CSA identify deficiencies in firms' relationship disclosure information practices

July 18, 2013

The Canadian Securities Administrators today released the findings of a review of the relationship disclosure practices of registered portfolio managers and exempt market dealers. Specifically, the review of a representative sample of 124 registered firms sought to assess compliance with section 14.2 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Ultimately, the CSA identified a number of deficiencies in the reviewed firms' relationship disclosure information. The staff notice specifically highlighted that registered firms were deficient by, among other things: (i) providing unclear disclosure regarding the type or nature of the account they managed for particular clients; (ii) not specifically providing information to clients regarding the types of securities in which they invest to fulfill an investment mandate; (iii) providing only a generic list of risks without describing the risk implications on clients' investment decisions and in some cases discussing risks verbally without providing clients anything in writing; (iv) not providing clients with information regarding the risks of using borrowed money to invest; (v) not adequately providing clients with information regarding conflicts of interest; (vi) referring to costs and fees generally and not providing specific and meaningful information; and (vii) not explaining the terms of the know-your-client form to clients.

The staff notice also provides guidance to assist firms in satisfying regulatory requirements. According to the CSA, relationship disclosure practices will be reviewed during ongoing compliance reviews and the guidance set out in the notice will be applied when assessing compliance.

For more information, see CSA Staff Notice 31-334.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

Stay in Touch with Knowledge Hub