The application and ongoing refinement of
methodology and process are the key to success
in many fields including, professional sports, motor
vehicle design, software development and, investment
However one of the areas where an organized
approach is often lacking is in management of
compliance for small and mid-size Exempt Market
Dealers and other securities registrants.
The Seeds of Confusion
In 1989 the Ontario Securities Commission,
introduced a “closed system” of registration, which
meant that any firm in the business of trading securities
had to be registered. The Limited Market Dealer
(LMD) registration was established as a category for
firms that only traded in exempt securities or exempt
transactions. At the time the Commission’s objective
was simply to have jurisdiction over such firms in the
event of an investigation or, if needed, to issue cease
and desist orders.
However, as many operating businesses started
to adopt the LMD license an expectation that such
firms would have a formal compliance structure
began to develop.
With the transition from the LMD to the Exempt
Market Dealer (EMD) category across Canada on
September 28, 2009, many of these expectations
became formalized under National Instrument 31-103
(NI 31-103). Over time these expectations have been
refined and/or clarified through amendments to
through various other published guidance.
For many industry participants (especially those
operating in business a long time) this trend appears
as regulatory overreach and as adding unnecessary
costs to the business.
In an attempt to deal with this hornet’s nest of
compliance confusion, firms have sought refuge in
seminars, lawyers, consultants and other sources
of technical information. Some have even chosen
to seek registration in a stricter IIROC category (the
equivalent of crawling into the hornets nest itself, on
the basis that there is no difference being stung by a
few hornets versus being stung by all of them).
Unfortunately what has never been explained
is that the first and most important regulatory
requirement of a member firm is to have an organized
process for managing compliance.
When a new regulatory requirement or
expectation is adopted, the Commission is effectively
saying, “Please adjust your processes to take care
of this new thing.” While many industry participants
often hear, “Here as some more rules and regulations
that will take up a lot of your time and money and,
possibly drive you out of the business.”
What is a Compliance Structure?
A well-organized compliance structure is a series
of processes that are integrated into the business, and
that do not require management’s ongoing direction.
It should include:
ARA Compliance Support
Private Capital Markets
Association of Canada
MISSING LINK By Vipool Desai