Canadian Securities Registration Systems
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Questions and Answers

All dealers are required to use the NRD for registration submissions only in their home province.

False

The Schedule G document executed by sales representatives must be filed with the securities regulators.

False

The implementation of NI 31-103 introduced a passport system allowing registration to apply across multiple jurisdictions.

True

Sales representatives are permitted to provide mutual fund advice immediately after submission of their registration application.

<p>False</p> Signup and view all the answers

The National Registration System operates independently from the passport system.

<p>False</p> Signup and view all the answers

An employee whose registration is suspended for less than three years is required to complete the applicable proficiency courses again.

<p>False</p> Signup and view all the answers

The grace period between suspension and reinstatement is consistent across all provinces.

<p>False</p> Signup and view all the answers

Continuing education requirements are not mandatory for registered salespersons in Canada.

<p>False</p> Signup and view all the answers

Once registered, dealing representatives can engage in sales activities immediately without confirmation from the securities regulatory authorities.

<p>False</p> Signup and view all the answers

Registered individuals must renew their registration every year to maintain their status.

<p>False</p> Signup and view all the answers

Sales representatives in British Columbia and Alberta are allowed to state that they are registered with a securities commission.

<p>True</p> Signup and view all the answers

Sales representatives are permitted to display their registration certificates publicly.

<p>False</p> Signup and view all the answers

Sales representatives can engage in tied selling if they believe it is necessary for business.

<p>False</p> Signup and view all the answers

A mutual fund company can provide sales representatives with cash awards as a form of compensation.

<p>False</p> Signup and view all the answers

It is acceptable for sales representatives to accept referrals in exchange for commissions from mutual fund companies.

<p>False</p> Signup and view all the answers

Sales representatives may attend business promotion activities sponsored by mutual fund companies.

<p>True</p> Signup and view all the answers

The use of nameplates and separate business cards for sales representatives is discouraged.

<p>False</p> Signup and view all the answers

Mutual fund companies can pay non-registered individuals to sell mutual funds as long as they have passed a mutual funds course.

<p>False</p> Signup and view all the answers

Payments and benefits from mutual fund companies to dealers and sales representatives are unlimited under NI 81-105.

<p>False</p> Signup and view all the answers

A mutual fund company may organize conferences for sales representatives without any conditions.

<p>False</p> Signup and view all the answers

All officers and sales representatives of investment dealers must be registered with the regulator of the province where they sell securities.

<p>True</p> Signup and view all the answers

The NI 81-105 establishes standards of conduct to increase conflicts of interest in the mutual fund sales industry.

<p>False</p> Signup and view all the answers

Branch staff must adhere to the regulations regarding the conduct of mutual fund sales regardless of their registration status.

<p>True</p> Signup and view all the answers

Sales commissions and trailing commissions can be paid to a mutual fund dealer by the mutual fund itself.

<p>False</p> Signup and view all the answers

There are diverse categories of registration for securities dealers, including investment dealers involved with various investment products.

<p>True</p> Signup and view all the answers

Commission rebates and financial assistance provided to sales representatives are exempt from restrictions under NI 81-105.

<p>False</p> Signup and view all the answers

Mutual fund companies have complete freedom to provide promotional items and hold business promotions as they wish.

<p>False</p> Signup and view all the answers

What is the maximum time frame for applying for registration after completing an approved examination?

<p>36 months</p> Signup and view all the answers

Which of the following credentials allows an individual to apply for registration without completing mutual fund courses?

<p>CFA Charter with specific experience</p> Signup and view all the answers

What is necessary for a candidate before they can begin selling mutual funds?

<p>Become registered in the National Registration Database</p> Signup and view all the answers

If a candidate passes the examination more than 36 months before applying, what condition allows them to still apply?

<p>Being approved in the same registration category for 12 months during the past 36 months</p> Signup and view all the answers

What is the Canadian Securities Administrators' role regarding the National Registration Database?

<p>To harmonize and centralize the registration process for dealers</p> Signup and view all the answers

How many months of relevant investment management experience are required if a candidate has the Canadian Investment Manager designation?

<p>48 months</p> Signup and view all the answers

What must a candidate do after completing one of the mutual fund programs to become a dealing representative?

<p>Apply for registration as per provincial requirements</p> Signup and view all the answers

Which of the following courses is NOT recognized for fulfilling registration requirements?

<p>The Personal Finance Course</p> Signup and view all the answers

What is the primary responsibility of the ultimate designated person in a registered firm?

<p>Ensuring overall compliance with securities law</p> Signup and view all the answers

Which activity requires written permission before sales representatives can engage in it?

<p>Accepting employment from another mutual fund dealer</p> Signup and view all the answers

What must happen for a sales representative's registration to be transferred when hired by a new branch?

<p>The new branch must notify the RCO with specific details</p> Signup and view all the answers

What is necessary for an individual to register in more than one Canadian jurisdiction?

<p>Dealing only with a principal regulator</p> Signup and view all the answers

Which type of application is required for a new employee not previously registered in the province?

<p>Registration application through NRD</p> Signup and view all the answers

Under what circumstance can sales representatives engage in business activities that could conflict with their duties?

<p>They should not engage in such activities at all</p> Signup and view all the answers

What constitutes a chief compliance officer’s primary duty?

<p>Overseeing daily compliance activities of the firm</p> Signup and view all the answers

Which of the following statements about conflict-of-interest matters is true?

<p>Such matters are outlined in the mutual fund dealer's code of conduct</p> Signup and view all the answers

What is the primary function of the NRD for dealers regarding registrants?

<p>To transmit information about the registration of salespersons, officers, and directors.</p> Signup and view all the answers

How does the passport system benefit dealers and salespersons seeking registration?

<p>It permits the principal regulator’s decision to be accepted by other regulators.</p> Signup and view all the answers

What is specifically required of sales representatives when they execute Schedule G?

<p>To acknowledge their obligation to follow MFDA rules and regulations.</p> Signup and view all the answers

What happens once an employee is registered with a securities regulator?

<p>They must wait for the notification of registration before engaging in sales activities.</p> Signup and view all the answers

Which of the following statements about the National Registration System and the passport system is correct?

<p>The National Registration System works in conjunction with the passport system for easier registration.</p> Signup and view all the answers

What is required of sales representatives regarding the Schedule G document?

<p>It remains on file only with the mutual fund dealer and does not require submission to regulators.</p> Signup and view all the answers

Which aspect of registration fees is highlighted in the NRD system?

<p>They can vary depending on the jurisdiction in which the registrant conducts business.</p> Signup and view all the answers

What is required if a dealing representative's registration is suspended for three years or more?

<p>They must complete new proficiency courses.</p> Signup and view all the answers

Which statement correctly describes the role of the principal regulator in the passport system?

<p>It grants approval for registration that is recognized by other jurisdictions.</p> Signup and view all the answers

What must a BCO ensure regarding dealing representatives' registration status?

<p>All continuing education requirements and registration status are fulfilled.</p> Signup and view all the answers

What happens to a dealer's registration if its representative does not maintain currency with their information?

<p>The registration status may be suspended or revoked.</p> Signup and view all the answers

What is a key responsibility of a BCO regarding the sales representatives once they are registered?

<p>They must file notices of changes in representative information.</p> Signup and view all the answers

What is NOT required annually for maintaining registration under NI 31-103?

<p>Submission of a renewal application.</p> Signup and view all the answers

When can a dealing representative begin selling mutual funds after a registration application?

<p>Only after confirmation from securities regulatory authorities.</p> Signup and view all the answers

What must happen if a registered individual has their registration status lapse?

<p>They need to complete proficiency courses if lapsed for a certain period.</p> Signup and view all the answers

What role does continuing education play for sales representatives?

<p>It ensures their skills and knowledge remain updated.</p> Signup and view all the answers

What is the primary purpose of National Instrument 81-105?

<p>To minimize conflicts of interest between dealers and investors.</p> Signup and view all the answers

Which of the following payments can a mutual fund company make to a dealer under NI 81-105?

<p>Sales commissions and trailing commissions.</p> Signup and view all the answers

Which condition must be met for mutual fund companies to organize seminars for sales representatives?

<p>The seminars must obtain prior approval from the head office.</p> Signup and view all the answers

What is one restriction placed on non-registered individuals regarding mutual funds?

<p>They are prohibited from selling mutual funds or offering any advice.</p> Signup and view all the answers

What is the requirement for investment dealers regarding registration in Canada?

<p>Dealers must be registered in every province they operate.</p> Signup and view all the answers

How do commission rebates relate to mutual fund sales activities under NI 81-105?

<p>They are subject to certain restrictions.</p> Signup and view all the answers

What type of investment products do investment dealers offer?

<p>A variety including shares, bonds, and mutual funds.</p> Signup and view all the answers

What responsibility does a Branch Compliance Officer (BCO) have regarding sales representatives?

<p>They should ensure sales representatives understand the benefits provided by mutual fund companies must be approved.</p> Signup and view all the answers

Study Notes

National Registration Database (NRD)

  • Dealers must use the National Registration Database (NRD) to transmit information regarding registrants (salespersons, officers, and directors)
  • NRD is the system for electronically submitting registrations, renewals, and amendments to securities regulators
  • Registration fees, which vary per province, are submitted via the NRD
  • The NRD allows for single electronic submissions to all jurisdictions in Canada

Passport System

  • The passport system enables dealers and salespersons to become registered in all Canadian jurisdictions by obtaining a decision from the securities regulator in their home province or territory
  • This system was introduced with the implementation of National Instrument 31-103 (NI 31-103) in 2009

Schedule G

  • Sales representatives must sign a Schedule G document, confirming their understanding of the MFDA rules and regulations and granting jurisdiction to the MFDA
  • This document is kept on file by the mutual fund dealer, not the securities regulator or MFDA

Registration Notification

  • Once registration is approved, the securities regulator will notify the Branch Compliance Officer (BCO)
  • Employees cannot provide advice or sell mutual funds until they receive registration notification

Restrictions on Sales Representatives

  • Sales representatives in Canada (except in British Columbia and Alberta) cannot advertise their registration with a securities commission or that their qualifications are approved by a securities regulator
  • Sales representatives are prohibited from displaying registration certificates, but can display course completion certificates
  • Sales representatives within a branch should be clearly identified using nameplates and separate business cards
  • Tied selling, or requiring clients to make a specific purchase as a condition of another transaction, is prohibited
  • Sales representatives cannot receive unauthorized sales incentives, such as cash awards or prizes, introduced at the branch level
  • Sales representatives cannot share incentives or rewards or receive compensation for referrals
  • Sales representatives cannot receive direct sales commissions or compensation from mutual fund companies, all compensation must flow through the mutual fund dealer
  • Mutual fund companies can provide promotional items or invite sales representatives to events, but only if the items aren't overly valuable or the events aren't so frequent that they would create an impression of improper influence on advice provided to clients

NI 81-105: Mutual Fund Sales Practices Rule

  • NI 81-105 establishes standards of conduct aiming to minimize conflicts of interest between dealer and sales representative interests and the fiduciary responsibilities to investors
  • It outlines permissible payments from mutual fund companies to dealers and their sales representatives, including sales commissions, trailing commissions, and marketing and educational event costs
  • Mutual fund companies can also organize and present conferences or seminars, subject to specific conditions

Investment Industry Registration Categories

  • Every investment dealer selling securities in Canada must be registered with the regulator in each province where they operate
  • All officers and sales representatives employed by investment dealers must be registered with the relevant provincial regulators
  • Categories of securities dealers and advisors include investment dealers, who offer various investment products

Dealing Representative Registration Requirements

  • An employee whose registration was suspended may be required to re-apply and complete proficiency courses again
  • If registration lapses for less than a specified period, proficiency course completion can be recognized
  • The completion of proficiency courses is only recognized if the representative becomes registered within a certain period
  • Sales representatives are expected to avoid activities requiring registration until their transfer of registration is confirmed

Post-Registration Reporting and Compliance Responsibilities

  • Dealing representatives must maintain their registration status to continue selling mutual funds
  • Branch Compliance Officers (BCOs) are responsible for ensuring ongoing registration requirements are met, including filing notices of changes in information, transferring registration, and terminating employee contracts

Continuing Education (CE) Requirements

  • CE requirements apply in all provinces and territories
  • MFDA expects dealers to have a CE program to ensure salespersons regularly update their knowledge and skills
  • Annual renewal of registration is not required under NI 31-103, but annual fees must be paid to maintain registration

Notice of Change

  • BCOs are responsible for ensuring up-to-date information is maintained for each sales representative
  • Any changes, such as a new address or change in employment, must be reported to the securities regulator within five business days
  • Failure to do so could result in fines or other penalties
  • The BCO must notify the RCO or registration department of any terminations or resignations

Continuing Education

  • Educational opportunities should continue after qualification and registration
  • Sales representatives should be made aware of educational opportunities in investment finance, including CSI’s CE programs
  • The MFDA requires new sales representatives to complete a training program within 90 days of registration
  • The program must cover general knowledge, product knowledge, advising clients, administration, sales processes, ethics, and standards of conduct
  • Mandatory CE requirements may be introduced in the future

Registration Requirements for Sales Representatives

  • Before applying for registration, individuals must meet requirements outlined in National Instrument 31-103.
  • Successful completion of the Investment Funds in Canada Course, the Canadian Securities Course, or the Canadian Investment Funds Course is required for registration.
  • Alternatively, holding a CFA Charter with 12 months of relevant investment management experience within the past 36 months qualifies for registration.
  • Obtaining the Canadian Investment Manager designation with 48 months of relevant investment management experience, including 12 months within the past 36 months, also qualifies for registration.
  • Candidates have a 36-month window from passing an examination or completing a program to apply for registration.
  • If the examination or program was completed more than 36 months prior, applications are still possible if the candidate was approved in the same registration category for any 12 months within the preceding 36-month period.

Registration Process and the National Registration Database (NRD)

  • All sales representatives must register (or obtain a license, depending on the province) after completing a required program.
  • The NRD system is used for all registration applications, renewals, and amendments across Canada.
  • Dealers use the NRD to transmit information about their registered salespersons, officers, and directors.
  • New registrations and renewals are submitted electronically through the NRD.
  • Registration fees, which vary by province and territory, are submitted through the NRD.
  • The NRD allows for a single electronic submission to all jurisdictions in Canada.

Passport System and MFDA Requirements

  • The passport system, introduced with NI 31-103, allows dealers or salespersons to register in any province or territory by obtaining a decision from their home jurisdiction's securities regulator.
  • Sales representatives must sign a Schedule G document, acknowledging their adherence to MFDA bylaws, rules, and regulations, and granting jurisdiction to the MFDA.
  • The Schedule G is kept on file by the mutual fund dealer.
  • The BCO or securities regulator notifies the BCO when an employee is registered.
  • Employees cannot offer advice or sell mutual funds until notification of registration is received.

Specific Restrictions on Sales Representatives

  • NI 81-105 sets standards of conduct to minimize conflict of interest between dealer and investor interests.
  • Mutual fund companies can pay dealers sales commissions, trailing commissions, and marketing costs within prescribed limits.
  • Mutual fund companies can organize conferences and seminars for sales representatives, subject to specific conditions.
  • Promotional items and business promotion activities provided by mutual fund companies to sales representatives are subject to restrictions.
  • Sales representatives must have head office approval for any benefits provided by a mutual fund company.
  • Non-registered individuals, even those who have passed a mutual fund course, cannot sell mutual funds or offer advice.

Investment Industry Registration Categories

  • Every investment dealer selling securities in Canada must register with the regulator in each province where they operate.
  • Investment dealers offer a variety of investment products, including shares, bonds, mutual funds, exchange-traded funds, limited partnerships, and exempt products.
  • The chief executive officer of a registered firm is the ultimate designated person responsible for compliance with securities law.
  • The chief compliance officer manages the firm's day-to-day compliance with securities law.

Outside Activities and Conflict of Interest

  • Sales representatives must obtain prior written permission from the BCO, RCO, or head office to engage in the following activities:
    • Engaging in any business other than that of the mutual fund dealer
    • Accepting employment or compensation from any other entity
    • Serving as an officer, director, or partner of any business organization
  • Sales representatives should avoid any employment or business activity that creates a conflict of interest with their duties at the mutual fund dealer.
  • Mutual fund dealers may have policies and procedures regarding personal investment trading, often addressed in the dealer's code of conduct.

Transfer of Registration

  • If a sales representative from another registered dealer is hired, their registration must be transferred to the new dealer using appropriate forms.
  • The transfer is filed through the NRD, and the required registration fee is paid.
  • The passport system allows individuals and firms to register in multiple jurisdictions through the principal regulator.
  • If a new employee is not registered in the province, a new registration application must be filed through the NRD and the associated fee paid.
  • Individuals whose registration was suspended or whose registration lapsed for an extended period may need to submit a new registration application and complete proficiency courses again.
  • The grace period for reinstatement varies by province.
  • Sales representatives cannot engage in activities requiring registration until their transfer is confirmed by the securities regulator.

Post-Registration Reporting and Compliance Responsibilities

  • Sales representatives must maintain their registration status to continue selling mutual funds.
  • The BCO is responsible for ensuring that registration requirements, including filing notices of change, transferring registrations, and terminating contracts, are fulfilled.
  • Continuing education (CE) programs are required in all provinces and territories for registered salespersons.
  • Annual renewal of registration is not required, but fees must be paid annually to maintain registration.
  • Registered individuals can operate within their registration scope until their registration is suspended, terminated, or surrendered.
  • The BCO is responsible for ensuring that information maintained by the securities regulator for each sales representative is accurate and up to date.

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Description

This quiz covers essential details about the National Registration Database (NRD) and the Passport System for securities registration in Canada. Key topics include the electronic submission of registrations and the requirements for sales representatives, including Schedule G. Test your understanding of these regulatory frameworks in the Canadian financial system.

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