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On May 11, 2017, the Canadian Securities Administrators (CSA) published CSA Staff Notice 33-319 Status Report on CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients (Notice).

The Notice provides a high level summary of the consultation process to date regarding CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients (Consultation Paper), and identifies certain high level themes arising in the process and gives a sense of the direction that the CSA will take in regards to certain of the proposals from the Consultation Paper.

Background

The Consultation Paper is part of the CSA’s effort in improving the relationship between clients and their advisers, dealers and representatives, and sought comments on proposed regulatory action aimed at enhancing same.  The Consultation Paper proposed two regulatory changes: (1) amendments to NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that would work together to better align the interests of registrants to the interests of their clients and enhance various specific obligations that registrants owe to their clients, and (2) a regulatory best interest standard, accompanied by guidance, that would form both an over-arching standard and the governing principle against which all other client-related obligations would be interpreted.  All CSA jurisdictions are participating in the consultation process on these topics, with the exception of the British Columbia Securities Commission who is only consulting on the proposed amendments to NI 31-103.


Continue Reading New Themes and Direction Resulting from CSA Consultation Paper 33-404

berlin-2018056_1280A recent case in Manitoba has explored certain issues relating to the use of proxies within the context of a limited partnership.  The case, 177061 Canada Ltd. et al. v. 5771723 Manitoba Ltd. et al., 2016 MBQB 40, discusses two points of interests relating to proxies in a limited partnership setting (and, by logical extension, a partnership setting): (1) whether, under Manitoba law, a unit holder in a limited partnership can give to another person an irrevocable proxy to vote, which extends beyond a single meeting or adjourned meeting, and (2) if so, whether such irrevocable proxy can be revoked.

The case concerns proxies that were created in 1998 as part of a payment for debt for various transactions between two sophisticated business parties (Lount and Shelter).  One of the parties, Lount, a respondent in this case, received two  “irrevocable voting proxies” from a company controlled by the other sophisticated party, Shelter, and from the wife of a business associate of Shelter (Sikora), each an applicant in this case, for voting rights of a limited partnership (unrelated to the transactions) which beneficially owned an apartment building in Winnipeg.

Lount proceeded to use the proxies until 2011.  An annual and special meeting of the limited partnership was scheduled for December 2013 in which significant changes to the limited partnership agreement were to be considered.


Continue Reading Use of Proxies within the Context of a Limited Partnership

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On December 15, 2016, the Canadian Securities Administrators (CSA) published CSA Staff Notice 33-318 Review of Practices Firms Use to Compensate and Provide Incentives to their Representatives (Notice) summarizing the results of a survey conducted in 2014 that gathered information relating to compensation arrangements and incentive practices that firms use to motivate their representatives (Survey).

The Survey was conducted as part of a larger framework of proposed reforms to enhance the client-registrant relationship, as set out in the CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives toward their Clients, published on April 28, 2016 (Consultation Paper).  The Consultation Paper is part of the CSA’s initiative towards improving the relationship between clients and their advisers, dealers and representatives.

The Survey asked adviser and dealer firms to identify the compensation practices used to compensate their representatives.  The Survey was focused on the incentive practices used for retail representatives who fell under the oversight of the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC), as well as representatives with portfolio managers or exempt market dealers working with high net worth clients.


Continue Reading CSA Provides Results of Survey Reviewing Types of Representative Incentives

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In light of the growing risk of cyberattacks on issuers, registrants and regulated entities (Market Participants), the Canadian Securities Administrators (CSA) recently published CSA Staff Notice 11-332 Cyber Security (Staff Notice) providing guidance to Market Participants on the subject.

Cybersecurity a Priority Area for the CSA

The Staff Notice identifies cybersecurity as a priority for the CSA, and states that the CSA has a central role to play in “assessing and promoting readiness and cyber resilience” of Market Participants.  To this point, enhancing cybersecurity is identified as a key initiative to facilitate fair and efficient markets and the reduction of risks to market integrity under the CSA’s 2016-2019 Business Plan (Business Plan).  This Business Plan includes tasks related to  improving collaboration and communication on cybersecurity issues with Market Participants and improving Market Participants’ understanding of the CSA’s cybersecurity activities, to which the Staff Notice speaks.

Previous CSA Notice on Cybersecurity

The CSA previously released guidance concerning cybersecurity in 2013 with Staff Notice 11-326 Cyber Security (2013 Notice).  The 2013 Notice provided general recommendations for the steps that Market Participants can take to manage cyber threats.  These recommended steps were to:

  • educate staff on the importance of cybersecurity and their role of ensuring such security;
  • follow industry best practices in regards to cybersecurity; and
  • conduct regular third party vulnerability and security tests and assessments against the Market Participants’ systems.

In addition to these steps, Market Participants were advised by the 2013 Notice to review their cybersecurity measures on a regular basis.


Continue Reading CSA Introduces Updated Cyber Security Guidance