[not proceeding] Proposed Multilateral Instrument: MI - 33-108 - Permanent Registration
[not proceeding] Proposed Multilateral Instrument: MI - 33-108 - Permanent Registration
NOTICE OF PROPOSED MULTILATERAL INSTRUMENT 33-108
PERMANENT REGISTRATION
Substance and Purpose of Proposed Instrument
The substance and purpose of the proposed Instrument are to introduce a permanent registration system under the Securities Act (the "Act").
The proposed Instrument is based in part on the proposed Ontario Securities Commission Rule 31-508 Permanent Registration (published for comment on June 26, 1998), which the Instrument is intended to replace.
The proposed Instrument is expected to be implemented as a rule, regulation or other appropriate instrument in all of the jurisdictions represented by the Canadian Securities Administrators (the "CSA"), except British Columbia, Alberta, Manitoba and Quebec.
This Instrument is expected to be implemented in British Columbia, Alberta and Manitoba if proposed Multilateral Instrument 31-102 National Registration Database is also implemented in those jurisdictions.
Because this Instrument is not proposed for adoption in all of the jurisdictions of the CSA, it is called a Multilateral Instrument rather than a National Instrument. However, since this Instrument is being adopted in a number of jurisdictions, it is numbered as a national instrument.
Summary of Proposed Instrument
The proposed Instrument creates a permanent registration system to replace the current annual renewal system of registration. It provides that on December 15 of each year every registered firm will be required to deliver to the regulator an annual registration fee for itself and its registered individuals.
If a firm fails to pay its annual registration fee on December 15, the registration of the firm will be suspended on December 31 of the same year. The registration of a firm that has been suspended for this reason will expire on the second anniversary of the suspension unless an application for reinstatement of registration is filed in the interim.
If a registered firm delivers its annual registration fee after December 15 but before the end of the day on December 31 of the same year, the regulator may approve the continuation of the firm's registration.
The proposed Instrument provides that the registration of a registered individual with a sponsoring firm is suspended on the date that the individual ceases to act on behalf of the firm or the registration of the sponsoring firm is suspended, is terminated, or expires. A registration that is suspended for this reason will expire on the second anniversary of the suspension unless an application for reinstatement of registration is filed in the interim.
The proposed Instrument requires that an application for reinstatement of registration shall be made in the form that is prescribed by the securities regulatory authority for an application for registration. Despite this requirement, until Multilateral Instrument 31-102 National Registration Database is effective, an application for reinstatement of registration filed by a salesperson within six months of the salesperson being suspended shall be made in the form that is prescribed by the regulator.
Related Instruments
The proposed Instrument is related to proposed Rule 33-505 (Commodity Futures Act) Permanent Registration, which is also being published for comment in this bulletin. The proposed Instrument is also related to proposed Multilateral Instrument 31-102 National Registration Database and proposed Rule 31-509 (Commodity Futures Act) National Registration Database, which have yet to be published for comment.
Regulations to be Amended and Revoked
The Commission will revoke sections 130 and 131, subsections 132(1) and 133(1), and Forms 5 and 6 of the Regulation since they are inconsistent with the proposed Instrument.
The Commission will amend section 96 of the Regulation by deleting "anniversary date" from the list of terms defined in that section.
The Commission will amend sections 102, 108 and 127 of the Regulation by deleting the references in those sections to renewals of registration. Subsection 108(4), which currently requires that a director's resolution be delivered with the application for renewal of registration, will be amended to provide that the director's resolution must be delivered within ninety days after the end of the registrant's financial year.
The Commission will amend subsections 132(2) and 133(2) of the Regulation, which currently require that registrants file with their renewal applications changes to registration information that have not otherwise been filed with the Commission, to provide that this information be filed on December 15 of each year.
The Commission will also amend sections 1 to 10 of Schedule 1 to the Act to make them consistent with the Instrument. The amendments to Schedule 1 will indicate that the fees currently required with an application for renewal of registration will be required on December 15 of each year. The amendments will also indicate that the fees required with an application for reinstatement of registration will equal those required with an application for registration except for salespersons who have been suspended for less than six months. The amendments will provide that no fee will be required with an application for reinstatement of registration for salespersons made within six months of the suspension.
Authority for Proposed Instrument
The following provisions of the Act provide the Commission with authority to make the proposed Instrument. Paragraph 143(1)1 of the Act authorizes the Commission to make rules prescribing requirements in respect of applications for registration and the renewal, amendment, expiration or surrender of registration and in respect of suspension, cancellation or reinstatement of registration. Paragraph 143(1)7 of the Act authorizes the Commission to make rules prescribing requirements in respect of the disclosure or furnishing of information to the Commission by registrants.
Alternatives Considered
As an alternative to requiring that annual registration fees are paid on December 15 of each year, the Commission considered whether the fees should be paid ninety days after a registered firm's financial year end. The latter payment date was proposed in Rule 31-508 and would correspond to the date when certain registered firms are required to deliver financial reports to the Commission. However, during the current development of the National Registration Database, an Internet based system which will permit registrants to submit registration fees electronically, it was determined that a single registration fee payment date would be more economical. A single fee payment date for all registered firms will reduce the complexity, and therefore the cost, of the National Registration Database. This benefit is expected to exceed any benefit resulting from requiring that registration fees be paid when financial reports are due, particularly since fees will be submitted electronically through the National Registration Database while financial reports will be delivered outside the system.
Unpublished Materials
In proposing the Instrument, the Commission has not relied on any significant unpublished study, report, decision or other written materials.
Anticipated Costs and Benefits
The proposed Instrument is expected to benefit registrants by harmonizing annual registration fee payment dates in the jurisdictions implementing the National Registration Database.
The Instrument will eliminate the administrative costs borne by staff in the process of reviewing applications for renewal of registration. Staff of the Commission has found that renewing registration is largely an administrative process and that concerns with a registrant's suitability for registration are typically discovered through compliance reviews, enforcement investigations and public complaints.
Although the Director will no longer have the opportunity to refuse to grant a renewal of registration under section 26 of the Act, implementing a permanent registration system will not diminish the Commission's ability to suspend or terminate registrations. Under a permanent registration system, where staff have determined that a registrant is no longer suitable for registration, staff will continue its current practice of seeking an order from the Commission under section 127 of the Act to terminate the registration. Furthermore, the Commission may choose to assign to the Director, pursuant to section 6(3) of the Act, the ability to suspend or terminate registrations.
Comments
Interested parties are invited to make written submissions with respect to the proposed Instrument. Submissions received by June 18, 2001 will be considered.
Submissions should be sent to all Canadian securities regulatory authorities listed below in care of the Ontario Securities Commission in duplicate, as indicated below:
Saskatchewan Securities Commission
Ontario Securities Commission
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Securities Commission of Newfoundland
Registrar of Securities, Northwest Territories
Registrar of Securities, Nunavut
Registrar of Securities, Yukon Territory
c/o John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario
M5H 3S8
[email protected]
A diskette containing the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As the Act requires that a summary of written comments received during the comment period be published, confidentiality of submissions cannot be maintained.
Questions may be referred to:
Dirk de Lint
Legal Counsel, NRD Project Team
Ontario Securities Commission
(416) 593-8090
Proposed Instrument
The text of the proposed Instrument follows, together with footnotes that are not part of the Instrument but have been included to provide background and explanation.
DATED: , 2001
MULTILATERAL INSTRUMENT 33-108
PERMANENT REGISTRATION(1)
PART 1 DEFINITIONS(2)
1.1 Definitions - In this Instrument
"registered firm" means a person or company that is registered as a dealer, adviser or underwriter;
"registered individual" means an individual registered to trade or advise on behalf of a registered firm; and
"sponsoring firm" means, for a registered individual, the registered firm on whose behalf the individual is registered to trade or advise.
PART 2 TERM OF REGISTRATION
2.1 Permanent Registration - Registered firms and registered individuals continue to be registered until their registration expires or is terminated.
2.2 Annual Payment of Fees - A registered firm shall deliver to the regulator(3) on December 15 of each year the annual registration fees required under securities legislation(4) for itself and its registered individuals.
2.3 Suspension of Registered Firms
(1) If a registered firm does not deliver the fees on a December 15 as required under section 2.2, the firm's registration is suspended at the end of the day on December 31 of the same year.
(2) Despite subsection (1), if a registered firm delivers the annual registration fees required for itself and its registered individuals after December 15 but before the end of the day on December 31 of the same year, the regulator may approve the continuation of the firm's registration.
(3) A registration that is suspended under subsection (1) expires on the second anniversary of the suspension unless an application for reinstatement of registration is filed in the interim.
(4) An application for reinstatement of registration shall be made in the form that is prescribed by the securities regulatory authority(5) for an application for registration and shall be accompanied by the fee required under securities legislation.
2.4 Suspension of Registered Individuals
(1) The registration of a registered individual with a sponsoring firm is suspended on the date that
(a) the registered individual ceases to act on behalf of the sponsoring firm; or
(b) the registration of the sponsoring firm is suspended, is terminated, or expires.
(2) A registration that is suspended under subsection (1) expires on the second anniversary of the suspension unless an application for reinstatement of registration is filed in the interim.
(3) An application for reinstatement of registration shall be made in the form that is prescribed by the securities regulatory authority for an application for registration and shall be accompanied by the fee required under securities legislation.
(4) Despite subsection (3) and until Multilateral Instrument 31-102(6) is effective, an application for reinstatement of registration filed by a salesperson within six months of the salesperson being suspended under subsection (1) shall be made in the form that is prescribed by the regulator.
2.5 Hearing - If the registration of a registered firm or registered individual has been suspended under this Instrument and a hearing is commenced under securities legislation relating to the registration, the registration shall continue in suspension until a decision is issued.
PART 3 EXEMPTION
3.1 Exemption
(1) The regulator or the securities regulatory authority may grant an exemption to this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.
1. This Instrument is new. It is intended to create a permanent registration system to replace the current annual renewal system of registration. The proposed Multilateral Instrument is being proposed for implementation as a rule, regulation or other appropriate instrument in all of the jurisdictions represented by the CSA, except British Columbia, Alberta, Manitoba and Quebec.
2. A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of certain terms used in more than one national or multilateral instrument. National Instrument 14-101 also provides that a term used in a multilateral instrument and defined in the statute relating to securities of the applicable jurisdiction, the definition of which is not restricted to a specific portion of the statute, will have the meaning given to it in that statute, unless the context otherwise requires. National Instrument 14-101 also provides that a provision or a reference within a provision of a multilateral instrument that specifically refers by name to a jurisdiction, other than the local jurisdiction, shall not have any effect in the local jurisdiction, unless otherwise stated in the provision.
3. The term "regulator" is defined in National Instrument 14-101 as meaning, "for the local jurisdiction, the person referred to in Appendix D opposite the name of the local jurisdiction."
4. The term "securities legislation" is defined in National Instrument 14-101 as meaning, "for the local jurisdiction, the instruments listed in Appendix A opposite the name of the local jurisdiction."
5. The term "securities regulatory authority" is defined in National Instrument 14-101 as meaning, "for the local jurisdiction, the securities commission or similar regulatory authority listed in Appendix C opposite the name of the local jurisdiction."
6. This is the proposed multilateral instrument for the National Registration Database.