When National Instrument 31-103 (NI 31-103) took effect on
September 28, 2009, it introduced new insurance requirements
for many categories of securities registrants and moved away
from the old $200,000 maximum limit insurance requirements
for firms handling client assets. More significantly, NI 31-103
created a new registration category exempt market dealers
(EMDs) for firms and individuals in the business of trading in the
With the new EMD registration category came new capital,
insurance, and proficiency requirements. Jones Brown has
worked with the EMDA to develop an insurance program
specifically designed for EMD firms.
What Insurance is an EMD Required to have?
The new requirements under NI 31-103 stipulate that the
same firm coverage that applies to other dealer registrant
categories must also be carried by EMD firms. This financial
institution bond (FIB) policy for an EMD firm requires coverage
for: fidelity, on premises, in transit, forgery or alterations, and
securities coverage’s – all of which are set out in Appendix A of
The limit requirements placed upon dealing representatives
of and EMD differs from other registrant categories in that it
mandates $50,000 of limit per employee be purchased up to a
maximum of $200,000, unless the EMD “handles, holds, or has
access to” client funds. If the EMD has access to client assets
the limit carried must be the lesser of $25,000,000 or one percent
of total client assets that the dealer holds or has access to.
Additionally, should the firm hold multiple registrations the FIB
limit must be in the greater of the mandated amounts placed on
each category for which the firm is registered?
Additionally, the capital requirements placed on EMDs
specify that any time there is a negative excess working capital
it must be reported to the regulator. This is important as it relates
to the FIB because the deductible of the FIB policy negatively
counts against the calculation of excess working capital. As a
result, Jones Brown has worked to provide the lowest deductible
options for association members that have access to the bonding
program through the EMDA.
Working alongside the EMDA, Jones Brown has put together a
comprehensive solution for EMD firms that goes above and beyond
the coverage requirements of NI 31-103, and based on competitively
discounted rates for a group FIB program open to all EMDA members.
Whether your firm is currently going through the registration process,
or already carrying a financial institution bond, we encourage you to
take advantage of the industry-leading EMD insurance product that
can be tailored to the specific needs of your firm.
For individual dealing representatives of an EMD, Jones Brown
and the EMDA also have developed an agents professional liability
insurance program (errors and omissions insurance) designed
specifically for EMDs. Just another advantage that your EMDA
membership provides. Contact us for more details or visit our
website at: www.emdacanada.com/?page=InsuranceProgram
For more information contact:
Satisfying Your Insurance Requirements Under NI 31-103
Financial Institution Bond Insurance
By Greg Markell, Account Executive, Jones Brown Inc.