Overview of the Registration Process - osc.gov.on.ca · Overview of the Registration Process...

Overview of the RegistrationProcess

Registrant Outreach Seminar

February 2014

Compliance & Registrant Regulation Branch

Disclaimer

The presentation is provided for general information purposesonly and does not constitute legal or accounting advice.

Information has been summarized and paraphrased forpresentation purposes and the examples have been providedfor illustration purposes only.

Information in this presentation reflects securities legislation andother relevant standards that are in effect as of the date ofthe presentation.

The contents of this presentation should not be modified withoutthe express written permission of the presenters.

2


Registration Regime

Ontario Securities Act sets up aninvestor protection regime

Standards relating to integrity,proficiency, and solvency

Must meet these standards• at time of initial registration, and• ongoing condition of registration

3


Presentation Overview

What’s new

Common filing deficiencies

NRD issues

4


Compliance and RegistrantRegulation Branch

5

Director

Debra Foubert

Team 1

PortfolioManager

Team 2

InvestmentFund Manager

Team 3

Dealer

Team 4

RegistrantConduct

Team 5

ComplianceStrategy & Risk

Analysis

Team 6

Registration


Team 6 - Registration

6

Manager Registration

Kelly Everest

Registration Supervisor

(Portfolio Managers)

Allison McBain

Registration OfficersKamaria Hoo

Jenny Tse Lin Tsang

Pamela Woodall

Marsha Hylton


(Investment FundManagers)

Oriole Burton

Registration OfficersFeryal Khorasanee

Rachel Palozzi

Kipson Noronha

Maria Aluning

Diana Cober

Toni Sargent


(Dealers)

Kirsty MacDonald

Registration OfficersChristy Yip

Maria Talag

Edgar Serrano

Anthony Ng


Registration Team – What We Do

Register, amend, suspend and revokeregistration of firms and theirrepresentatives

Often your first point of contact

Seek legal and compliance supportfrom Teams 1- 4 as required

7


On-line Forms and Electronic Filings

OSC Rule 11-501 –Electronic Deliveryof Documents to OSC

• Mandatory as of February 19, 2014• OSC’s web filing portal• Web based forms or PDFs

http://www.osc.gov.on.ca/en/SecuritiesLaw_forms_index.htm

8




Forms and Filings - Firms

Form Use this form to: Submission method

Form 33-109F6/ 33-506F6 FirmRegistration

•Apply for initial registrationas a dealer, adviser orinvestment fund manager•Apply to add a category orjurisdiction to an existingregistration

Complete form andsubmit a copy online.

PDF: Form 33-109F6PDF: Form 33-506F6

Form 33-109F3/ 33-506F3 BusinessLocations other thanHead Office

•Notify the OSC of theopening of, or any change to,a business location of the firm

NRD

Form 33-109F5/ 33-506F5 Change ofInformation

•Notify the OSC of a change topreviously submittedregistration information

Complete form andsubmit a copy online.PDF: Form 33-109F5PDF: Form 33-506F5

Insurance information•Notify the OSC of changes topreviously submittedinsurance information

Online Form

9


Forms and Filings – Individuals

Form Use this form to:Submissionmethod

Form 33-109F1/33-506F1Notice of Termination ofRegistered and PermittedIndividuals

•Notify the OSC of the termination of aregistered or permitted individual’s authorityto act on behalf of the firm

NRD

Form 33-109F2/ 33-506F2Change or Surrender ofIndividual Categories

•Apply for registration or approval in anadditional category•Surrender a category while maintainingregistration in one or more other categories

NRD

Form 33-109F4/ 33-506F4Registration of Individuals andReview of Permitted Individuals

•Apply for registration in individual categoriesor review as a permitted individual

NRD

Form 33-109F5/33-506F5Change of Information

•Notify the OSC of a change to previouslysubmitted registration information

NRD

Form 33-109F7/ 33-506F7Reinstatement of RegisteredIndividuals and PermittedIndividuals

•Transfer individual’s registration betweensponsoring firms or reinstate an individual’sregistration or a permitted individual status

NRD

10


Forms and Filings – Financial


Form 31-103F1Calculation ofExcess WorkingCapital

•Determine and notify the OSC of a firm’sexcess working capital as at the end of afinancial year or interim period

Online form

Financialstatements andother financialinformation

•Deliver required financial information to theregulators

Online form

SubordinationAgreements

•Notify the OSC that a firm has executed asubordinated loan agreement and relying onit for the purposes of Form 31-103F1

Online form

Repayment ortermination of asubordinationagreement

•Notify the OSC of a repayment of asubordinated loan or termination of asubordination agreement

Online form

Capital deficiency•Notify the OSC of a capital deficiency (i.e.excess working capital of a registered firm isless than zero)

E-mail [email protected]

11


Forms and Filings – ParticipationFees


Form 13-502F4/ 13-503F1ParticipationFeeCalculation

•Determine and notify the OSC of participationfees payable•All registered firms and unregistered exemptinternational firms must complete this form byDecember 1 each year•Unregistered investment fund managers onlymust complete this form within 90 days afterthe end of each of its fiscal years

Form 13-502F4:Online form

Form 13-503F1:Online form

AdjustedForm 13-502F4 andForm 13-502F5/AdjustedForm 13-503F1 andForm 13-503F2

•Determine and notify the OSC of adjustedparticipation fees payable. Firms who provideda Form 13-502F4 or Form 13-503F1 (above)based on estimated revenues must completethese forms electronically within 90 days oftheir fiscal year end only if their participationfee payable has changed

Adjusted Form13-502F4 andForm 13-502F5:Online form

Adjusted Form13-503F1 andForm 13-503F2:Online form

12


Forms and Filings - RegistrationExemptions

13


Form 31-103F2Submission toJurisdiction andAppointment ofAgent for Service

•To notify the OSC of reliance on theexemption from the registration requirementunder sections 8.18 International Dealer and8.26 International Adviser of NationalInstrument 31-103 RegistrationRequirements and Exemptions

Complete theform andsubmit a copyonline.

Form 31-103F3 Useof MobilityExemption

•Notify the OSC of an individual’s reliance onan exemption from the registrationrequirement under section 2.2 Client mobilityexemption - individuals


Form 32-102F1Submission toJurisdiction andAppointment ofAgent for Servicefor IFM

•Notify the OSC of reliance on the permittedclient exemption for international investmentfund managers under section 4 Permittedclients



Forms and Filings - RegistrationExemptions (cont’d)


Form 32-102F2 Noticeof Regulatory Action

•Notify the OSC of reliance on the permitted clientexemption for international investment fundmanagers under s. 4 Permitted clients

Complete formand submit acopy online.

Reliance on exemptionfrom IFM registrationunder MultilateralInstrument 32-102Registration Exemptionsfor Non-Resident IFMs

•Notify the OSC of reliance on the permitted clientexemption for international IFM under s. 4Permitted clients•Notify the OSC of the total assets undermanagement attributable to securities beneficiallyowned by residents of Ontario as at the mostrecently completed month•Unregistered international investment fundmanagers must complete this form by December 1each year

E-mail [email protected]

Form 35-101F1/35-101F2 Submission toJurisdiction andAppointment of Agent ofService of Process byAgents of the BrokerDealer

•To notify the OSC of United States Broker-Dealersand Agent’s reliance on the exemptions fromregistration under National Instrument 35-101Conditional Exemption from Registration for UnitedStates Broker Dealers and Agents

Complete formand submit acopy online.

Form 35-101F1Form 35-101F214


Revised Service Standards –Individual Application

Effective spring 2014

Applies if:

• Routine (not novel)• Complete• Not associated with a new business

submission, and• No concerns with fitness for registration

15


Revised Service Standards –Individual Application (cont’d)

New applications and reactivations

• Dealing reps

• 5 working days for 80% of all filings

• ARs, AARs and CCOs

• 20 working days for 80% of all filings

Notices of termination (NOT)• 5 working days for 95% of all filings

16


Revised Service Standards – NewFirm

Effective spring 2014

Apply if:

• Routine (not novel)• Non-SRO applicant• All questions are answered with

sufficient detail• All regulatory obligations are met• No concerns with fitness for registration,

and• Timely responses to requests for

information

17


Revised Service Standards – NewFirm (cont’d)

Initial contact within 5 working days for95% of filings, including

• fee payment instructions and• notification that ready to accept

applications for "mind andmanagement"

Decision within 90 working days for80% of filings

18


Deficient Filings - Return ofIncomplete Applications

When applications are substantiallyincomplete. For example

• Required business corporation numbersnot obtained

• No audited financial statements• No auditor appointed, or• Firm is not prepared to file the individual

registration applications on NRD

Return the application without review

If application is re-filed, may requirethe filing fees to be paid again

19


Deficient Filings - Closing InactiveApplications

If no response to a request within 3weeks, application will be considereddormant

Notification asking for a status updatewithin 2 weeks

Closed if no response

20


Common FilingDeficiencies

21


Registration Regime

Ontario Securities Act sets up aninvestor protection regime

Standards relating to integrity,proficiency, and solvency

Must meet these standards• at time of initial registration, and• continuing condition of registration

22


Registration Regime – KeyLegislation

National Instrument (NI) 31-103Registration Requirements, Exemptionsand Ongoing Registrant Obligations

NI 33-109 Registration Information

National Policy 11-204 Process forRegistration in Multiple Jurisdictions

Multilateral Instrument 11-102 PassportSystem

OSC Rule 13-502 – Fees

23


Common Deficiencies – New FirmApplications

Incomplete applications

Accompanying individual applicationsnot ready to be filed

Insufficient detail about the firm'sproposed business activities andoperations

24


Common Deficiencies – New FirmApplications

CEO not applying as UDP

CCO does not meet proficiencyrequirements

Business corporation numbers notprovided for all relevant jurisdictions

25


Common Deficiencies – OngoingFirm Filings

F5s not filed within specified timeframes (generally required within 10days). For example,

• Firm/CCO contact information

• Civil disclosure

• Shareholder information

• Change of auditor

• Insurance information

26


Common Deficiencies – General

New firm has not obtained NOT fromprior firm

Reinstatement used when individual isnot eligible

Conflicts of interest not properlyassessed

Exemptive relief not requested/obtained for dual registration

27


Common Deficiencies - Individuals

Disclosure is insufficient, absent ormisleading

• Outside business activities (OBA)

• Financial disclosure (i.e. solvency)

• Proficiency

Disclosure is late

28


Common Deficiencies – Individuals(cont’d)

Disclosure is insufficient, absent ormisleading

• Circumstances of resignation ortermination

• Regulatory disclosure such as insurancelicensing

• Criminal charges and/or convictions• Civil or regulatory actions

29


Common Deficiencies - OutsideBusiness Activities (OBAs)

Current employment

OBAs

• Landlord/owner of apartment building• Tax planning• Holding company

Officer or director positions

Equivalent to officer/director positions

• Trustee• Admissions manager at retirement home

30


Common Deficiencies - OBADisclosure

Insufficient detail

Firm has inappropriately assessedactual or potential conflicts of interestand/or client confusion

Firm has provided insufficientexplanation addressing why no conflictsor client confusion exist

31


Common Deficiencies – IdentifyingHigh-conflict OBAs

Assess three factors:

• Position of influence (e.g., religiousleader)

• Position of authority (e.g., teacher orcity councilor)

• Potentially vulnerable clients ( e.g.,seniors)

Expect T&Cs in most cases restrictingtrading/advising for clients (and closefamily members) met through the OBA

32


Common Deficiencies – FinancialDisclosure

Failure to disclose (initial and ongoing)

Bankruptcy/consumer proposals

Unpaid debt over $5,000

Unsatisfied judgements

Garnishments

Requirements to pay (CRA)

33


Common Deficiencies – FinancialDisclosure

Individuals with current solvency issuescan only be registered with closesupervision T&Cs

T&Cs can be removed once solvencyissue disappears (after F4 is updatedand supporting documents provided)

34


Common Deficiency - Bankruptcy

If not discharged, registration will berefused for a new applicant

If discharged within the last 12 months,close supervision T&Cs will be imposedfor six months

35


Common Deficiencies - Late Filings

For not meeting deadlines to notify usof changes in registration information

In particular, we see numerous latefilings relating to terminations, OBAs,and criminal, civil and financialdisclosure

NI 33-109 sets out the deadlines forthese and other filings

36


Common Deficiencies - Late Filings(cont’d)

Result in late fees of $100 per businessday (to annual maximum of $5,000 perfirm)

Best practices:

• File NOTs quickly after registered/permitted individual leaves firm

• New OBA does not begin until approvedby firm

• Registered/permitted individuals signannual attestation that all F4information is correct

37


Common Deficiencies - Proficiency

Proficiency Requirements set out in Part3 of NI 31-103

• Education (examinations ordesignations)

• Experience• Proficiency Principle

38


Proficiency - Education

Qualifying courses/designations

Time limits on examinationrequirements• Passed exam within last 36 months unless:

• registered in same category (in any jurisdiction inCanada) in last 36 months, OR

• gained 12 months of relevant securities industryexperience during the last 36 months

• does not apply to CIM and CFA designations

39


Common Deficiency – Education

Required courses not completed withinrequired time limit or at all

No exemption application nor anyindication of how the individual mightqualify under section 3.3(2)( b)

40


Proficiency - Experience

Section 3.3(2)(b) – where time limithas passed for courses

• Must have relevant securities industryexperience (to the category beingapplied for). For example,

• EMD dealing rep has experience withexempt products

• CCO has experience in supervisorycapacity in securities industry

41


Experience – AR and AARs

Relevant Investment ManagementExperience

• Refer to CSA Staff Notice 31-332Relevant Investment ManagementExperience for Advising Representativesand Associate Advising Representativesof Portfolio Managers

42


Experience - CCOs

CCOs of Portfolio Managers andInvestment Fund Managers

• Relevant securities experience• Worked in a compliance capacity• Provided professional services in the

securities industry

43


Experience - Common Deficiencies

Insufficient information and analysisprovided to assess whether theindividual has relevant experience

• Describe duties and responsibilities indetail

• Explain how they are relevant to thecategory being applied for

44


Experience – Common Deficiencies

Information provided on duties isexaggerated or otherwise not entirelyaccurate

• Firm obligation to make reasonableefforts to ensure truth andcompleteness

• It is an offence if an individual givesfalse or misleading information

45


Proficiency – Exemption Applications

Required where applicant does not haverequired courses or experience and3.3(2)(b) does not apply

Filed over NRD: with supportingdocuments sent electronically in pdfformat

Qualifications or Relevant Experiencethat is equivalent to, or moreappropriate in the circumstances than,the prescribed requirements

46


Common Deficiency - ProficiencyExemptions

Insufficient relevant information andanalysis

Overly focused on what the firm doesor what the team does

No comparative analysis of alternativecourses to the requiredcourses/designations

Information provided on duties andresponsibilities is exaggerated orotherwise not entirely accurate

47


Proficiency - General Principle

Section 3.4 of NI 31-103

Applies both at initial registration andat all times throughout registration

Responsibility of the registered firm toensure individuals are proficient at alltimes

48


General Proficiency Principle –Individual

Must have education, training andexperience that a reasonable personwould consider necessary to performactivity competently

• Includes understanding

• structure

• features, and

• risks

of each security recommended

49


General Proficiency Principle - CCO

Education, training and experience thata reasonable person would considernecessary to perform responsibilitiescompetently

Includes good understanding of theregulatory requirements

Knowledge and ability to design andimplement an effective compliancesystem

50


NRD issues and otherinformation

51


NRD – Password Issues

Chief AFR

• only CSA Service Desk can reset password• Chief AFR must know PIN• if Chief AFR has lost/forgotten PIN –

contact OSC

Other AFRs

• CAFR/AFR administrator can resetpassword

Individual applicants (not yet registered)

• individual user ID/password must bedisabled in order to reset

52


NRD – Issues with Firm Filings

NRD does not allow most firmfilings/updates. For example,

• Does not allow firm to add category• Does not allow you to add jurisdiction

to firm's registration• Name change• Address change

File F5 via pdf and submit electronically– we will update NRD

53


NRD – Firm Submissions

54


NRD – How to Submit NewIndividual Application

Use one of 4 submission types forindividual new to firm

Described on NRD System and in Rule33-109

• Initial• Reactivation• Reinstatement• Add sponsoring firm

55


Individual Application – Initial Types

56


NRD – How to Submit NewIndividual Application (cont’d) Must use existing NRD number, if already

assigned

Warning may mean that they have an NRDnumber or may mean that they havepreviously applied

Staff can only disclose NRD number directly toindividual

57


Another Individual - Same Nameand Birth Date

58


Individual Application –Amendments


NRD – Passport/Non-Passport Filings

Check “Passport” if individual is:

• Applying for registration in multiplejurisdictions

• Adding one or more jurisdictions

Don’t check “Passport” if individual is:

• Applying for registration only in their PRjurisdiction

• Filing only as a Permitted Individual(See 4A.1 – 11-102CP)

60


Passport/Interface Selection

61


NRD – Navigation/SubmissionIssues

Information not complete – Redmessage will appear at top of screen

• Often section 8.4 not complete re:relevant securities industry experience

62


NRD – Navigation/SubmissionIssues (cont’d)



To ensure all is complete

• Use “Continue” or “Save and Continue”button at the bottom of screen

To skip to new screen

• Use local navigator (panel on left ofscreen will allow you to jump to adifferent section)

64



65


NRD – Finding and TrackingSubmissions Work In Progress

• Submission may have been created byanother AFR and in their WIP

• We cannot see this

• CAFR/AFR Administrator may reassign

Sent to Regulators

• No longer showing in your WIP

Returned to firm

• Returned to AFR’s WIP to correctdeficiencies

66


NRD - Submission History

Current statuses on all submissions

• Submitted• Approved• Withdrawn• Denied

Additional statuses on notices

• Pending acknowledgement• Acknowledged

67


NRD - Submission History

68


NRD – Resubmit Fee Payment


NRD – Resubmit Fee Payment(cont’d)

Correct Default EFT Payment

•Use to resubmit fees that wererejected/returned (e.g. NSF)

•Will accumulate all rejected/returnedfees until paid

•Will resubmit all rejected/returnedfees to parties originally specified

70



71



Use to submit fees where NRD does notautomatically pull fees, e.g. exemptionapplications or late fees

Must specify each jurisdiction andamount

72



73


NRD – Annual Fee Exclusion

Ensures firm not charged annual feesfor individuals surrendering/terminatingby Dec 31st

One submission for multiple individuals

Per jurisdiction basis

Can be reversed

Must be filed by 3:00 pm Dec 31st

NOT must be filed within 10 days ofactual termination date

74


NRD – Annual Fee Exclusion (cont’d)

75


NRD – Reports


NRD Transition

New CSA service desk in Moncton, NB

• 1-800-219-5381 (Unchanged)

NRD Forms

• NRD Form 1 - ENROLMENT OF FIRM• NRD Form 2 - ENROLMENT OF CHIEF AUTHORIZED

FIRM REPRESENTATIVE• NRD Form 3 - NRD (BANK) ACCOUNT HOLDER

AUTHORIZATION• Available under NRD HELP (Enrolment Forms)• Forms contain instructions and where to send them

No HST on NRD system fees

Two transition issues

• Session times out prematurely• Slow to search

77


Recap

What’s New

• Registration Team• Online forms and filings• Revised service standards

Common Filing Deficiencies

• Some examples provided• More information in CRR annual

summary reports

NRD Issues

• NRD Help (on top right corner of NRD)

78


General Inquiries

79

Local (Toronto)

Toll-free (North America)

TTY

Fax

E-mail

416-593-8314

1-877-785-1555

1-866-827-1295

416-593-8122

[email protected]

mailto:[email protected]

Compliance & Registrant Regulation Branch 80

Questions?

80

Overview of the Registration Process - osc.gov.on.ca · Overview of the Registration Process...

Documents

Transcript of Overview of the Registration Process - osc.gov.on.ca · Overview of the Registration Process...