The Mutual Fund Dealers Association of Canada is alerting its members to the changes they will face when registration reform takes effect at the end of the month.

On Tuesday, the MFDA issued a bulletin concerning the Canadian Securities Administrators’ registration reform rule — National Instrument 31-103 Registration Requirements — which is slated to come into force on September 28. The new rule will spell changes to proficiency requirements, compliance systems, referral arrangements and reps’ ability to service clients in other provinces, among other things.

In terms of proficiency requirements, the bulletin points out that the rule requires individuals to pass exams, not courses, to fulfill educational requirements for registration. As a result, the MFDA rules, which currently refer to courses, will be changed to conform. Additionally, the rules will revised to reflect proficiency requirements to sell labour sponsored investment funds and commodity pools.

The new rule will create a new category of registration, the Ultimate Designated Person, which must be the chief executive officer of the firm, or its sole proprietor. The MFDA rules will also be change to reflect the new UDP requirement. Firms will have three months to designate and apply for registration for their UDP.

The CSA rule will do away with the branch manager registration category, but the MFDA is retaining its branch manager requirements, as its’ members only conduct retail operations.

Additionally, the rule will mean new parameters for dealing with clients in other jurisdictions. Reps will be allowed up to five “eligible clients”, which the firm can serve in another province without requiring registration, and a firm overall is allowed up to 10 eligible clients in each jurisdiction. Firms will have to ensure they are in compliance with the new requirements.

The rule also requires all reps’ referral arrangements be conducted through their firm. There’s a six month transition period for this requirement, which includes referral arrangements entered into prior to the new rule taking effect.

Under the new rule, firms will also be required to deliver account statements to clients at least once every three months for both client name and nominee name accounts. Firms that only hold a mutual fund dealer license will have 24 months to comply with the quarterly statement requirement, but firms that will be registered in the exempt market dealer category will have to comply right away (although the MFDA notes that, at least in Ontario and Newfoundland, consideration is being given for a transition period for client account statements for EMDs).

MFDA members that want to sell exempt securities after September 28, will be required to obtain EMD registration. The bulletin notes that in Ontario and Newfoundland, firms that are registered as limited market dealers will not have to apply for an EMD license, the LMD registration will convert automatically to EMD registration. In the other provinces and territories, firms will have to apply for EMD registration, and they will have 12 months to do so.

IE