The IDA’s board of directors has approved a by-law regarding leverage disclosure, to be effective immediately.

A national instrument regulating certain registrant activities came into force on August 1, 2001. That rule addresses the issue of leverage disclosure and requires certain disclosures be made to clients. The rule states that a registrant does not have to comply with the leverage disclosure rules if the registrant is subject to and complies with the leverage disclosure rules of a recognized SRO.

So, the IDA has drafted a by-law to address the issue of leverage disclosure. It requires that each partner, director, officer, registered or approved person of a member firm provide a Leverage Risk Disclosure Statement at the time a new account is opened, when a recommendation is made to a client to purchase securities using in whole or in part borrowed money or when they become aware of a client’s intent to purchase securities using in whole or in part borrowed money.

It does not need to be complied with if within the preceding six-month period a Leverage Risk Disclosure Statement has been provided to the client. It also does not apply to purchases by a client on margin if the client’s margin account is operated in accordance with the rules of the IDA.