On June 11, 2012, the Ontario Securities Commission (OSC)
sent e-mails to exempt market dealers (EMDs) and portfolio
managers indicating that it is undertaking a targeted sweep to
assess their compliance with know-your-client (KYC), know-your-product (KYP) and suitability obligations. The OSC advises that
the purpose of the sweep is to assess dealers’ and advisers’
compliance with applicable securities laws and to assess whether
further guidance is needed on firms’ KYC, KYP and suitability
requirements. The sweep started in mid-June and EMDs have
already been contacted.
Whether you are contacted by the OSC or not, EMDs should
have an understanding of the information that the OSC may
ask for when undertaking a field review which is set out below.
However, this list is not exhaustive. Be prepared that during the
on-site visit the OSC may request additional books and records if
it becomes necessary.
Documents the OSC may ask for
1. A copy of the Registrant’s written policies and procedures
manual, including its policies and procedures or any Code of
Ethics governing the personal securities transactions.
2. A copy of the Registrant’s business continuity plan (BCP).
3. Access to client files, including those for clients lost during
the review period.
4. A copy of the Registrant’s current organization chart,
management structure and employee list with telephone
5. Business cards of all individuals who deal with clients,
suppliers, and the public.
6. The name of the compliance officer and the name of the
ultimate designated person.
7. A list of all salespersons of the Registrant.
8. A list of individuals on whom the Commission has imposed
“close supervision” terms and conditions.
9. A list of branch offices of the Registrant, both active and
dormant during the review period, and a description of the
functions of each branch.
10. A list of all affiliated parties to the Registrant, and the nature
of the relationships.
11. A copy of the Registrant’s most recent audited or unaudited
12. A breakdown of revenue generated by transaction type (i.e.
product and/or service) and total revenue generated for the
13. A copy of any reports issued during the review period by
the Registrant’s internal audit department as a result of their
review of operations, including a copy of the management’s
14. A copy of any management letters issued during the review
period by the Registrant’s external auditor as a result of their
annual audit, including a copy of the management’s response.
15. A copy of all minutes of meetings of the Board of Directors, Audit
Committee, Investment Committee or other committees of the
Registrant during the review period.
16. A list of any outstanding claims filed by or against the
Registrant, identifying the nature of the claim and their
17. Complaint log and files for the review period.
18. A copy of any exemptions obtained from the Commission.
19. A copy of any contract or agreement executed by the
Registrant with other third parties. (i.e. service provider,
OSC Undertakes Suitability Sweep
By Peter Dunne, Partner, Cassels Brock & Blackwell LLP