The Investment Dealers Association of Canada has issued a regulatory notice that clarifies the rules around client priority in TSX Venture private placements.

The notice says that IDA staff have received queries from firms as to the exact application of the rules, particularly given the increased financing activity on the TSX Venture Exchange.

As clarification, the notice cites IDA by-laws, TSX Venture rules and an earlier bulletin.

“It is the view of the Association that the payment of a finder’s fee or any other form of compensation or remuneration in connection with the distribution of securities (except sales commissions on subsequent resales of such securities) is evidence that the member is acting in the capacity of an adviser, agent or underwriter in connection with the transaction. Consequently, client priority rules are triggered and reasonable efforts must be made to ensure that client orders are honoured in priority to non-client orders,” the notice counsels.

The notice goes on to say that relevant by-law and other related rules are in the process of being amended. It reminds firms that, “It is a well-established principle that the interests of clients take priority over those of registrants.”

In a separate notice, the IDA board has approved an amendment to IDA by-laws, adding a definition of “approved person”, to be effective immediately.

The definition is required in order to provide guidance to firms as to what persons fit within the category and are therefore subject to the relevant by-laws, regulations, policies and forms. The notice says, “Some examples of those that fall within the category of Approved Person include all registered representatives and investment representatives, trading and non-trading partners, directors and officers, branch managers, ultimate designated persons, chief compliance officers and alternate designated persons.”

“A definition also makes clear the difference between IDA approval and registration by a securities commission. Some IDA Approved Persons in non-trading categories do not require registration under securities acts and regulations in some provinces,” it notes.