 1,450 locations. It is
Page 13
Response different procedures and processes to increase the percentage of accuracy of this information. One suggestion is that some securities regulatory authorities may consider providing each firm with a list of registrants registered in the jurisdiction at least once or twice prior to the data conversion date. The list would include the birth dates of each registrant. Firms would be able to confirm that the information contained on the report is correct. The NRD Transition Committee will update industry on its decisions regarding this issue.
Category Comment Response recommend that a minimum of 30 business days or staggered submission times for Form 33-109F3 based on firm size/number of branch offices would be more appropriate. 22. 31-102 The proposed implementation dates of September, The CSA has decided upon an NRD launch date of Implementatio October, November 2002 and January 2003 are the November 25,2002. By changing the transition n busiest times for registration activity due to the requirements of Multilateral Instrument 31-102, the RRSP season and the need for additional regulators expect that the burden on industry of registrants. The timing of the Continuing Education launching at this time should be significantly reduced. reporting requirements and the proposed December 2002 transition to permanent registration add to the At this time the regulators are of the view that given burden and risk of implementing NRD at the the other testing that will be done on the system prior proposed times. To ease the burden on industry and to its launch a pilot test will not be necessary. for an effective implementation of NRD consideration should be given for a Spring 2003 effective date.
Several commentators supported a pilot or field test prior to the launch of NRD. 23. 31-102 On commentator proposed an October 2002 Staff has considered implementation plans such as Implementatio effective date for small firms and an April 2003 this but have come to the conclusion that they are n effective date for large firms for the purpose of administratively very complex and that all testing allowing for a better testing period with should be finalized prior to the mandated use of the manageable groups in the beginning. system. 24. 31-102CP Section 2.1 should refer to “securities regulatory Staff agree with this comment and have revised the authorities” as opposed to “securities regulatory MI 31-102 companion policy accordingly. authority”. 25. 31-102F1 With regard to the Initial Filing under NRD, given The NRD administrator will be provided with a firm’s that securities regulators are already aware of the legal name only upon submission of NRD enrolment Page 14
Category Comment legal names of firm filers and firm filers are obliged to notify the securities regulators of any change in their legal name, why is it necessary to provide documentary evidence that confirms the legal name of a firm filer.
A simple and economical way to obtain accurate legal name information is to ask for documents such as the articles of incorporation, business registration, etc.
26. 31-102F1 With regard to change to Previous Filing please consider replacing the second bullet with “Change Bullet number two under Previous Filing in Form 31-in information in section 3” as the reference to 102F1 has been changed to read “NRD account “other change to account information” is unclear as information.” Item number 3 of Form 31-102F1 has no section of the form is entitled account been changed to read “NRD Account Information for information. This change would be consistent with Electronic Pre-authorized Debit”. the language found in the third paragraph of Section 4. Please consider revising the first sentence in Section 4. The phrase “shall complete a Change of Previous Filling to this form” is awkward. A similar change is suggested in the third sentence of this paragraph. 27. 31-102F1 In the preamble above section 1, reference is made The opening to the Appendix has been revised to Appendix to the terms and condition of use above and below. reference the “following terms and conditions”. Page 15
Response forms by a firm with the NRD administrator. On occasion, the individual submitting the enrolment forms may not be aware of, or may be misinformed about, the correct legal name of the firm. The NRD administrator wants to make certain that all firm legal names entered on NRD are correct. The NRD administrator also wants to confirm that no duplicate firms show up on the system (albeit with slightly different names).
Category Comment Response Which terms and conditions are above?
28. 31-102F1 With respect of the second paragraph in Section 1 Appendix the language should be modified such that firm filers are clearly liable only for actions of individual filers who are sponsored by the firm filer.
29. 31-102F1 The use of the word “could” in the first sentence of Appendix the second paragraph of Section 2 is troublesome as it is impossible for any one to conclude that any particular use could not overburden or impair NRD or the NRD’s web site. The test should be based on knowledge or belief that the use would likely damage, disable, overburden or impair. 30. 31-102F1 Both the fact that there is to be a penalty for Appendix payment for unpaid fees of 1% per month and the fact that it is payable to the NRD Administrator are objectionable. Is the rate to be applied on a per diem basis or is it 1% for any late payment within the first month?
Page 16
The liability provision has been amended to add the word “its” before “AFRs and individual filers”. Please note that a firm’s individual filers include its non-registered individuals. These individuals are not sponsored by the firm.
A firm filer will have to use its judgment to determine whether or not its use of the system could be harmful to the system. Staff have revised the form to include a test that is based on “reasonable belief”. The relationship between a firm filer and the NRD adminstrator is commercial in nature. As such, it is within the NRD administrator’s control to charge late penalties. Having said that, NRD is designed to automatically withdraw fees from a firm filer’s account through an electronic debit system. As such, fees would only be late if funds are not available in a firm filer’s account.
Category Comment 31. 31-102F1 The limitation of liability provisions and Appendix disclaimers found in section 6 should be amended such that NRD filers’ responsibilities and liabilities are suspended automatically during a system failure. 32. 31-102F1 Appendix The terms of use can be amended by the NRD Administrator, with CSRA approval, and firms are deemed to accept the new terms by continued use of the system. We note however that firms have no opportunity for input with respect to these amendments and have been given no recourse beyond abandoning use of the system.
Use of the NRD is mandatory and “opting out” to avoid terms that are found to be oppressive is not an option. Firms will in fact have no recourse with respect to amendments that they do not agree with. We are of the opinion that a process should be established for approving amendments to the terms of use, and the process should permit industry comment.
Please indicate whether or not the CSRA will solicit comments from the industry before a proposed amendment is approved and further
Page 17
Response Please note that the late payment penalty only applies to NRD user fees payable to the NRD administrator. These terms and conditions by and large relate to the use of NRD. If NRD is not operational, these terms and conditions will, for the most part, not be relevant. Material changes to the forms must be made following proper legislative procedures. Those procedures include the publication of the forms for comment.
Category Comment Response describe what realistic avenues of recourse will be available to firms who take issue with amendments made to the NRD terms of use 33. Manual Consider changing the definition of “sub-branch” to This definition will be redrafted for clarity. Definitions exclude locations of a firm that do not need to be registered. At present it reads “any location’, which is confusing. 34. Manual With regard to Chapter 3 (C) consider providing Chapter 3 instructions as to how a firm will be given access to Form 31-102F1 has been revised so that a firm filer their NRD number, so that they can put it on their will only have to input an NRD number if a change is 31-102F1 for initial enrolment with the NRD being made to the previous Form 31-102F1. A firm Administrator. filer will not yet be assigned a number upon an initial filing. As such, the NRD number section will not be completed by the firm filer.
35. Manual On page 17 of Chapter 3 - “Enrolling Your Firm to Chapter 3 Use the NRD,” a list is provided that sets out the The filer manual is being revised to reflect this sequence of actions to be taken by a firm applying comment. for registration for the first time as a dealer, adviser or underwriter. We find the list helpful and would ask that a similar list be included in the filer manual for dealers, advisers and underwriters that are already registered. 36. Manual Chapter 3 Section C 2(b) P.16 - mention is made of A firm’s application materials are listed in s. 2.1 of Chapter 3 regulators reviewing the firm’s “application MI 33-109. Securities regulatory authorities or materials”. Please indicate the specific application regulators may also ask for some supporting materials materials being referred to by listing these at their discretion. documents by name and/or form number. 37. Manual Chapter 5, P. 23 - It is mentioned that fees will be Chapter 5 paid from the firm’s designated accounts On December 1 of each year, firms will have access Page 18
Category Comment automatically on December 15 th for annual registration fees. Firms need to arrange and plan the collection of monies from advisors in advance. In addition, firms should also be given the opportunity to verify the correctness of the amounts being automatically withdrawn prior to such withdrawal so as to enable them to reconcile their own records prior to the payment of these fees. We would like to see a clear statement indicating whether annual registration for all provinces will also be at the same time of the year, (December 15 th ) and whether or not these fee payment withdrawal dates will include the withdrawal of funds for extra provincials
Each jurisdiction will have a common fee payment date. All requisite fees (registration fees and NRD
Page 19
Response to a report setting out which individuals they will be responsible for paying fees for to cover the upcoming year. The report will also set out the amount of fees payable for these individuals. After reviewing the notice, a firm will advise the securities regulatory authorities as to which individuals should not be on the firm’s list. Firms shall do this by submitting a bulk annual fee exclusion notice for those individuals. A Form 33-109F1 Notice of Termination should also be filed with respect to those individuals. Please note that bulk annual fee exclusion notices can be filed as often as required each December. For example, if an individual resigns on December 30, 2003, a bulk annual fee exclusion notice should be filed for that individual. Please note that the fee payment date has changed. On December 31 of each year, fees will automatically be debited from each firm’s NRD account. Because NRD accounts will be automatically be debited you will want to be vigilant about ensuring your list of registrants remains current and accurate. This will be easy to do as you will have access to this list through NRD. This regular access is designed to ensure that there are not the same discrepancies that exist currently.
Category Comment 38. Manual With reference to Chapter 7 (E), consider indicating Chapter 7 how long the regulators will wait for a response from a firm before they will treat a submission as abandoned.
39. Manual Chapter 7, P.31/32 – The instructions state that a This provision has been redrafted for clarity. Chapter 7 transfer is possible only if three conditions are satisfied. Condition (B) states, “the employment or agency of the individual with his or her last sponsoring firm was terminated between September 16 and December 15 of a given year, and he or she is applying for registration prior to December 15 of that year”. The provision makes it difficult to determine the course of action to be adopted with respect to a “transfer” if the individual was terminated from his/her last sponsoring firm before September 16 of any given year. 40. Manual Chapter 7, P. 36 - No explanation as to the A “change” involves the change from one individual Chapter 7 differences between a registrant/applicant/non- category to another by a registrant or non-registrant. registrant changing an individual registration and a A “surrender” involves the surrender of all registrant/applicant/non-registrant voluntarily registration categories by a registrant. surrendering an individual registration are provided. Please provide an explanation as to the
Page 20
Response user fees) will be payable on this date. This will be decided on a case-by-case basis. Typically, if a securities regulatory authority has not received a response from a filer for a significant period of time, the securities regulatory authority will send a written notice prior to treating a submission as abandoned. The period of time will vary depending upon the circumstances.
Category Comment Response distinction between these two submission types and also explain in detail the significance/consequence of making one of these submissions versus the other. 41. Manual The NRD Filer Manual states in Chapter 8 (G), Chapter 8 “You will receive an error message if your report This is no longer true. We have revised the software contains more than 200 items or if no information to ensure that there is no limit as to how many items is retrieved.” One of the proposed reports a firm can be referenced on a report. can generate is the Individual Registrant Report, which lists all individuals associated with the firm. How will a firm with more than 200 associated individuals be able to access this report?
Chapter 8, P. 50 – While it is possible to use the same user ID for all firms for which one is acting as Chief AFR, we note that the Filer Manual states that an error message will be received if any one given report contains more than 200 items. This is problematic, particularly for larger firms as an AFR logging on with one user ID and generating all companies submissions, will easily exceed the 200 item limit. While a single user ID for all firms for a Chief AFR would be the preferable option, it could lead to disadvantages with respect to how data is displayed and the amount of data that can be displayed at once. It is imperative that the 200 item limit be increased. Our strong preference is to see the 200 item limit increased while preserving a single user
Page 21
Category Comment Response ID. However and only to the extent that this is not possible, it may be necessary to consider the use of multiple user ID’s as a 200 item limit will not in practice be sufficient for the Chief AFR’s of larger firms or when one is acting as Chief AFR for multiple firms. 42. Manual Administrative AFR’s: Since all submissions of all Submissions of AFRs can only be viewed by the Chapter 8 the AFR’s can be viewed, we would like to see submitting AFR and by that AFRs chief AFR and clarification as to whether or not submissions and AFR administrator. The AFRs user number will be works in progress will be clearly identified as to displayed on each work in progress. who the processing AFR was. 43. Manual Please provide guidance in situations where the In order to transfer to a new firm, an individual’s Feature individual is attempting a transfer from one firm to employment must be terminated with the prior firm. Request another, but has his relationship with the first firm An individual can ask the new firm’s AFR to check to has not yet been terminated. Will there be a way see if evidence of the termination (i.e., a Notice of for individuals to determine if their registration has Termination) has been processed by the relevant been terminated with the first firm? securities regulatory authority. 44. Manual Use screen shots to assist with understanding how Feature to use NRD The filer manual is being revised to reflect this Request comment. 45. Manual Manual should include: A transition checklist for Feature implementation of NRD and a detailed summary of A transition checklist is being considered for the filer Request the supporting documents that are required to be manual. submitted and the documents required to be kept by Each firm will have to refine their due diligence the firm. For example, current F4s must be signed practices and determine which supporting documents and notarized. What documentation are the firms they intend to maintain. required to have on file? Will signatures still be required for audit purposes? The rule does not mandate that Forms F33-109F4 be Page 22
Category Comment 46. 31-102 Will registrants be able to initiate the filing of a Clarification material change in their record using the NRD?
A registered firm will be required to submit all changes to its Form 3 information outside of NRD in paper format. There is one exception, however. A registered firm will be required to submit any changes to information about a business location (other than a head office) via NRD (using the Form 33-109F3 submission).
47. 31-102 Will the “fast-tracking” agreement with IFIC under The OSC has a current arrangement with IFIC under Clarification which new registrants are conditionally approved which IFIC reviews registration applications, remain in place after the implementation of the primarily for clerical errors, on behalf of the OSC and NRD? provide conditional registration approval subject to final approval by OSC staff. This arrangement was designed to ensure that the registration process would not be delayed inordinately, due to simple clerical errors. This “fast-tracking” agreement with IFIC will not remain in place after the implementation of NRD for two reasons: 1. IFIC will not have access to the information of NRD filers in NRD and 2. NRD is designed to eliminate a number of the previously mentioned clerical errors.
Page 23
Response signed, notarised and kept by firms. An individual will be required to submit all changes to his or her Form 33-109F4 information via NRD. An AFR will submit these changes on behalf of the individual filer.
Category Comment 48. 31-102 Please indicate whether or not there is there a limit Clarification to the number of AFRs a firm can have 49. Clarification Will there be a test environment available to dealers to train staff on how to use NRD? 50. Clarification What does NRD require when setting up a new manager with a new branch? 51. Clarification Does NRD contemplate incorporating financial planning requirements as per provincial jurisdictions? 52. Clarification What information will ultimately be made public as referred to in the Notice? 53. Clarification How senior a person must an AFR be? Does the Chief AFR have to be an officer of the firm? 54. Clarification Will a member be able to seek permission to access Page 24
Response There is no limit to the number of AFRs a firm can have. Dealers will be provided with training seminars on how to use NRD. Dealers will be provided with the details of the NRD training program once they are finalized. Under Part 3, a notice of the new location must be submitted using a completed Form 33-109F3. The position of branch manager is not a registration category of its own though registered individuals may also be branch managers. Part 1.1 of MI33-109 will be amended to reflect this. If the new manager is not registered then the firm will have to submit a Form 33-109F4, otherwise the new manager will have to submit an amendment to their existing Form 33-109F4 indicating that they are now also categorized as a non-registered individual. Not at this time. This issue has yet to be determined. However, certain information such as name of individual, name of dealer, category of registration and past orders are already made public on some of the provincial regulator’s websites. It is left to the sole discretion of the firm to determine who will be their AFRs and Chief AFR. If the prospective registrant has given the firm his
Category Comment info on a prospective registrant? 55. Clarification With ON proposing to move to a sustaining fee rather than an annual fee per registrant, how will this impact the annual renewal process? 56. Clarification Screening of new applicants – the RCMP form is not included in the new application as well as the Collection of Personal Information Form. This means added costs and responsibilities to Dealers for conducting their own credit or background checks. How is this an economic benefit to the dealer? 57. Clarification Specifically clarify the tasks required when applying for registration with NRD. Does one list all jurisdictions on a single F3 or use a separate F3 for each jurisdiction? 58. Feature The F4 should provide additional sections in order Request to include specific information desired by the dealer. For example, the number of accounts of the salespersons, etc. 59. Feature Will an individual registrant be able to access their Request information by using their own NRD ID#? Please consider giving registrants access to their permanent record. It is more likely that registrants Page 25
Response NRD identification information then the firm will have access to his information. Otherwise, the firm may only obtain information that is already made available to the public. Other than how the fee is calculated, the renewal process will be the same. Ontario’s proposed participation fee will be paid through NRD on December 31, the same day that annual fees will be paid in other jurisdictions. The regulators will continue to conduct criminal record checks on prospective registrants. Conducting proper due diligence will help firms ensure that they hire competent and qualified people. This should assist firms in providing their clients with proper service and thus protect against vicarious liability losses due to improper registrant conduct. An F3 is filed for each branch office and only in the jurisdiction where the branch office will be opened. Due to cost considerations this feature cannot be included in NRD at this time. This suggestion will be considered for future releases of NRD. At present, the NRD system does not permit individuals to access their own information unless they are an AFR. However, it is being considered whether such a feature can be implemented prior to
Category Comment Response will recognize whether the information that has the NRD launch date. been filed on their behalf is accurate and up to date if the registrant can view the record. 60. Feature For instances where forms listed in Part 2 of 31-102 As with all other existing forms, each CSA member Request need to be submitted outside of the NRD system, will have the NRD forms available in PDF format on the Forms should be made available on the its web site. regulator’s websites in PDF format to facilitate their completion in electronic format 61. Feature An optional field should be added that the dealer NRD will generate a firm Reconciliation Report. For Request can use to capture a code that will link a each NRD submission the report will show: the date it record/transaction to a registrant or to a region was made; the fee that was paid; the individual’s within the dealer. This would be particularly name for whom it was made; and the name of the helpful for dealers who recover the costs of responsible AFR. registration from their registrants. Information from this field should be included in the statement that dealers receive to aid in the process of the bank account reconciliation and in the reports that NRD generates.
The system must be able to quickly identify the amount you debited out of a dealer’s account, and whom that was related to so that a dealer can reconcile its records 62. Feature It is important that the MFDA be encouraged to Discussions are being undertaken with the MFDA in Request accept NRD to ensure that the NRD is the regard to this matter. However, the MFDA’s appropriate tool for use by the MFDA to maximize requirements have yet to be finalized. NRD’s efficiency and effectiveness. NRD should capture all data required by the MFDA such as trade names of mutual fund dealers
Page 26
Category Comment 63. Feature Please consider marking the mandatory fields on Request the database especially for those who will not be using NRD with any frequency, such as registrants. 64. Feature Please consider developing a process of Request communication that uses NRD to deal with such things as filing deficiencies identified by the Securities Regulators.
65. Feature Regulators should disclose the NRD processing Request times that can be expected for transfers and the approval of new registrants for in-good-order. 66. Feature Please consider changing the reporting platform Request from Adobe Acrobat to MS Excel. Excel has data sorting capabilities that are not available with Adobe Acrobat. 67. Feature A comprehensive training and communication plan Request will be needed to ensure that individuals have the opportunities to become familiar with the database before going live. In addition, there should be
Page 27
Response Whenever a user submits any screen information, NRD will automatically check it to ensure that the required fields have been completed. The system will advise the user of any information that is missing and that the submission cannot be accepted until such information is provided. The system will automatically check to ensure that the required information fields have been filled in before the submission is completed. Any additional deficiencies that are identified by the regulators after a submission has been made will be conveyed to the filer through existing communication channels. Using NRD as one of those communication channels will be considered for future releases of NRD.
NRD will improve the efficiency of the registration process. Once NRD has been in operation for a sufficient amount of time to provide service standards, its procedures will be continually reviewed with the goal of improving their effectiveness and efficiency. Phase I of NRD will only provide reports in the Adobe Acrobat format. Alternate formats will be considered for future releases of NRD. The CSA plans to hold training seminars for industry. The suggestions will be considered when finalizing the details of the training sessions.
Category Comment publicized training events held across Canada, an internet training device, and a well-staffed 1-800 help line for the first few months of operation. 68. Feature NRD should integrate with the IDA’s ComSet to Request ensure that registrants do not have to enter the same data twice, once for NRD and once for ComSet. It is unreasonable to expect dealers to file overlapping information twice or bear any additional costs for multiple filing of the same information. Please provide clarification as to whether or not dealers will in fact be made to file overlapping information with both the Comset system and NRD. 69. Feature It would be useful from an operations perspective Request to have the process of making submissions via NRD separated into individual steps and summarized in a checklist/itemized format.
70. Feature Prior to implementation of NRD system, consider Request allowing public access to NRD website to complete and print form 33-109F4. This would eliminate the need to type or handprint the applications submitted during the period between the effective date and access date. Alternatively, consider an overlap to accept 1-U-2000 or Form 4 for a two month period after the access date 71. Feature Consider utilizing common software for NRD Page 28
Response This is not possible for phase I of NRD due to time and budget constraints. However, further expansion and integration will be considered for future releases of NRD. Because NRD’s initial release will not be integrated with ComSet, any information required by both NRD and ComSet will have to be filed with both systems. The NRD user interface is organized to walk users through their particular task without the need for a check list. In addition, on-screen instructions, automated checking for required information, and task tables in the filer’s manual should provide sufficient guidance as to what is required to complete any particular task.
This was considered and it was decided that a firm will not be granted access to the system prior to being enrolled to use NRD and being granted access by the NRD administrator as set out in the instrument. In addition, it was decided that the most efficient and effective transition is as indicated in the instrument and will not include the suggested overlap of the two forms. This will be considered
Category Comment Response Request reports, i.e. MS-Excel. Also, consider enabling firms to download the reports as well as the ability to print. 72. Feature Consider adding an alpha numeric free form text This will be considered. Request box whereby firms can add their own accounting codes for reconciliation purposes and internal accounting processes 73. Feature When a registered individual transfers to another If individuals do not wish to request their NRD Request firm, they or their new firm should be able to obtain numbers at the time of a transfer then they can obtain the individual’s NRD number through NRD and their NRD numbers from their dealer as soon as they not have to obtain it from the individual’s previous are registered with NRD and keep it in a safe place firm outside of NRD for future use. 74. Feature We want to be able to generate and print reports at This is not possible for phase I of NRD due to time Request anytime, not just initial submissions of completed and budget constraints. However, further expansion F4s. and integration will be considered for future phases of To be useful, reports and data should integrate into NRD. a dealer’s system. 75. Feature Please consider the next release you develop having This will be considered. Request drop down boxes for all the branch locations to allow the address for service of the firm to be selected by the applicant 76. Feature Once inputted, the Address for Service should be This will be considered. Request available for use elsewhere via a drop down menu selection. 77. Feature Most dealers file in multiple jurisdictions across Persons can compile their own copies of the Request Canada. To this end, it would be useful from an applicable fee schedules since the NRD fee schedule administrative perspective to be provided with a fee will be provided on the system and each CSA schedule that consolidates into one document the member’s fee schedule is published and made various NRD user and filing fees along with the available to the public for free. In addition, prior to Page 29
Category Comment provincial regulatory filing fees for all provinces. 78. Feature The dealer should be notified by way of email Request when the regulator approves an individual application. It is very time consuming for the dealer to check the regulator database everyday on all its submissions. 79. Mutual We have been given to understand that each Reliance applicable jurisdiction will review and approve applications submitted on NRD. We propose that a system of mutual reliance be implemented to permit an applicant’s jurisdiction of residence to approve applications on behalf of all jurisdictions. To require registrants to file different documents with different regulators, keep different documentation on file (e.g. course marks), as well as have different approval processes with the various regulators, greatly diminishes the promised benefits of NRD. 80. De-regulation We question the long-term viability of NRD in light proposals of recent regulatory initiatives calling for the disbanding of the current registration structure altogether. 81. Uniformity NRD should embrace uniformity and be the foundation for implementing uniformed and harmonized registration requirements among all Page 30
Response making any payments for a submission, the NRD fee payment screen will present the user with an itemized fee calculation for the submission. This will be considered. Though there is no formal mutual reliance registration system yet, NRD will provide many of the benefits of one by streamlining the submission and response process. Registrants will only have to file one set of documents once for all jurisdictions and the jurisdictions will each share, maintain, and review one central set of registration records for individuals. While providing these benefits, NRD will act as a foundation for the regulators to continue to create a formal mutual reliance registration system. One jurisdiction asked industry to comment on ideas for reforming the registration process. However, to date, no jurisdiction has implemented any proposal to do so. NRD will provide benefits for the present registration regime and therefore it is not prudent to delay the delivery of such benefits based on ideas that may or may not come to fruition. For the first phase of NRD registration requirements were harmonized as much as possible. It is anticipated that they will continue to be harmonized
Category Comment NRD jurisdictions. Please clarify how NRD will address the various supplementary requirements from each province and whether all provinces will agree on uniform requirements? How will NRD deal with other non-uniform requirements such as BC’s and AB’s resident supervisor requirement for out-of-province reps. 82. Uniformity The NRD proposal illustrates the high cost of a fragmented system of securities regulation and, indirectly, underscores the merits of national regulation. 83. General The dealer community should have been invited to participate in the planning and creation of NRD as a gesture of goodwill and to ensure that industry obtains the maximum benefits from the NRD system. Further, given that the Instrument presumes that the industry is to pay for the development and maintenance of NRD, it would seem only fair and reasonable that the industry’s views must be given full and due consideration, even if this means a significant delay in the implementation of NRD. We are concern that the desire to get the system up and running in the short term will override any decision to have a system that meets its potential in terms of ease of use and economic efficiency for all those involved.
84. General Where signatures and/or certain documentation are All NRD submissions other than enrolment with the required in hard copy, please clarify whether or not NRD administrator and those under the hardship Page 31
Response as NRD progresses. In addition, the CSA has implemented initiatives to work towards a Canadian harmonized securities regime. NRD is a step towards a harmonized registration system. 100% harmonization will take some time, but NRD is part of the first steps towards it. Industry feed back has been obtained through industry information sessions and the assistance of certain industry members during the ongoing testing of the system. Staff takes all of industry’s comments very seriously and will respond to each one. It is intended that phase I of NRD will form the basis upon which a fully integrated and functioning national registration system can be built. Such systems are built and released in phases otherwise they remain in production and are never delivered because of constant change requests and advances in technology.
Category Comment these hardcopies must be filed with all jurisdictions. It is recommend that the filing of hard copies be restricted to maintaining such copies at one given office (head office or a location chosen on the basis of what is commercially practicable) without the requirement to file in multiple jurisdictions.
Page 32
Response exemption will be made electronically. Persons will have to continue to make hardcopy filings that are not NRD submissions unless an alternate system is provided. In regard to the due diligence material a firm collects in connection to an individual’s NRD submission, the firms will not have to submit such materials to CSA members unless specifically requested to do so.