The Mutual Fund Dealers Association is modifying its rules due to the implementation of the passport model’s Principal Regulator System in all provinces apart from Ontario.

In a notice released today, the regulator points out that the new system took effect September 19 throughout the jurisdiction of the Canadian Securities Administrators, except in Ontario.

The MFDA says that the system gives market participants the opportunity to seek and obtain certain types of regulatory approvals in participating jurisdictions dealing through their principal regulator.

Notably, the rule provides an exemption from registration requirements, which permits a firm or individual to continue dealing with a client that moves to a different jurisdiction, and to deal with certain family members of that client. Provided the registrant is registered in its principal jurisdiction and has a minimal number of clients and minimal amount of assets under management in the other jurisdiction, the registrant will not have to become registered in the other jurisdiction.

The rule also provides separate mobility exemptions for dealers and individuals. If an individual rep is relying on the exemption for trading in a local jurisdiction, the rep’s dealer must either be registered as a dealer in the local jurisdiction, or ensure that it also meets the terms of the mobility exemption. If a rep can no longer rely on the exemption, then both the rep and the firm must apply for registration in the local jurisdiction if they want to continue to deal with clients in the jurisdiction.

Because Ontario has not adopted the rule, the exemption is not available to: dealers whose head office is located in Ontario; reps at a branch, sub-branch or other working office in Ontario; and, dealers and reps in other jurisdictions whose clients move to Ontario.

The MFDA notes that its rules require members to have policies and procedures to: prevent the opening of new accounts in jurisdictions where the firm or rep is not registered; and, identify and take appropriate action where clients move to jurisdictions where the firm or rep is not registered. It says its staff will monitor compliance with these requirements in light of mobility exemptions that may be available. “Members must, in any event, establish policies and procedures to monitor compliance with the conditions of any mobility exemptions that the member intends to rely on and to ensure that their responsibilities with respect to Ontario resident clients are met,” it says.