Notice: NP- 33-201 - Networking And Selling Arrangement

Substance and Purpose of Proposed National Policy

The substance and purpose of the proposed National Policy are to set out guidelines as to the process by which the Canadian securities regulatory authoritiesintend to review and respond on a national basis to networking and selling arrangement notices.

As a result of amendments to Canadian securities legislation in 1987 relating to the removal of ownership restrictions on registrants, a number of financialinstitutions invested in existing registrants or incorporated registrants as subsidiaries. The Canadian Securities Administrators (the "CSA") expressed regulatoryconcerns about the arrangements between a financial institution and its related registrants in relation to conducting securities activities within retail offices of thefinancial institution, in particular the sale of mutual fund securities and the other relationships of registrants to clients common to the financial institution and itsrelated registrants.

In 1987, the CSA established a subcommittee to review these regulatory issues and provide recommendations to the CSA. The subcommittee consulted withrepresentatives of financial institutions, registrants related to financial institutions, self-regulatory organizations, the Canadian Bankers Association, The TrustCompanies Association of Canada, the Investment Funds Institute of Canada and the Office of the Superintendent of Financial Institutions. The subcommitteethen put forward to the CSA a series of "Principles of Regulation" for consideration by the CSA commencing in 1988.

The CSA adopted The Principles of Regulation Re: Full Service and Discount Brokerage Activities of Securities Dealers in Branches of Related FinancialInstitutions in November 1988. These Principles permit dealers to carry on securities activities in branch offices of the registrant established within retail officesof a related financial institution subject to conditions that are intended to limit potential public confusion and conflicts of interest.

In November 1988 most of the CSA also adopted The Principles of Regulation Re: Distribution of Mutual Funds by Financial Institutions, which permit thesale of mutual fund securities issued by a mutual fund that is sponsored by the financial institution or an affiliate of the financial institution in retail offices of thefinancial institution by persons who are dually employed by the financial institution and the registrant. These Principles also establish conditions to the sale ofmutual funds in this manner that are intended to limit potential public confusion and conflicts of interest.

In June 1990 the CSA adopted The Principles of Regulation Re: Activities of Registrants Related to Financial Institutions, which deal with several issues arisingout of the ownership by a financial institution of registrants including selling arrangements, disclosure of confidential client information and settling of securitiestransactions through a customer's account at a related financial institution. These Principles also established a national clearing system for review of networkingnotices.

This proposed National Policy and proposed National Instrument 33-102 Distribution of Securities at Financial Institutions and its Companion Policy 33-102CP,National Instrument 33-103 Distribution Networks and National Instrument 33-104 Selling Arrangements and its Companion Policy 33-104CP replace thePrinciples of Regulation.

The proposed National Policy is an initiative of the CSA. The proposed National Policy implements, in part, the recommendation of the CSA Task Force onOperational Efficiencies that Canadian securities regulatory authorities increase the co-ordination of regulation, including standardization of requirements. TheNational Policy is proposed to be adopted as a policy in each of the jurisdictions represented by the CSA in which Canadian securities legislation has networkingnotice or selling arrangement notice requirements.

Terms used in the proposed National Policy that are defined or interpreted in a definition instrument in force in the jurisdiction should be read in accordance withthe definition instrument, unless the context otherwise requires.

Summary of Proposed National Policy

The proposed National Policy sets out guidelines as to the process by which the Canadian securities regulatory authorities intend to review and respond on anational basis to networking notices and selling arrangement notices. These guidelines are substantially similar to those contained in The Principles of RegulationRe: Activities of Registrants Related to Financial Institutions.

Unpublished Materials

In proposing the National Policy, the CSA has not relied on any significant unpublished study, report, decision or other written materials.

Related Instruments

The proposed National Policy is related to proposed National Instrument 33-102 Distribution of Securities at Financial Institutions and its Companion Policy 33-102CP, proposed National Instrument 33-103 Distribution Networks and proposed National Instrument 33-104 Selling Arrangements and its Companion Policy33-104CP. In Ontario, the proposed National Policy is also related to section 229 of the Regulation to the Securities Act (Ontario) (the "Ontario Regulation").

Comments

Interested parties are invited to make written submissions with respect to the proposed National Policy. Submissions received by February 27, 1998 will beconsidered.

Submissions should be sent to all of the Canadian securities regulatory authorities listed below in care of the Ontario Securities Commission in duplicate, asindicated below.

Submissions should also be addressed to the Commission des valeurs mobilières du Québec as follows:

A diskette containing the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As securities legislation in certainprovinces requires that a summary of written comments received during the comment period be published, confidentiality of submission cannot be maintained.

Questions may be referred to any of:

Proposed National Policy

The text of the proposed National Policy follows, together with footnotes that are not part of the National Policy but have been included to provide backgroundand explanation.

DATED: November 28, 1997.