FORM 31-103F1 CALCULATION OF EXCESS WORKING CAPITAL ______________________________________ Firm Name Capital Calculation (as at ________________ with comparative figures as at ______________) Component Current period Prior period 1. Current assets 2. Less current assets not readily convertible into cash (e.g., prepaid expenses) 3. Adjusted current assets Line 1 minus line 2 = 4. Current liabilities 5. Add 100% of long-term related party debt unless the firm and the lender have executed a subordination agreement in the form set out in Appendix B and the firm has delivered a copy of the agreement to the regulator or, in Québec, the securities regulatory authority 6. Adjusted current liabilities Line 4 plus line 5 = 7. Adjusted working capital Line 3 minus line 6 = 8. Less minimum capital 9. Less market risk
10. Less any deductible under the bonding or insurance policy required under Part 12 of National Instrument 31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations 11. Less Guarantees 12. Less unresolved differences 13. Excess working capital Notes: This form must be prepared using the accounting principles that you use to prepare your financial statements in accordance with National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards. Section 12.1 of Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations provides further guidance in respect of these accounting principles. Line 5. Related-party debt – Refer t o t he CICA Ha ndbook for t he defi nition of "related party" for publ icly acco untable enterprises. Line 8. Minimum Capital – The amount on this line must be n ot less than (a) $25,000 for a n adviser and (b) $50,000 for a dealer. For an investment fund manager, the amount must be not less than $100,000 unless subsection 12.1(4) applies. Line 9. Market Risk – Th e amount on this line must be calculated according to the instructions set out in Schedule 1 to this Form. Line 11. Guarantees – If the reg istered firm is guaran teeing the liability of an other party, the total amount of the g uarantee must be included in the capital calculation. If the amount of a guarantee is included in the firm’s statement of financial position as a current liability and is reflected in line 4, do not include the amount of the guarantee on line 11. Line 12. Unresolved differences – Any unresolved differences that could result in a loss from either firm or client assets must be included in the capital calculation. The examples below provide guidance as to how to calculate unresolved differences: (i) If there is an unresolved difference relating to c lient securities, the amount to be rep orted on Line 12 will b e equal to the fair value of the client securities that are short, plus the applicable margin rate for those securities. (ii) If there is an unresolved difference relating to t he registrant's investments, the amount to be reported on Line 12 will be equal to the fair value of the investments (securities) that are short. (iii) If there is an unresolved difference relating to cash, the amount to be reported on Line 12 will be equal to the amount of the shortfall in cash. Please refer to secti on 12.1 of Co mpanion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations for further guidance on how to prepare and file this form.
Management Certification Registered Firm Name: ____________________________________________ We have examined the attached capital calculation and certify that the firm is in com pliance with the capital requirements as at ______________________________. Name and Title Signature Date 1. ______________________ _________________________ ________________________ ______________________ 2. ______________________ _________________________ ________________________ ______________________
Schedule 1 of Form 31-103F1 Calculation of Excess Working Capital (calculating line 9 [market risk]) For purposes of completing this form: (1) "Fair v alue" means th e valu e o f a security d etermined in acco rdance with Canad ian GAAP a pplicable to publicly accountable enterprises. (2) For each sec urity whose val ue is included in l ine 1, Current Assets, m ultiply the fa ir value of the security by the margin rate for that security set out below. Add up the resulting amounts for a ll of the securities you hold. The total is the "market risk" to be entered on line 9. (a) Bonds, Debentures, Treasury Bills and Notes (i) Bonds, debentures, treasury bills a nd other securit ies o f or guaran teed by the Go vernment of C anada, of the United Kingdom, of the U nited St ates of Am erica a nd of a ny other na tional fore ign g overnment (p rovided s uch foreign government secu rities are currently rated Aaa or AAA b y Mo ody's In vestors S ervice, Inc. or Stan dard & Po or's Corporation, respectively), maturing (or called for redemption): within 1 year: 1% of fair value m ultiplied by the frac tion determined by dividing the number of days to maturity by 365 over 1 year to 3 years: 1 % of fair value over 3 years to 7 years: 2% of fair value over 7 years to 11 years: 4% of fair value over 11 years: 4% of fair value (ii) Bonds, debentures, treasury bills and other securities of or guaranteed by any jurisdiction of Canada and obligations of the International Bank for Reconstruction and Development, maturing (or called for redemption): within 1 year: 2% of fair v alue multiplied by the frac tion de termined by dividing the number of days to maturity by 365 over 1 year to 3 years: 3 % of fair value over 3 years to 7 years: 4% of fair value over 7 years to 11 years: 5% of fair value over 11 years: 5% of fair value (iii) Bonds, debentures or no tes (not in default) of or guar anteed by any municipal co rporation in Canada or t he United Kingdom maturing: within 1 year: 3% of fair v alue multiplied by the frac tion de termined by dividing the number of days to maturity by 365 over 1 year to 3 years: 5 % of fair value over 3 years to 7 years: 5% of fair value over 7 years to 11 years: 5% of fair value over 11 years: 5% of fair value (iv) Other non-commercial bonds and debentures, (not in default): 10% of fair value
(v) Commercial and cor porate bonds, debentures and notes (not in default) and non-negotiable and non-transferable trust company and mortgage loan company obligations registered in the registered firm’s name maturing: within 1 year: 3% of fair value over 1 year to 3 years: 6 % of fair value over 3 years to 7 years: 7% of fair value over 7 years to 11 years: 10% of fair value over 11 years: 10% of fair value (b) Bank Paper Deposit cer tificates, promissory not es or de bentures issued by a C anadian c hartered bank (a nd of Ca nadian chartered bank acceptances) maturing: within 1 year: 2% of fa ir value multiplied by the fra ction determined by dividing the number of days to maturity by 365 over 1 year: apply rates for commercial and corporate bonds, debentures and notes (c) Acceptable foreign bank paper Deposit certificates, promissory notes or debentures issued by a foreign bank, readily negotiable and transferable and maturing: within 1 year: 2% of fa ir value multiplied by the fra ction determined by dividing the number of days to maturity by 365 over 1 year: apply rates for commercial and corporate bonds, debentures and notes "Acceptable Foreign Ba nk Paper" consists of deposit certificates or prom issory notes issued by a bank ot her than a Ca nadian chartered bank with a net worth (i.e., capital plus reserves) of not less than $200,000,000. (d) Mutual Funds Securities of mutual funds qualified by prospectus for sale in any jurisdiction of Canada: (i) 5% of the net asset value per security as determined in accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, where the fund is a money market mutual fund as defined in National Instrument 81-102 Mutual Funds; or (ii) the margin rate determined on the same basis as for listed stocks multiplied by the net asset value per security of the f und as det ermined in a ccordance wit h Nati onal Instrum ent 81-106 Investment Fund Continuous Disclosure. (e) Stocks In this paragraph, "securities" includes rights and warrants and does not include bonds and debentures. (i) On securities including investment fund securities, rights and warrants, listed on any exchange in Canada or the United States of America: Long Positions – Margin Required Securities selling at $2.00 or more – 50% of fair value Securities selling at $1.75 to $1.99 – 60% of fair value
Securities selling at $1.50 to $1.74 – 80% of fair value Securities selling under $1.50 – 100% of fair value Short Positions – Credit Required Securities selling at $2.00 or more – 150% of fair value Securities selling at $1.50 to $1.99 - $3.00 per share Securities selling at $0.25 to $1.49 – 200% of fair value Securities selling at less than $0.25 – fair value plus $0.25 per shares (ii) For p ositions in sec urities that are c onstituent sec urities o n a m ajor broa dly-based i ndex of one of the fo llowing exchanges, 50% of the fair value: (a) Australian Stock Exchange Limited (b) Bolsa de Madrid (c) Borsa Italiana (d) Copenhagen Stock Exchange (e) Euronext Amsterdam (f) Euronext Brussels (g) Euronext Paris S.A. (h) Frankfurt Stock Exchange (i) London Stock Exchange (j) New Zealand Exchange Limited (k) Stockholm Stock Exchange (l) Swiss Exchange (m) The Stock Exchange of Hong Kong Limited (n) Tokyo Stock Exchange (f) Mortgages (i) For a firm registered in any jurisdiction of Canada except Ontario: (a) Insured mortgages (not in default): 6% of fair value (b) Mortgages which are not insured (not in default): 12% of fair value of the loan or the rates set by Canadian financial institutions or Schedule III banks, whichever is greater. (ii) For a firm registered in Ontario: (a) Mortgages insured under the National Housing Act (Canada) (not in default): 6% of fair value (b) Conventional first mortgages (not in default): 12% of fair value of the loan or the rates set by Canadian financial institutions or Schedule III banks, whichever is greater. If you are registered in Ontario regardless of whether you are also registered in another jurisdiction of Canada, you will need to apply the margin rates set forth in (ii) above. (g) For all other securities – 100% of fair value.
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