Final amendments to National Instrument 33-109 Registration Information (NI 33-109) and related instruments (the Final Amendments) clarify outside activity reporting requirements, among other things. The Ontario Securities Commission has also issued a related extension on the moratorium on "outside activities" late filing fees.

The Final Amendments were published in December 2021, came into force on March 3, 2022, and take effect on June 6, 2022 (Effective Date). The Final Amendments are based on proposed amendments that the Canadian Securities Administrators (CSA) published for comment last year (as previously discussed) to help registrants provide up-to-date complete and accurate registration information and reduce the regulatory burden of doing so (the Proposed Amendments). Reflecting comments received on the Proposed Amendments, the Final Amendments include the following changes to NI 33-109 (and related forms and instruments):

  • Firms will no longer be required to report small changes in the ownership of the firm's voting securities on an ownership chart referred to in Form 33-109F6 Firm Registration  (Form 33-109F6) unless the change results in a person or company's percentage of ownership falling below or exceeding 10%, 20% or 50% of the firm's voting securities.
  • To reduce multiple filings of the same information by corporate groups, registered firms will be permitted to delegate the requirement to notify the securities regulatory authority of changes in certain registration information to an authorized affiliated registered firm where they have a shared principal regulator.  Changes in information related to the following items of Form 33-109F6 are eligible for notification by the authorized affiliate: ownership chart, securities registration, membership of exchange or SRO, refusal of registration, licensing or membership, registration for other financial products, regulatory action and legal action.
  • Section 12.7 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registration Obligations  has been amended to no longer require reporting of a change in the expiry date of a firm's insurance policy where the insurance policy has not lapsed and there have been no other changes to the insurance policy.
  • The companion policy to NI 33-109 (NI 33-109CP) has been amended to clarify that certain changes in outstanding legal actions considered immaterial, such as documentary discovery and adjournments, will not be required.

Outside Activities

Particularly noteworthy are certain changes and clarifications included in the Final Amendments with respect to the new reporting framework for reporting activities carried on by registered individuals outside of their sponsoring firms, referred to as "outside activities". Categories of outside activities that must be reported to regulators include:

  • activities with another registered firm (including affiliated entities);
  • activities with an entity that receives compensation from a registered firm;
  • other securities-related activities;
  • provision of financial or financial-related services; and
  • positions of influence.

With respect to positions of influence, a new rule will be implemented that replaces the existing practice of imposing terms and conditions which restrict the client base of registrants whose outside activities are positions of influence over certain clients. The new rule prohibits registered firms and registered individuals from selling to or advising an individual that:

  • the registered firm knows the registered individual is in a position of influence over; or
  • the registered firm or registered individual knows are certain close family members of an individual they are in a position of influence over.

The Final Amendments include guidance for reporting positions of influence of registered individuals regarding activities that tend to have high levels of conflicts of interest, including, registrants' acting as elected officials, or activities with community, cultural or religious organizations. The CSA indicate that this list is not meant to be exhaustive, and that positions of influence are a matter of judgment of a reasonable person based on particular facts.

Other Changes and Clarification

  • Additional guidance has been provided in NI 33-109CP, clarifying that required updates to new and outstanding legal actions reported on Form 33-109F6 should include any new claims, defenses, counterclaims, third-party claims, amendments, settlements or resolutions of the claims, and appeals, as well as any decision that could significantly adversely affect the firm's financial health or business or affect the outcome of the legal action. As mentioned above, non-material updates such as documentary discovery and adjournments are not required.
  • Instructions have been added to Form 33-109F4 Registration of Individuals and Review of Permitted Individuals (Form 33-109F4) to clarify that only registrations and licenses required for dealing with the public in any capacity must be disclosed.
  • Individual registrants will be required to report business titles and professional designations on Form 33-109F4 where such titles and designations are used or will be used once the individual is registered. Individuals will be required to keep this information up-to-date.
  • Required disclosure with respect to resignations and terminations on Form 33-109F4 have been clarified. Disclosure should include any existing allegations of non-compliance with statutes, regulations, orders of a court or regulatory body, rules, or bylaws or failure to meet any standards of conduct (including a firm's policies and procedures or of a professional body) that existed at the time of resignation or termination from a firm, whether or not they are the reason for termination or resignation.
  • Criminal offences under any foreign jurisdiction will be required to be disclosed on Form 33-109F4.
  • Financial disclosure obligations on Form 33-109F4 have been clarified to ensure correct reporting of all bankruptcy, consumer proposals and other insolvency events no matter how long ago they occurred, including discharges and releases from bankruptcy.
  • Clarification has been provided for the use of Form 33-109F7 Reinstatement of Registered Individuals and Permitted  (Form 33-109F7). When an individual leaves a sponsoring firm and joins another registered firm, they may only use a Form 33-109F7 for reinstatement of registration if all the information previously submitted on their Form 33-109F4 is up-to-date, and if there are no allegations relevant to an assessment of suitability for registration existing at the time of leaving a sponsoring firm (such as those noted above). They are otherwise required to file a Form 33-109F4 by making a "Reactivation of Registration" submission on NRD.
  • Certification has been moved to the front of each registration form to remind regulated persons of their obligations to provide complete and accurate information.
  • The notice of use and collection of personal information for each registration form has been updated to improve readability.

Reporting Deadlines

Deadlines for reporting changes in registration information have been extended. Generally, notice periods listed in NI 33-109CP have been extended from 10 days to 15 days, while others have been extended from 15 to 30 days. These extensions include, among others: 

  • The deadline for a firm to file a Form 33-109F1 Notice of End of Individual Registration or Permitted Individual Status with the regulators and provide the registrant with a copy of the form is extended from 10 to 15 days.
  • Permitted individuals will have 15 days to submit Form 33-109F4 to the regulator after becoming a permitted individual (instead of 10).
  • Changes to the name of an agent for service of process or address for service of process required by Form 33-109F6 must be reported within 15 days (instead of 10).
  • Changes to or opening a business location required by Form 33-109F3 Business Locations Other than Head Office  must be reported within 15 days (instead of 10).
  • Notice of changes to a firm's information on Form 33-109F6 to be provided within 30 days to the regulator includes changes to: business history and structure (already 30 days), securities registration, auditor, client assets and conflicts of interest.  Changes to any other information must now be reported within 15 days (instead of 10). 
  • Notice of changes to an individual's information on Form 33-109F4 to be provided within 30 days to the regulator includes changes to: current and previous residential addresses, mailing address, citizenship (already 30 days), reportable activities, previous employment (already 30 days) and other activities. Changes to any other information must now be reported within 15 days (instead of 10).

Implementation

As a result of the Final Amendments, responses to new questions or those requiring clarification on individual NRD records will state "there is no response to this question" until they are updated. Registrants are required to review and update their registration information and respond to these questions by the earlier of (i) June 6, 2023; and (ii) the date on which the registration next has a reportable change in registration information (provided such date is on or after June 6, 2022). The CSA has clarified that current individual registrants do not have to update their registration information for their titles as of the effective date of the Final Amendments or immediately after that date. Individual registrants will be required to update their titles by the earlier of when there has been a change in registration information previously provided and June 6, 2023. The Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) are expected to implement similar amendments to their rules.

In connection with the anticipated Effective Date, in December 2021 the Ontario Securities Commission also published a Notice of General Order – Ontario Instrument 13-508 Extension of Moratorium on Outside Activities Late Filing Fees and Ontario Instrument 13-509 Extension of Moratorium on Outside Activities Late Filing Fees (Commodity Futures Act) to extend the temporary exemption from the requirement to pay late fees on the late submission of outside activity disclosure. A moratorium on the payment of late fees for disclosing outside activities past the required filing deadline was originally put into place in May 2019 for the timeframe January 1, 2019 to December 31, 2021 while the CSA worked on clarifying outside activity disclosure obligations. The moratorium has been extended to June 6, 2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.