Registration Information Amendments – December 16, 2021 - Annex B – List of commenters and summary of comments on the Proposals and responses

1.

Support for the Proposals

Many commenters indicated general support for the Proposals. They were of the view that many of the Proposals were important for clarifying Registrant reporting obligations, will lead to a more streamlined registration regime and will reduce regulatory burden. However, they also saw further opportunity to enhance the efficiency of the registration information process.

We thank commenters for their support. We have carefully developed the Proposals with the involvement of the SROs and believe the Amendments will clarify registration information requirements, help Registrants provide complete and accurate information, and reduce the regulatory burden, while allowing the CSA to receive the information necessary to carry out its regulatory role.

One commenter, while supportive of the Proposals, felt other investor protection matters, such as a binding decision mandate for OBSI and review of firm complaint handling procedures, should have been a priority.

As set out in the CSA's 2019-2022 Business Plan, Strategic Goal 1.4, it remains a priority of the CSA to improve investor access to redress for losses resulting from improper or fraudulent transactions by supporting and strengthening OBSI as an independent dispute resolution service.

The same commenter was of the view that the CSA team evaluating the SRO framework should be asked to comment on these proposed changes given that there is a possibility that all registration activities could be assigned to a new SRO.

2.

New reporting framework for Outside Activities

Many commenters were supportive of the introduction of a new reporting framework for Outside Activities and the new guidance. However, a couple of commenters were of the view that reporting Outside Activities was duplicative in light of the Client Focused Reforms. In contrast, one commenter believed the new framework went too far with respect to lessening the reporting requirements for Outside Activities and that the proposed changes may result in disclosure of fewer positions or activity that can give rise to conflict of interest issues, resulting in potential investor harm. Another commenter identified concerns with permitting Outside Activities for individuals charged with acting in the best interest of clients.

The new reporting framework for Outside Activities is intended to address concerns raised by the previous principles-based reporting requirement and to provide greater clarity to Registrants. Based on the test we conducted on the Proposals relating to Outside Activities, there was a significant improvement in disclosure by participants who saw the Proposals relating to Outside Activities.

Several commenters were of the view that it would be a burden to track, monitor and potentially report all Outside Activities. Two commenters believed that because firms must continue to monitor and supervise Outside Activities, the proposed changes are unlikely to reduce regulatory burden.

From an assessment of the application of the new framework against a sample of information on Outside Activities reported to us, we anticipate a 27% reduction in reporting to securities regulatory authorities and, in turn, a reduction in burden for Registrants.

Several commenters raised suggestions for revising the reporting framework, including that a more principles-based approach be implemented; that reporting of activities should only arise where the individual is engaging with clients or proposed clients; or that a mechanism to allow discretion for firms to include or exclude activities that should not be reported.

We acknowledge that Registrants will need to continue to obtain information from their Individual Registrants on their Outside Activities and to monitor the Outside Activities in order to fulfil their responsibilities to address the risk and conflicts arising from their Individual Registrants' Outside Activities.

One commenter noted that there could be potential inconsistency between CSA and SROs reporting expectations that could be a challenge especially with respect to assessing conflicts of interest.

Although Registrants are responsible for addressing conflicts of interest, securities regulatory authorities require reporting of certain Outside Activities to carry out their ongoing oversight role.

3.

General comments on the categories

Several commenters were of the view that the various categories of Outside Activities are relatively clear. In contrast, several other commenters held the opposite view and believe that what should or should not be reported can sometimes be unclear and asked for more guidance.

The Proposals included guidance in 33-109CP to assist Registrants in their assessment of what types of activities fall within each category. We have made changes to the guidance to clarify that an Individual Registrant's activity for an affiliated entity is considered an Outside Activity.

Many commenters indicated that they did not identify any other category of Outside Activities that should be reported to the CSA.

Registered firms are required to have policies and procedures to identify and address material conflicts of interest and risks arising from all Outside Activities that their Individual Registrants may participate in. This assessment should not be limited to only the Outside Activities reportable by the registered firm to securities regulatory authorities.

Three commenters suggested guidance be provided on what types of activities would be outside the proposed six categories and would not have to be reported by Individual Registrants to their sponsoring firms, and in turn, to regulators, unless subject to another reporting requirement.

Two commenters sought clarification as to whether a Registrant engaged with an affiliated company would be required to report that activity as an Outside Activity. Another commenter was of the view that activities for affiliated entities within a corporate group should not be considered Outside Activities and should not be reportable.

4.

Category 1 [Activities with another registered firm]

One commenter was of the view that Category 1 should focus on securities industry related activity, and not on positions that are more administrative in nature.

Reporting of all activities with a registered firm (regardless of the activities performed) assists us in understanding what activities an Individual Registrant is carrying on for other registered firms and assists in our assessment of whether the individual is suitable for registration and how conflicts are addressed by both registered firms.

5.

Category 3 [Other securities-related activities]

Several commenters disagreed with the requirement to report Outside Activities involving raising capital. One of these commenters was of the view that this activity should be reported in other sections of the forms. Two of these commenters thought the category is overly broad, not adequately defined or easily subject to a variety of interpretations. A couple of commenters requested further guidance to clarify the types of activities that should be reported under the category.

We are of the view that whether an Individual Registrant is or was previously involved in capital-raising activities is relevant information to securities regulatory authorities to understand whether the Individual Registrant is suitable for registration.

The Proposals included guidance in 33-109CP to assist Registrants to understand the types of activities that fall within this category.

6.

Category 4 [Provision of financial or finance-related services] -- General

One commenter believed that the proposed category "financial or finance-related services" was overly broad, not adequately defined or easily subject to a variety of interpretations. This commenter sought clarification that the activities listed in this category are the only applicable activities captured by these terms. Another commenter requested further guidance to clarify the types of activities that should be reported under the category.

The Proposals included guidance in 33-109CP to assist Registrants to understand the types of activities that fall within this category.

One commenter described various activities, such as a registrant being a trustee or beneficiary of a family trust/holding company that is a client of the registrant's firm or having a personal holding company, that they were of the view was unclear whether those activities would be disclosable in Category 4.

We have made changes to describe the types of activities in plain English and to include instructions that reiterate the requirements at the top. We have also clarified that the activities described are non-exhaustive in order to capture financial services that may not exist today but may evolve from technological changes and innovation.

Many commenters agreed that 7 years is an appropriate timeframe, noting that it is a similar timeline required for records management and retention under securities legislation and aligns with other timelines. Several commenters disagreed and suggested reporting timeframes of 4 years or 10 years.

We have not changed the timeframe for reporting capital-raising activity as we believe it to be an appropriate timeframe.

One commenter suggested that the Outside Activities' financial questions be written in plain English to reduce confusion.

One commenter requested the instructions in Category 4 be moved to the top so it would not be overlooked.

7.

Category 6 [Specified activities]

Many commenters generally disagreed with the specific time requirement for this reporting category. Five commenters suggested that activities reportable in this category should be those that would impact the client-Registrant relationship, principally conflicts of interest. Another commenter recommended that rather than monitoring a time threshold, firms should assess the potential risk of an Outside Activity considering more relevant factors as outlined in the other categories of the reporting framework. Several commenters recommended the removal of category 6.

We have revised the framework to remove the requirement to report activities that fall within Category 6 [Specified activities]. We are of the view that from the reporting under Categories 1 to 5, we will continue to receive the necessary information understand the activities of the Registrants and to oversee the Registrants.

One commenter believed that any Outside Activity raising potential or actual conflicts of interest should be reportable, regardless of time spent.

Although only certain Outside Activities are reportable to securities regulatory authorities, registered firms are required to have policies and procedures to identify and address material conflicts of interest and risks arising from all Outside Activities that their Individual Registrants may participate in. This assessment should not be limited to only the Outside Activities reportable by the registered firm to securities regulatory authorities.

In contrast, one commenter agreed with a cumulative minimum time threshold.

As this category has been removed, we have not addressed the comment to provide a list of activities that would fall within it.

One commenter requested a detailed list of "specified activities" that would fall under this category to provide further clarity and to reduce the confusion and over-reporting.

8.

Category 6 [Specified activities] -- time threshold

Many commenters disagreed with the 30-hours per month threshold and thought it was too low.

We did not address these comments as we have removed the requirement for Registrants to report Outside Activities that fall within Category 6 [Specified activities].

A couple of commenters noted that many Registrants may engage in activities full-time on weekends and evenings and could easily exceed the 30 hours per month without any negative effect on their ability to appropriately serve their clients.

The commenters believed 50 hours; 60 hours; or 80 hours per month are more appropriate. Five commenters recommended a principles-based approach to establishing the amount of time.

One commenter indicated that different registration categories may have different time commitments. Another commenter suggested that the time threshold be averaged over a longer time period than monthly, as this could represent a new regulatory burden for the firm and advisor.

9.

Business versus non-business activity

One commenter was of the view that the removal of the word "business" from the term "Outside Business Activity" increased the breadth of monitoring and reporting to include any and all activities a Registered Individual may participate in, and increases regulatory burden.

The removal of the word "business" addressed confusion it raised and helps clarify that unpaid activities outside the registered firm is an Outside Activity. The Amendments reduce and clarify the scope of what must be reported to securities regulators.

Another commenter held the opposite view and believed the change from "Outside Business Activities" to "Outside Activities" added clarity and reflects current regulatory expectations.

10.

Non-compensated and volunteer activities

A number of commenters agreed with the clarity provided on activities that are no longer reportable under the new framework.

We have made changes to the instructions and to the guidance in 33-109CP to clarify when non-compensated activities are reportable.

Some commenters identified circumstances that they thought non-compensated activities should be reportable, including if non-active operations (such as being the owner of a holding company or acting as a landlord) exceed a specified time threshold and when personal corporations should be reported.

We agree that there is a benefit in financial professionals taking on community roles that are complementary to their existing knowledge and expertise. However, we have continued to maintain the reporting requirement of uncompensated financial and financial services related activities as it is information necessary for our oversight role, particularly in light of the potential for confusion and conflicts. We also note that, for many of the categories of reportable Outside Activities, compensation is not a factor as to whether an activity falls within a category.

One of these commenters suggested publishing a dynamic list of uncompensated activities relating to securities or financial services to help increase clarity.

Another commenter was of the view that volunteer financial and financial services-related activities (e.g., serving as treasurers) should not be reportable, unless they give rise to potential conflicts of interest. They noted that there is a benefit to encouraging financial professionals to take on community roles that are complementary to their existing knowledge and expertise.

11.

Dual-licenced individuals

One commenter believed that life and disability insurance, including segregated fund sales, should not be reportable because the CSA has no jurisdiction in the insurance industry. Another commenter disagreed and felt that insurance agents, along with mutual fund salespersons, raise the most significant conflicts of interest. The commenter recommended an integrated insurance-securities database, at least at the provincial level.

We have continued to maintain the reporting requirement of uncompensated financial and financial services related activities as it is information necessary for our oversight role, particularly in light of the potential for confusion and conflicts.

12.

Guidance on Outside Activities

Two commenters sought guidance on Outside Activities, including:

The current guidance in 31-103CP, as well as in the Amendments, provides the information sought by commenters, including:

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guidance on the required separation of an Outside Activity and a registrable activity;

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the conflicts and risks that arise from Outside Activities;

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how a sponsoring registered firm is required to monitor Outside Activities;

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expectations of how firms should monitor and supervise their Individual Registrant's Outside Activities; and

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policies and procedures on how a firm will approve Outside Activities; and

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practices that Regulated Firms should consider in monitoring and supervising their Individual Registrant's Outside Activities.

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how clients will be informed of any approved Outside Activities associated with their dealer representative.

One of the two commenters disagreed with the requirement to assess whether a Registered Individual's activities and lifestyle are commensurate with the person's compensation by the firm. The commenter was of the view that this was too intrusive, difficult to monitor and raised unrealistic expectations.

The guidance on practices that Regulated Firms should consider in monitoring and supervising their Individual Registrant's Outside Activities, including whether a registered individual's activities and lifestyle are commensurate with the person's compensation by the firm, was previously published in guidance issued in CSA Staff Notice 31-326 Outside Business Activities.

The other commenter identified factors for when an Outside Activity should not be permitted by a registered firm.

The same commenter also recommended that both securities regulators and firms take steps to prevent off-book transactions and fraud from Outside Activities.

13.

Reporting Outside Activities

Commenters also asked for clarity on how activities should be reported on the Individual Registration Forms, including:

Where multiple activities are related to one entity outside the registered firm, one schedule may be completed.

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whether multiple activities that are related to one entity can be completed on one schedule;

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whether the information requested in each field can be made more explicit; and

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what date should be included as the "start" date for an Outside Activity where the individual is transitioning from one firm to another and the activity was approved by the previous firm.

One commenter asked if the removal of Outside Activities no longer reportable can be completed as part of any subsequent changes or reporting of registration information.

We have reviewed the questions asked in Schedule G of the Individual Registration Form and Schedule D of the Reinstatement Form and have not made any changes as we are of the view that the questions are clear.

Another commenter noted employers outside of the financial industry or regulated firms do not typically have conflicts of interest procedures, especially for the type of role that Individual Registrants would be involved with on a part time basis, such as in retail or hospitality industries, yet the Individual Registration Form appears to require applicants to disclose the conflict of interest procedures of these employers.

The start date should be the actual start date of the Outside Activity, which may be a date prior to the Individual Registrant joining the registered firm.

Where an Outside Activity is no longer reportable as a result of the Amendments, this may be removed as part of any subsequent changes or reporting of registration information.

If the employer of the Outside Activity does not have conflicts of interest policy or procedures, we would expect the Individual Registrant to state the same.

14.

Training and communication

One commenter believed that training and communication on the revised expectations will be important, and that registered firms should be reminding Individual Registrants of their duty to report both new, and changes to, their Outside Activities and provide context to the due diligence requirement. The commenter also noted that registered firms should also periodically re-evaluate the accepted and denied Outside Activities of their advisors, and supervisory or compliance staff should receive regular training on the Outside Activities that are accepted or denied, to better detect red flags.

As set out in the guidance in 31-103CP, we expect registered firms:

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to provide training or education on Outside Activities, including the need to report on changes in Outside Activities and the restrictions on a registered individual who is in a position of influence as to the clients the registered individual can deal with or advise; and

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assess whether the registered firm has the necessary information and is able to properly supervise and monitor the Outside Activities.

15.

Reporting of Outside Activities by independent board members

One commenter identified the difficulties firms face in obtaining information about Outside Activities from Permitted Individuals that are independent board members. The commenter noted that, unlike with employees, firms have limited ability to hold such board members accountable and to enforce reporting timelines.

We remind Individual Registrants that they have disclosure obligations under NI 33-109, such as notifying the regulator about changes to their registration information, including Outside Activities. Disregard by board members of securities law requirements may raise concerns about a firm's fitness for registration.

16.

Consequences for non-compliance

One commenter recommended that the CSA takes steps to hold firms accountable and liable where approved Outside Activity has harmed an investor, particularly where the firm did not approve the Outside Activity. The commenter also recommended increasing the level of sanctions in cases of unauthorized Outside Activities to the point where they are impactful on the firm and provide strong general deterrence.

We conduct compliance reviews of registered firms to monitor whether they are complying with securities laws. If a registered firm or individual associated with the firm has not complied with securities laws, we may take a number of actions, including:

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Tracking and monitoring the firm or individual;

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Conducting a follow-up review;

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Imposing terms and conditions on registration; or

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Referring the matter to Enforcement, who may initiate a proceeding against the firm or individual.

17.

Disclosure of Outside Activities

One commenter suggested that firms should disclose to clients engaged with a representative for which the firm has approved an Outside Activity, that such approval has been granted and that such information should be made available on CSA Registration Check.

Subsections 13.4(1) and (2) of NI 31-103 require a registered firm to take reasonable steps to identify and address material conflicts of interest. Further, subsection 13.4(3) of NI 31-103 requires the registered firm to disclose in writing all material conflicts of interest identified under subsection (1) to a client whose interests are affected by the conflicts of interest if a reasonable client would expect to be informed of those conflicts of interest. This disclosure requirement is also set out in paragraph 14.2(2)(e) of NI 31-103 as information a firm must deliver to clients.

The same commenter recommended that the CSA launch an investor education program on how to engage with representatives that have or could have outside business or other activities.

To the extent that a registered firm approved Outside Activity has been identified by the firm as a material conflict of interest that must be addressed in the best interest of the client, then pursuant to subsection 13.4(4), the firm is required to disclose material conflicts of interest to a client whose interests are affected by the conflict of interest if "a reasonable client would expect to be informed of those conflicts of interest". This disclosure must be prominent, specific and written in plain language, and must be disclosed at the appropriate time in order to be meaningful to the client.

18.

General comments

Several commenters were of the view that restrictions on positions of influence were not required as concerns could be addressed under the conflicts of interest provisions of NI 31-103.

We have maintained restrictions on the clients a registered individual in a position of influence may have. The restrictions are required to address the conflict arising from the relationship between a registered individual and the clients the registered individual knows from the outside activity that is a position of influence and in our view, are a measured regulatory approach in contrast to a ban on the activity.

One commenter suggested that the CSA consider alternative approaches to the prohibition, including mitigation factors such as professional requirements (e.g., codes of conduct, ongoing education, fiduciary duty). Two commenters recommend that section 13.4.3 of NI 31-103 be amended to align with IIROC's personal financial dealings rule.

We continue to be of the view that positions of influence should be reported to regulators.

One commenter believed that no aspect of the new rule on positions of influence will be difficult to administer if a principles-based approach is applied. Another commenter was of the view that education and training will be a key component for implementation by firms.

19.

Definition of "position of influence"

Several commenters were of the view that the list of positions was sufficient. One commenter noted that as the list was non-exhaustive, there were no additional positions that need to be specifically set out. Another commenter believed that lawyers and accountants should be added to the list.

We have maintained the definition of position of influence as published, including (a) a reasonable person standard and (b) listing certain positions of influence. Based on our experience, these are positions with a high level of conflict which must be reported and managed by firms. We are of the view that the listed positions will ease compliance burden on firms by providing clarity and consistent treatment.

A few commenters disagreed with the list of professions that were identified as positions of influence. These commenters:

Positions of influence are a matter of judgment of a reasonable person and based on the particular facts and circumstances. Therefore, it is not an exhaustive list and guidance is provided in 31-103CP.

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emphasized the importance of avoiding a one-size-fits-all perspective;

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suggested that the list should be guidance; and

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disagreed that simply by virtue of being a notary, an Individual Registrant should be deemed to be in a position of influence.

Several commenters noted whether someone is in a position of influence is context specific. Two commenters were of the view that the test is subjective and unclear, and will result in confusion and inconsistent application.

Two commenters were concerned that regulators in different jurisdictions could have differing views of when an Individual Registrant is or is not in a position of influence.

Several commenters provided suggestions for the definition of "position of influence" including:

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adding at the end of the sentence "and is a conflict of interest that cannot be managed in accordance with applicable securities laws";

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having a "reasonable person" standard or provide discretion to registered firms in determining whether or not a position of influence exists;

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qualifying whether the individual in a position of influence is using that position to solicit business;

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adding persons who hold powers of attorney or are executors or beneficiaries; and

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removing teachers and instructors as "positions of influence"; and

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adding bank employees who are registered to sell mutual funds.

20.

Guidance on "positions of influence"

Guidance was sought by commenters on the following:

We have provided additional guidance on individuals who are involved in the activities of community, cultural or religious organizations, as well as on individuals who are elected officials.

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what characteristics define a position of influence;

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when individuals with trust-based relationships and positions of community, cultural or religious leadership are positions of influence.

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susceptibility is a question of fact and circumstances for the specific individual; and

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examples of positions of influence that are more common in the discretionary asset management industry (e.g., those that may raise affinity-fraud type concerns).

Two commenters recommended that the position of influence guidance in the draft amendments to NI 31-103CP be amended as follows: "If both the degree of influence by the registered individual in the position of influence and the confusion or susceptibility of a person subject to that influence result in or could result in the person being subject to the undue influence of the registered individual, a registered firm is expected to consider the outside activity to be a position of influence".

Positions of influence are a matter of judgment of a reasonable person and based on the particular facts and circumstances. Therefore, it is not an exhaustive list and guidance is provided in 31-103CP.

21.

Community positions

Some commenters were concerned that the prohibition would discourage Individual Registrants from becoming involved with community organizations or may inadvertently capture certain community activities that do not pose a material conflict of interest. A couple of commenters recommended a positive statement be made in 31-103CP that the application of new section 13.4.3 is not intended to restrict registrants from assuming roles in their communities. In contrast, one commenter believes that the Proposals provided clarity and will alleviate rejection of volunteer activities on the basis they are positions of influence.

Whether a position is compensated does not affect whether it is a position of influence. These positions give rise to a high level of conflict which must be reported and managed by firms.

One commenter did not agree that pro bono activities should be categorized as "positions of influence." Other commenters suggested clarifying that individuals who are associated with charities but are not involved in their money raising efforts, or are members of fraternal organizations or religious congregations, are not to be considered to be in positions of influence solely by these relationship.

We have included additional instructions and guidance on when a non-compensated position is a reportable Outside Activity.

22.

The term susceptibility

A number of commenters were supportive of the use of the term "susceptibility". One commenter was of the view that it supported the CSA's intent to move towards a principles-based approach to reporting Outside Activities and reflects the nature of the relationships of concern.

We have continued to apply the term "susceptibility" as we believe it accurately reflects the nature of the relationships that gives rise to the concerns being addressed by the prohibition.

Alternatively, two commenters suggested that an objective "reasonableness" standard be applied to the concept of susceptibility. A third commenter suggested a degree of influence test and degree of client confusion test.

Two commenters disagreed with the use of the term "susceptibility" as it requires an understanding of the facts and circumstances outside the registered individual's areas of expertise. One of those commenters suggests terms "subject to persuasion" or "easily influenced" instead. Two commenters suggested "vulnerability".

One commenter believed that "susceptibility" implies a higher level of "may be" influenced and could be assumed when no influence exists.

23.

Prohibited clients

A couple of commenters were of the view the prohibition was too broad.

Based on our experience, these are positions with a high level of conflict which must be reported and managed by firms. We have revised the language of the prohibition to specify that registered firms and their Individual Registrants should not sell to or advise individuals that the registered firm or Individual Registrant knows are certain close family members of an individual that the Individual Registrant is in a position of influence over, given that familial relationships may not be always be readily apparent.

Two commenters indicated that it may be difficult for a Registrant to know the familial relationship and suggested a knowledge qualifier.

We are of the view that the list of individuals (which registered individuals in a position of influence cannot sell to or advise) will ease compliance burden on firms by providing clarity and consistent treatment. Due to the close familial relationship, we are of the view that these individuals could be susceptible to persons who are in a position of influence over their family members.

One commenter suggested the close family members be similar to that of related persons under the Income Tax Act (Canada), which would result in the removal of grandparent from the list. The commenter also questioned the inclusion of brothers and sisters as they did not believe that siblings share such information and that one sibling would be susceptible to the influence of a person who is in a position of influence over their sibling.

Accordingly, we have not removed grandparents or siblings from the list of individuals that registered individuals in a position of influence cannot sell to or advise. Grandparents and siblings are currently clients that persons in positions of influence may not sell to or advise as set out in the standard terms and conditions imposed on the registered individual's registration. We have not observed any compliance concerns in practice.

24.

Application of section 13.4.3 of NI 31-103

One commenter did not identify any potential difficulties in administering the new rule, other than the subjectivity of any influence/non-influence determination and any assessments of an individual's degree of susceptibility.

We thank commenters for their comments.

Another commenter noted that it would be difficult to determine the level of continued involvement or communication a registered individual who is in a position of influence can have with a client who is transferred and serviced by another registered individual.

We expect the sponsoring registered firm to have procedures in place to provide reasonable assurance of compliance with the restriction on the registered individual's activities as set out in section 13.4.3 of NI 31-103.

25.

Disclosure of positions of influence

One commenter suggested positions of influence be posted on the CSA Registration Check website.

Subsections 13.4(1) and (2) of NI 31-103 require a registered firm to take reasonable steps to identify and address material conflicts of interest. Further, subsection 13.4(3) of NI 31-103 requires the registered firm to disclose in writing all material conflicts of interest identified under subsection (1) to a client whose interests are affected by the conflicts of interest if a reasonable client would expect to be informed of those conflicts of interest. This disclosure requirement is also set out in paragraph 14.2(2)(e) of NI 31-103 as information a firm must deliver to clients.

To the extent that a registered firm approved Outside Activity identified by the firm as a material conflict of interest that must be addressed in the best interest of the client, then pursuant to subsection 13.4(4), the firm is required to disclose material conflicts of interest to a client whose interests are affected by the conflict of interest if "a reasonable client would expect to be informed of those conflicts of interest". This disclosure must be prominent, specific and written in plain language, and must be disclosed at the appropriate time in order to be meaningful to the client.

26.

General reporting deadlines

Many commenters supported the change of some reporting requirements from 10 days to 15 days and from 15 days to 30 days as being sufficient time for gathering, analyzing and submitting information to securities regulatory authorities.

In developing the Amendments, we reviewed and carefully considered each reporting requirement and assessed the timeframe for the reporting of that information to us.

One commenter disagreed with the increase in filing deadlines on the basis that registration information will be out of date for longer periods. The commenter did not see how extended reporting deadlines improved investor protection.

27.

Reporting deadline for Outside Activities

Many commenters indicated specific support for extending the deadline for reporting Outside Activities or changes in Outside Activities from 10 days to 30 days. However, one commenter requested the CSA consider whether reporting of Outside Activities from Permitted Individuals who are not employed with the firm can be done on an annual basis or quarterly. On the other hand, one commenter understood Registrant concerns about the current 10-day period for reporting outside business activities, but believes that increasing the time period to 30 days and extending the deadline for other filings to 15 days will continue to lead to confusion and late filings by market participants.

We have maintained the 30-day reporting deadline for Outside Activities as set out in the Proposals. We are of the view that this reporting deadline is appropriate for the reporting of this type of information.

One commenter saw the extension to 30 days for reporting Outside Activities as reasonable and aligns with other international regulators such as FINRA.

28.

Multiple reporting deadlines

Many commenters raised concerns about having 3 different reporting deadlines (10, 15 or 30 days) noting this will add complexity to the reporting process and increase the likelihood of errors.

We changed the deadline to report a cessation of authority of an Individual Registrant or a change in an individual's status to 15 days, such that there are generally two reporting deadlines -- 15 days or 30 days.

Alternative reporting deadlines were suggested by multiple commenters.

A longer reporting period does not raise regulatory risk where an individual ceases to have authority of an Individual Registrant.

If an individual becomes a permitted individual, a notice under section 11.9 or 11.10 of NI 31-103 is typically filed at least 30 days prior to any acquisition or as soon as the registered firm becomes aware. Accordingly, securities regulatory authorities will already be aware of any changes to the permitted individuals of a registered firm.

29.

Ontario late filing fee

One commenter disagreed with the late filing fees of the Ontario Securities Commission (OSC). The commenter was of the view that late fees deter the reporting of these activities and encourages late filing.

We anticipate that the new reporting framework for Outside Activities, along with the extension of time to report Outside Activities to 30 days, will reduce the number of late filings of new or changes to Outside Activities.

The OSC waived late filing fees for the period from January 1, 2019 to December 31, 2021 for the purposes of developing the Proposals and publishing the Amendments. The OSC has extended the moratorium until the Amendments come into effect on June 6, 2022.

30.

Challenges from updated reporting deadlines

One commenter noted that there may be unanticipated challenges in providing updates by the proposed deadlines.

We thank the commenter for their comments.

31.

Reporting deadlines in other areas

Regarding required timeframes for information, one commenter noted that there are inconsistencies throughout the document, and requests that the CSA reviews and synchronizes the applicable time periods, while taking into consideration how far past timelines should go to determine fitness for registration.

Amending the time periods for other requirements is beyond the scope of the targeted changes. We will consider these time periods for future amendments.

32.

General delegation of reporting to an authorized affiliate

A number of commenters supported this change.

We continue to only allow firms to delegate reporting to a registered affiliate with the same principal regulator. Extending this initiative to registered firms with different principal regulators is not practical given there is no national database for firm registration information, including reporting updates. These filings are submitted through each of the CSA's local electronic filing systems and not through NRD.

A number of commenters believed that as it only applies to Registrants with the same principal regulator, it is unlikely to meaningfully reduce the burden for Registrants that are part of large groups. Other commenters also noted that as it can only be relied upon by Registrants with the same principal regulator, it cannot be relied upon by international firms that are exempt from registration in Canada.

From an assessment of a sample of filings we received from affiliated registered firms, we anticipate a 27% reduction in reporting to securities regulatory authorities and, in turn, a reduction in burden for Registrants.

One commenter thought this provision would be of limited use because a Registrant is required to file an attestation each time it wants another firm to make a filing on its behalf.

We note that international firms relying on an exemption do not submit registration information. Generally, they are required to pay participation fees and submit a new notice of who their agent for service is when there is a change. We do not think this is unduly burdensome for the international firms to report this information.

We have revised the provision to make it clear that a certificate is only required to be filed at the start of using the delegation function and then afterwards only when there is a change to the authorized affiliate.

33.

Authorized affiliate

One commenter was not aware of any circumstances where reporting could not be delegated. A couple of commenters noted that the firm may have its own reasons for who it would delegate the authority to report on its behalf, such as a centralized corporate group that handles regulatory reporting.

We thank commenters for their comments. As noted above, we maintained the requirement that the authorized affiliate be an affiliate of the registered firm and have the same principal regulator.

Alternatively, one commenter believed that if there is a change in registration information that only applies to one of the firms, such as a change in UDP or CCO, that should not be delegated to an affiliate.

34.

Reporting that may be delegated

One commenter believed that the newly proposed subsection 3.1(2.1) of NI 33-109 is of limited use as it pertains only to certain parts of the Firm Registration Form.

We have not made any changes to the information that may be reported by an authorized affiliate. In developing the Amendments, we considered the information that affiliated firms submit that is duplicative because of their affiliation. These formed the basis of the information that may be reported by an authorized affiliate.

Commenters suggested that the delegation be extended to other reporting requirements including:

We have not amended the reporting of information about a registered firm's "specified affiliates". We are of the view that information about specified affiliates provides relevant information about the registered firm's stewardship, and in turn, its fitness for registration.

•

the reporting of information on "specified affiliates";

•

the reporting of address changes that may apply to one or more affiliates; and

•

the reporting of notices on litigation even if the filing firm is not named in the litigation.

Two commenters suggested that each Registrant should be required to disclose information about its own activities only and not on the activities of their "specified affiliates."

35.

Support for the change in reporting percentage ownership changes

Four commenters supported the proposal to report changes in percentage ownership only where a person or company's percentage crosses certain thresholds as it would reduce the number of filings.

We have not changed the percentage thresholds where reporting is required. We have maintained the 20% as it aligns with the insider reporting requirement under securities laws.

One commenter suggested a change from 20% to 25% to be consistent with NI 31-103 subsection 13.2(3) Know Your Client requirements and anti-money laundering and anti-terrorist financing requirements.

36.

Reporting status change in legal actions

One commenter believed the Proposals relating to litigation status reporting should reduce the number of reports firms file.

We have revised the guidance on reporting status updates to litigation to take into account the comments received.

Another commenter did not identify any changes in litigation that should not be reported or would be captured in reporting elsewhere. Other commenters suggested what information should be reported, including:

Reporting has not been limited to certain types of allegations because non-compliance or misconduct in areas beyond fraud, theft or securities-related activities could provide important information about the firm's suitability for registration. Similarly, we have also not added a blanket declaration for class actions as the nature of the claims made in each class action will be different and may be pertinent to an assessment of a firm's suitability for registration.

•

the settlement of the case or the issuance of a judgment.

•

service of the claim, when there are substantive findings, and final resolution of the claim;

•

only legal actions that are significant need be reported (i.e., over a certain amount that is considered material to the firm and/or its parent);

•

limited to those that involve fraud, theft or securities-related activities or that could significantly affect the firm's business; and

•

procedural motions and related matters should not be reported.

One commenter suggested that for integrated financial institutions with multiple affiliates, a blanket declaration could be used to state that at any time, any of the entities could be subject to class action lawsuits and will only report to the CSA when the courts have concluded the case against the applicable entity.

Reporting has not been limited to certain entities because non-compliance, misconduct, or fraudulent activities at an affiliate entity in another country may provide important information on the suitability for registration of the Registrant where the entities are under common control.

One firm asked that the CSA consider allowing registered firms and affiliated international entities relying on registration exemptions to only report regulatory and/or legal action in respect of the registered firm, and not for specified affiliates that do not have dealings with Canadian investors.

We disagree that reporting should be based on the size of the firm and have not added a materiality threshold. Integrity issues are not dependent on the size of the claim. Firms are required to maintain ongoing suitability for registration, which includes integrity and proficiency, not simply solvency. Some civil claims, if proven, can bear on the integrity or proficiency of a Registrant. We also disagree that larger firms should not be required to disclose comparable civil claims that smaller firms or individuals are required to disclose.

One commenter requested clarification on what is meant by "significantly affect the firm".

Legal action disclosure has been streamlined by permitting filings to be made by one firm on behalf its affiliates and by expressly excluding non-material information such as discovery, procedural and scheduling developments from the disclosure requirement.

37.

Privacy of litigation information

One commenter was of the view that certain changes in legal actions could compromise private or confidential information, and may significantly affect the outcome of the action and the firm. The commenter noted that these issues will likely be specific to the firm and the actual issues being litigated and noted it was important to provide an element of discretion or allowance for confidential reporting so that they are not compromised by the reporting requirement.

Information provided to us is not published and is kept confidential to the extent permitted by law.

38.

Reporting changes of expiry date of insurance policies

Several commenters supported the proposed amendments that remove the update requirements for expired insurance policies where a firm has simply renewed the insurance policy without change. One of the two commenters also requested that the CSA clarify that a notice of change in an insurance policy pursuant to section 12.7 of National Instrument 31-103 is also not required to be filed when the only change is to the expiry date.

We have made a consequential amendment to section 12.7 of NI 31-103 to remove the reporting requirement of renewal of an insurance policy.

39.

General comments on common errors

Several commenters were of the view that the Proposals relating to common errors were clear.

We thank the commenters for their comments.

One commenter believed that, where an Individual Registrant changes sponsoring firms, the CSA should require the previous sponsoring firm to address the incomplete or inaccurate information, rather than the new sponsoring firm.

We expect Registrants to keep their registration information up-to-date.

40.

Detrimental information at time of termination or resignation (Item 12 of the Individual Registration Form)

One commenter supported the amendment that clarifies Individual Registrants must disclose detrimental information that existed at the time of their resignation or termination, regardless of whether it caused or contributed to the resignation or termination.

Regarding detrimental information that existed at the time of an individuals' resignation or termination, we continue to be of the view that disclosure of the detrimental information is required even if it is not the reason for termination or resignation. This information is used to assess the individual's fitness for registration.

Another commenter requested that the "for cause" be reinserted. The commenter was of the view that proposed revised wording does not allow for the individual to rebut or indicate if they were subsequently cleared and is contrary to a presumption of innocence unless an appropriate review process has occurred. When there has been cause the implication is that the previous employer has met a higher level of proof.

41.

Scope of allegations (paragraph 2.3(2)(b) of NI 33-109; Item 12 of the Individual Registration Form; Reinstatement Form)

Two commenters questioned whether the reporting of allegations in Canada or in any foreign jurisdiction of a commission of a crime or a contravention of "any statute, regulation, order of a court or regulatory body, rules or bylaws of an SRO or failure to meet any standard of conduct of the sponsoring firm, an industry association or any relevant authority" is too broad. One of the two commenters noted that some of the additional qualifications relating to reinstatement of registration are too broad and could result in registration delays from disclosures that may not be meaningful to the individual's fitness for re-registration.

We view this information to be relevant to an assessment of whether an individual is suitable for registration or whether their registration is otherwise objectionable.

We have removed the requirement to report resignations and terminations following allegations that the Individual Registrant violated, or failed to appropriately supervise compliance with, the rules or bylaws or standards of conduct of an industry association as industry associations are advocacy bodies that do not grant credentials and enforce standards of conduct.

We have revised the language from "any authority exercising jurisdiction over specific business activities or professions" to "professional body".

42.

Industry associations and professional bodies (paragraph 2.3(2)(b) of NI 33-109; Item 12 of the Individual Registration Form; Reinstatement Form)

Two commenters believed that references to "industry associations" should be deleted in subsection 2.3(2) of NI 33-109 and Item 12 of Form 33-109F4 with respect to resignations and terminations, as industry associations are not self-regulatory and do not monitor their members' compliance nor sanction them, and the language used does not accurately reflect what the CSA is trying to capture. The commenters suggested the use of "professional bodies" as an alternative.

We have removed the requirement to report resignations and terminations following allegations that the Individual Registrant violated, or failed to appropriately supervise compliance with, the rules or bylaws or standards of conduct of an industry association.

We have revised the language from "any authority exercising jurisdiction over specific business activities or professions" to "professional body".

43.

Reporting of licences (Item 13.3 of the Individual Registration Form)

One commenter believed that reporting all "non-securities licences, including medical licences" is unclear and appeared to be excessive, given that the commenter has never come across doctors that are also Registrants. The commenter noted that it appears that possessing a firearms licence or a hunting licence would also be reportable.

We are of the view that registration and licences required to deal with the public provides information relevant to an assessment of whether the individual is suitable for registration or whose registration is otherwise objectionable.

Another commenter provided suggestions for Item 13 Regulatory Disclosures and Schedule J, including replacing "doctor" with "medicine" or "medical professions"; and restoring "professional" to question (c).

We have added instructions in Item 13.3 of the Individual Registration Form to make clear that only registration and licences that involve dealing with the public are to be disclosed.

44.

Reporting of relevant securities experience (Item 8.4 and Schedule F of the Individual Registration Form; Item 2.3 and Schedule A of Form 33-109F2 Change or Surrender of Individual Categories

One commenter requested clarification as to whether item 8.4 [Relevant securities experience] of 33-109F4 applies to Associate Portfolio Managers and Portfolio Managers, and Supervisors.

We have amended the instructions to clarify the supervisor category.

45.

Reporting of course information (Item 8.1 and Schedule E of the Individual Registration Form)

One commenter suggested clarifying that reporting education and course information required for registration should only apply to securities requirements applicable to the individual's registration category.

We have revised the language to clarify this point.

46.

Certification

Three commenters indicated they were not aware of any circumstances where the certification standard may not be met. For one of these commenters, this was subject to the inherent and inevitable subjectivity of "reasonable inquiry".

We have maintained the standard of certification. Each registration form has a warning in bold at the beginning that it is an offence to knowingly give false or misleading information to the regulator or securities regulatory authority.

One commenter supported the certification being placed at the beginning.

Detailed guidance on the expectations of applicants and sponsoring firms in providing true and complete applications for registration is set out in <<CSA SN 33-320 The Requirement for True and Complete Applications for Registration>> issued on July 2017.

Another commenter recommended requiring a certification such as "true and complete and understands the consequences of providing false information", as a strong attestation that will give investors confidence that the information can be relied upon; if the signatory cannot locate a certain piece of information, they should flag it for the firm and CSA.

47.

Reinstatement of Registration

One anonymous commenter was supportive that the Reinstatement Form could only be used if the applicant's NRD record is up-to-date as it will mean a consistent standard for all jurisdictions.

We have amended section 2.3 of NI 33-109 to clarify when an Individual Registrant's NRD record is up-to-date and have provided guidance in Annex C of this notice on an Individual Registrant's registration information in NRD that reads "there is no response to this question".

Another commenter sought clarification on whether an individual's registration information in NRD was up-to-date and could rely on the Reinstatement Form if, at the time the individual ceased to be registered as a permitted individual, their information was up-to-date, but their NRD record now includes "there is no response to this question" as opposed to a Yes or No answer for certain questions.

48.

"Termination" to "Cessation"

One commenter noted by replacing "termination" and "terminate" with "cessation" and "cease", the CSA will also now receive information from Registrants that were treated as independent contractors.

We thank the commenter for their comment.

49.

General comments

A number of commenters supported the requirement to report titles. Reporting of titles will help confirm compliance with the new regulations under Client Focused Reforms and the pending Financial Advisor and Financial Planner titles frameworks. Some of the commenters noted that this will also help reduce consumer confusion and ensure that investors are accessing advice from professionals with appropriate credentials.

We have maintained the requirement for Individual Registrants to report their titles. This information requirement implements the CSA's oversight for the new section 13.18 of NI 31-103 introduced as part of the Client Focused Reforms that prohibits Registrants from holding out their services in any manner that could reasonably be expected to deceive or mislead any person as to:

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their proficiency, experience or qualifications;

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the nature of the person's relationship or potential relationship with the Registrant; or

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the products or services provided or that might be provided.

Several commenters indicated that a survey of industry participants would be more efficient than collecting titles through the registration process. One of these commenters was of the view that imposing ongoing title reporting obligations was unlikely to provide useful information. The commenter along with other commenters were of the view that the requirement would be burdensome and likely to result in reporting deficiencies.

Paragraph 13.18(2)(c) of NI 31-103 [once the Client Focused Reforms come into force] prohibits a registered individual from using a title that was not approved by their sponsoring firm.

One commenter was of the view that the CSA should make it clear that individuals do not have the right to self-title.

50.

Challenges in reporting titles

Two commenters did not identify any challenges in reporting titles.

We have clarified that Individual Registrants are to provide all the business titles and professional designations that they use or will use once registered and to keep this information up-to-date.

Commenters raised questions on what titles would be reported, including:

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whether "professional title" means business titles and professional designations granted by a recognized credentialing body (e.g., Chartered Financial Analyst);

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how Registrants with multiple titles (e.g., those who hold other financial licences for insurance or other products) report; and

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for new applications, whether it is necessary to indicate the current title used and proposed title to be used upon regulatory approval.

51.

Implementation of reporting titles

One commenter inquired if there was an expectation to update the titles for active Registrants.

It is not our expectation that current Individual Registrants would have to update their registration information for their titles as of the effective date of the Amendments or immediately after that date. Individual Registrants will be required to update their titles when there has been a change in registration information previously provided and by June 6, 2023. At that time, we would expect the Individual Registrant to report their titles and for any changes to their titles thereafter.

52.

Further work on titles

Various commenters provided suggestions for further work on titles.

We thank commenters for their suggestions.

53.

Effective date and transition period

A few commenters had no objections to the transition plan and did not foresee any issues with achieving the implementation of changes based on the noted dates.

We thank commenters for their comments.

However, a significant number of commenters indicated that the proposed transition date of December 31, 2021 would not provide adequate time for these changes for the following reasons:

We have revised the effective date of the Amendments and removed the transition period for positions of influence. Subject to Ministerial approvals being obtained, the Amendments (including the Amendments to NI 31-103 relating to positions of influence) will come into force on June 6, 2022.

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time is required to assess what changes will need to be made to the firms' practices and processes;

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training will need to be provided;

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many Registrants operational and technical resources will be focused on implementing pre-existing regulatory changes;

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Individual Registrants will already be overwhelmed by the volume of new changes coming into effect during this period; and

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the timing conflicts with other work, such as year-end compliance attestations.

These commenters recommended various alternative transition dates, generally for more time.

We acknowledge the comments received regarding the existing regulatory changes Registrants are implementing and the difficulties commenters raised with the year-end implementation. Additionally, we are of the view that a single date to implement the Amendments is simple and avoids potential confusion and error.

54.

Updating information

Several commenters raised comments on when current Individual Registrants would need to review and update the Individual Registration Form for the Proposals in light of new or amended information requirements (e.g., titles, Outside Activities).

It is not our expectation that current Individual Registrants would have to update their registration information, such as reporting Outside Activities under the new framework or providing their titles, as of the effective date of the Amendments (i.e., June 6, 2022) or immediately after that date. Individual Registrants are required to update their registration information when there has been a change in registration information previously provided. At that time, we expect the Individual Registrant to review and update any other registration information that is not complete or accurate in light of the Amendments. Where the response in NRD states "there is no response to this question" (which generally will be the case for new questions), Individual Registrants will be required to respond to those questions the earlier of when they next update their registration information and June 6, 2023.

One commenter requested an "amnesty" or grace period for reporting Outside Activities and positions of influence that would have been reportable prior to the Proposed Revisions taking effect.

The OSC waived late filing fees for the period from January 1, 2019 to December 31, 2021 for the purposes of developing the Proposals and publishing the Amendments. The OSC has extended the moratorium until the Amendments come into force on June 6, 2022.

The same commenter also requested clarification on the intended future or extension of the moratorium on late fees for OBA filings. The moratorium expires on December 31, 2021 at the latest.

55.

NRD changes

One commenter requested clarification on what changes would be made to NRD in light of the following statement "At this time, we are not proposing new forms or enabling Form 33- 109F6 Firm Registration (Firm Registration Form) to be submitted in the National Registration Database (NRD). Any amendments to the registration information requirements will require changes to the NRD and NRD is currently anticipated to be replaced by SEDAR+ in 2023."

NRD will be updated to reflect the Amendments.

Another commenter raised various suggestions to improve the registration information, including:

NRD will be replaced with SEDAR+. Accordingly, we have made targeted changes that, in our view, will provide the most benefit to Registrants and securities regulatory authorities pending SEDAR +. As a result, we have not proceeded with significant changes, such as enabling the Firm Registration Form to be submitted in NRD.

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implementing technological changes such as self-check software to eliminate reporting errors before filing;

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updating the structure and format of the registration forms and digitalized forms; and

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publishing a plain language manual on how registration works.

56.

Individual Registrant access to records

One commenter was not aware of any circumstances where a registered individual will need to request a copy of their individual registration form from the regulator to update information that is not complete or accurate.

A registered firm can view an individual's current and previous Individual Registration Form disclosure in NRD.

Three commenters identified that Individual Registrants may need to request a copy of their Permanent Record (i.e., the Individual Registration Form) from the regulator to update information if they are no longer associated with the firm, particularly if they are seeking to join a new firm. The commenters explained that the new Registered Firm may require the Permanent Record to conduct a suitability review prior to engaging the individual. The commenters also identified that the Individual Registrant may wish to request a copy of their Permanent Record for their files and for future reference from the regulator.

A registered firm can also generate a report which discloses an Individual Registrant's current disclosures for each item of the Individual Registration Form. At the end of the report there is a section on previous disclosures for each item, which can be provided to the Individual Registrant.

An Individual Registrant may request a copy of their own registration information by making a request to their principal regulator or SRO in accordance with the applicable procedures for the principal regulator or SRO, as the case may be.

57.

Access to NRD

Several commenters believed that Registrants should always have access to the full record of what has been submitted and it should be readily made available from securities regulatory authorities upon request. One of those commenters and another commenter believed that in order to ensure accuracy of the file, there must be an effort to move away from physical forms and focus on machine-to-machine delivery of digitized filings that can be accessed by a Registrant.

It is expected that SEDAR+ will allow for more functionality in terms of both access to registration filings and information as well as through the use of enhanced methods of filing information (for example, the possible use of an Application Programming Interface for making updates).

One commenter was of the view that the CSA should not say it is not their responsibility to keep track of a Registrant's books and records.

We have considered the suggestion that registered firms be given the ability to run pertinent NRD reports such as Outside Activities on a comprehensive all registered individuals basis rather than single registered individual. This functionality is being assessed by the CSA IT Systems Office to determine when and how it could be implemented in the future.

Two commenters noted that the administrative burden that implementing the Proposals will place on many registered firms can be significantly reduced if registered firms are given the ability to run pertinent NRD reports such as Outside Activities on a comprehensive all registered individuals basis rather than single registered individuals.

Two commenters noted that access to NRD would allow individual to review and confirm accuracy of their information and would promote more timely and accurate updates.

58.

SEDAR+

Three commenters stressed the importance of engaging Registrants early on in the development of SEDAR+ to ensure a more effective electronic filing system is in place.

The CSA has been steadily working on SEDAR+ and is working on responding to feedback on its existing systems to improve market participants' filing experiences and offer investors better access to disclosure information.

These commenters noted that the design of SEDAR+ could significantly improve reporting obligations (i.e., quality of the information being provided and time frames) and reduce regulatory burden if firms are presented with more meaningful reports, including Outside Activities.

Earlier in the project, insights and feedback from a representative set of users on system elements were incorporated into the platform requirements. Though market participants will not be asked to formally participate in testing, they will have the opportunity to train on the platform before the migration.

One commenter suggested that the CSA coordinate the Amendments with the launch of the usability improvements contemplated in the SEDAR+ project. The commenter requested additional details about the status of SEDAR+ and how it will impact the Proposals. The commenter suggested enabling the Firm Registration Form to be submitted via NRD.

59.

Regulatory focus

One commenter also provided various suggestions on what securities regulators should focus on, including:

We thank the commenter for their comment.

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enhance monitoring of social media;

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increasing the requirements to be an EMD in light of plans to expand the role of EMDs to increased retail investor access and expand the products retail investors can buy from EMDs; and

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use OBSI complaints as a data source for policy development and registration criteria.

60.

Drug addiction and mental illness

One commenter believed that firms are required to take steps to mitigate the risks associated with drug addiction and mental illness, as they can lead to flawed investment recommendations causing harm to clients.

We thank the commenter for their comment.