Both the Canadian Securities Administrators
(the CSA) and the Ontario Securities Commission
(the OSC) have recently announced changes to
the exempt market dealer (EMD) registration
requirements that will make it tougher to get
registered as an EMD. The CSA have recently
announced that chief compliance officers (CCOs)
for EMDs will have to satisfy certain experience
requirements before registration will be granted.
We will also discuss the OSC’s new requirement
for pre-registration interviews as part of the
approval process for EMD registration.
I. NEW EXPERIENCE REQUIREMENTS FOR
CCOs OF EMDs
On October 16, 2014, the CSA published
the final amendments to National Instrument
31-103 Registration Requirements, Exemptions
and Ongoing Registrant Obligations (NI 31-103)
and related instruments (the Amendments).
As part of the Amendments, the CSA will soon
require a CCO of an EMD to have 12 months of
relevant securities experience in the 36-month
period before applying for registration (section
3. 10 of NI 31-103). The proposed Amendments
are expected to become effective on January
11, 2015. A copy of the Amendments can be
The CSA position is that the experience
requirement for CCOs of EMDs is consistent with
the proficiency principle articulated in section
3. 4 of NI 31-103. Section 3. 4 states that the
CCO of a dealer firm must have “the education,
training and experience that a reasonable
person would consider necessary to perform the
activity competently, and the ability to design
and implement an effective compliance system”
[emphasis added] (the CCO Proficiency
Standard). Experience is already a component
of the CCO Proficiency Standard.
Section 3. 4 of the Companion Policy to
NI 31-103CP explains the CCO Proficiency
Standard as follows:
CCOs must have a good understanding of
the regulatory requirements applicable to
the firm and individuals acting on its behalf.
CCOs must also have the knowledge and
ability to design and implement an effective
The CSA stated that careful consideration
was given to the requirement for 12 months
of relevant securities experience in light of
comments received, and concluded that it
aligns with its mandate to provide protection to
investors and to foster fair and efficient capital
markets and confidence in the capital markets.
What experience will be required?
Our initial observation is that the CSA
has not moved the guidance very far beyond
the existing CCO Proficiency Standard. We
assume that registration officers of Canadian
securities regulators have been bearing that
standard in mind when considering applications
to date in the context of the CCO Proficiency
Requirement, so query whether there has been
a meaningful change.
Assuming a meaningful change is
intended, we are concerned that the obvious
and most direct experience requirement will be
past experience as a registered CCO. Arguably,
anything short of that would be in doubt.
Clearly, the CSA can’t intend that we default
to a requirement that only past registered CCO
experience will be sufficient or the pool of
CCOs will never grow. Something short of that
must be sufficient.
Although we expect a greater understanding
of the CCO experience requirement for EMDs
will evolve over time, our concern is what
applicants can do in the short run to determine
whether an application will be successful.
We are also concerned that until such time,
the experience requirement will evolve on a
piecemeal basis that may be inconsistently
applied across jurisdictions by different CSA
Cassels Brock & Blackwell LLP
Private Capital Markets
Association of Canada
Cassels Brock & Blackwell LLP
It’s Going to Get Tougher
to Get Registered as an Exempt Market Dealer
By Brian Koscak and Peter Dunne