Director Broker Products
Company of Canada
Company of Canada
is a federally licensed
trust company providing
registered product trustee
services in all jurisdictions
The exempt or private securities market in
Canada is flourishing. Estimates put the amount
of capital flow facilitated by the Canadian private
markets each year at more than $100 billion and
growing. The Ontario Securities Commission
(OSC) recently published its Corporate Finance
Branch 2014-2015 Annual Report, which stated
that “in 2013, non-investment fund issuers raised
approximately $45 billion through prospectus-exempt distributions in Ontario.” The report also
noted that, “non-investment fund issuers raised
capital through approximately 27,000 purchases
made by Ontario residents in 2013.”
Growth and Regulation in the Private Securities Market
More organizations are diversifying by investing
in private equity with the hope of increasing their
returns. The Ontario Teachers’ Pension Plan had
private equity investments totalling $21.0 billion at
the close of 2014, compared to $14.8 billion the
same time the previous year. OMERS, the Ontario
Municipal Employees Retirement System, one of
Canada’s largest pension plans, reported in 2015
that its private investments returned 9.5% (net).
The growth in the private market is attracting
attention – both from investors and from regulators.
The “know-your-client” (KYC) and “
know-your-product” (KYP) rules have introduced requirements
for transparency and accountability in the market.
Beginning in 2016, exempt market dealers (EMDs)
and advisors will now also need to meet the
requirements of the Client Relationship Model
- Phase 2 (CRM2) amendments to NI 31-103.
These amendments will require them to provide
more reporting to their clients, including: an annual
report on charges and compensation paid to their
dealer or advisor as well as an annual investment
performance report that includes reporting on the
deposits into and withdrawals from the account,
changes in value of the account and the percentage
returns from the previous year.
Further changes were introduced in the
Ontario market in the fall 2015 when the OSC
published the OM exemption and crowdfunding
regime in final form. The result is Ontario
investors will have more options in the coming
years, and EMDs and vendors must navigate
these additional layers of complexity.
Next Steps for Issuers, EMDs and DRs
With new regulation being introduced each year,
the time now required to ensure that issuers and
trades are ‘suitable’ for a client accounts, that the
clients meet the prospectus exemption requirements
and that appropriate asset diversification is achieved,
is most likely the largest time commitment faced by
EMDs and their dealing representatives.
EMDs are devoting ever-increasing time and
focus to ensuring that KYC and KYP requirements
are met, as well as to supporting subscription and
Are you compliant?
Choosing the right registered plans partner.
By Neil Carnell