Registration Requirements of Representatives

Registration Requirements of a Registered Representative

• The securities industry entails different permitted activities and rules for all registrants
• All registrants follow strict regulations around communications with clients
• Good communication skills are required from registered employees of a dealer member, as well as a value added proposition that complies with industry regulations
• National Instrument (NI) 31-103 requires that persons wishing to trade in securities or advise on the purchase or sale of securities in Canada must first be approved and registered
• These people must be registered in one of the following two categories: dealing representatives and advising representatives
• A representative of an investment dealer that is a member of the Canadian Investment Regulatory Organization (CIRO) must be approved by CIRO before registering with the applicable provincial securities administrators as a dealing representative
• The most common CIRO registration categories for individuals employed at an investment dealer member are Registered Representatives (RRs) and Investment Representatives (IRs)
• Both types of registrants must be registered to operate in the geographic location of their clients
• CIRO must be notified of the customer type (retail or institutional) and the products the RR or IR will trade
• There is no requirement that either type be employed full-time, but employees in both categories must state the number of hours they will work, and explain if it is under 30 hours per week
• Securities regulators in Canada impose stringent requirements on their registrants
• Registered status means registrants must adhere to rules and conditions
• It is a privilege to work in the securities industry
• Registrants of CIRO member firms must adhere to SRO rules and applicable provincial securities law
• Dealer members may permit their employees to engage in outside business activities, but only if the applicable provincial regulator allows it
• Registrants must observe the policies and procedures of their dealer members, which may or may not authorize outside activities
• Where a policy conflicts with a rule, the most stringent of the two applies
• When a registrant engages in another occupation, that occupation must not bring the securities industry into disrepute
• Outside activities must be disclosed and pre-approved by the dealer member
• Provincial securities administrators and CIRO prepare rules on the initial and ongoing proficiency requirements for RRs and IRs
• These rules establish proficiency requirements for both education and experience, determine periods of supervision, and establish time limits during which proficiencies remain valid
• Registered Representatives are permitted to provide advice on the full range of equity and fixed-income securities products
• Additional proficiency requirements are necessary for an RR to solicit orders for or to advise on trades with respect to options, futures contracts, and futures contract options
• An RR is often referred to in the industry as an investment advisor or broker
• An RR requires broad industry knowledge, including knowledge of individual securities, capital markets, economic cycles, the performance of securities within those cycles, and taxation issues
• A dealing representative registered to sell mutual funds only, as an RR, can sell nearly all products provided by a full-service dealer
• Successful RRs typically have strong communication skills and a good understanding of the ethical decision-making process
• A new RR must meet the following requirements:
• Successful completion of the Canadian Securities Course (CSC) and the Conduct and Practices Handbook Course (CPH), administered by the Canadian Securities Institute (CSI)
• A 90-day training period, meaning that you are not permitted to have contact with customers or prospects in obtaining, taking, or soliciting orders for securities or advising on trades in securities
• Activities permitted during the 90-day training period include:
• Gathering information from existing or prospective clients on behalf of another RR
• Assisting clients with inquiries about their accounts and giving quotes
• Contacting the public by sending out introduction letters
• Inviting the public to seminars and forwarding non-securities specific information
• Creating and researching lists of potential clients for future follow-up work
• After being approved as an RR, you are placed under the close supervision of your supervisor
• To deal with retail customers, you must successfully complete the Wealth Management Essentials (WME) course within 30 months after your approval, will result in immediate suspension until the course is complete
• Participation in the industry's CE program is a condition of maintaining your licence
• Those dealing with options trading must complete the Derivatives Fundamentals and Options Licensing Course or the Derivatives Fundamentals Course (DFC) and the Options Licensing Course (OLC)
• People dealing with futures and futures options, must complete the DFC and the Futures Licensing Course
• Full-service dealers have moved to provide holistic wealth management services to high-net-worth clients
• Discretionary portfolio management has led to growth of advisor-managed accounts
• Individuals who deal with or provide discretionary portfolio management for managed accounts must be approved as either Portfolio Managers (PMs) or Associate Portfolio Managers (APMs)
• PMs and APMs must meet proficiency requirements in addition to industry course completion
• They must also demonstrate a high level of experience that is relevant to discretionary portfolio management activities or relevant investment management experience (RIME)
• Applicants must demonstrate research and analysis and portfolio construction skills related to a range of individual securities
• CIRO assesses RIME through:
• Assessing each exemption application of its own merits on a case-by-case basis
• Holistic reviews
• Providing specific information rather than using "boilerplate" wording
• To register as a PM, candidates must successfully complete the CPH and Canadian Investment Manager designation, or the Chartered Investment Manager (CIM) designation, or the Chartered Financial Analyst (CFA) Charter
• If the Canadian Investment Manager designation or CIM designation is completed:
  • At least four years of RIME; one year of which was gained within the three years before requesting approval acceptable to CIRO
• If the CFA Charter is completed, at least one year of RIME must be gained within the three years before requesting approval acceptable to CIRO
• To register as an APM, candidates must complete the CPH and Canadian Investment Manager designation, or the CIM Designation, or Level 1 or higher of the CFA Program
• APMs also require two years of RIME acceptable to CIRO within three years before requesting approval
• Investment Representatives are registered solely to take or submit client orders for execution
• IRs must never provide clients with investment advice
• Investment Representatives are sole employees of CIRO investment dealer members
• IRs and RRs are registered provincially as dealing representatives

Restrictions on Non-Registered Staff

• SRO rules restrict the activities of non-registered personnel, such as administrative assistants, office managers, and mailroom clerks who are employed by a dealer member or related financial services entity
• Non-registered staff are not permitted to carry out the following tasks and functions:
• Open client accounts
• Complete KYC information on an account application other than biographical information
• Provide recommendations or advice on securities
• Solicit securities transactions
• Assist clients in completing orders for securities transactions
• Non-registered staff are permitted to engage in the following activities:
• Advertise the services and products offered
• Deliver or receive securities to or from clients
• Contact clients to arrange appointments or give notice regarding deficiencies in completed forms

CIRO Registration Reviews: The Fit and Proper Test

• CIRO's registration staff conducts suitability reviews known as the fit and proper test, for individuals seeking CIRO approval or registration under securities legislation
• CIRO evaluates termination, regulatory, criminal, civil, or financial disclosures filed on the National Registration Database (NRD)
• CIRO provides guidance on best hiring practices that CIRO-regulated firms consider adopting
• Regulatory filings regarding registered individuals must be completed through the NRD
• An initial submission involves completion of Form 33-109F4 for registered and non-registered people when applying through NRD for the first time
• This is also used when transferring a registration, getting registered with an additional firm or jurisdiction and reactivating a registration
• A notice of change must be submitted if an individual's registration information changes
• Registrants must notify their dealer members as possible whenever there is any change to their registration information in order to report on NRD within the prescribed time period
• The fit and proper test is an evaluation by the registration staff of the applicant's integrity, financial solvency, and competence
• Examiners emphasize the applicant's competence, integrity, financial solvency, and discussion regarding maintaining proficiencies
• CIRO can refuse an application if:
• The applicant does not meet Ciro Rules or Rulings
• The applicant will not comply with Ciro Rules and Rulings
• The applicant is not qualified to reasons relating to integrity, solvency, training or experience
• The approval of the applicant is not in the public interest

Continuing Education

• Continuing education (CE) is vitally important requirements for ongoing licensing
• CE ensures you maintain proficiency in chosen area of expertise
• CE helps stay updated emerging on product developments, legal and compliance issues, industry trends, capital market developments
• Dealer members can design compliance and professional development courses that follows CIROs guidance
• As an RR, your CE requirements consist of 20 hours and 5 of compliance every 2 years that's approved that will touch on Canadian Issues
• You are required to keep documentary proof and a licensed environment has maintenance
• If you transfer, partial or unreported CE credits can be transferred, and ask your firm about CE requirements

Communication with the Public

• Registrants must be aware of what is and not permitted with client contact
• CIRO establishes rules regarding contacting via phone,mail/email and through internet
• Provinces and CIRO publishes rules about client contact such as, no registrars can use other registrar names/signs unless in writing, certificates can't displayed in business only course can, and no security can approved by the registrants or fitness

Rules for Telemarketing and the National Do Not Call List

• Canadian Radio-television and Telecommunications Commission (CRTC) created a regulatory enforcement for unsolicited telecommunication
• Telemarketers must subscribe to do not call list and must consult when calling and follow a time standard or else be fined
• Any member dealer employee of telemarketing is subjected if their connected a 3rd party

Canada's Anti-Spam Legislation

• Canada's Anti-Spam Legislation (CASL), establishes rules to control the spam from electronic messages(CEMs)
• To send Cems(emails/socials) business must obtain an express(opt-in) or implied, sender has to be verified, must have contacted info
• Non-compliance such as criminal charges, will result to monetary penalties

Rules for Marketing Materials

• Provincial marketing is advertising and soliciting on securities that has to be fair
• Rules require material to be balanced for its risks, benefits and sales, should not misleading at all or be omitted
• The CIRO identifies advertising as, commercials/commentaries a dealer promotes for business
• Sales literature is a communication of recommendations of security
• Dealer members provide with materials such as research reports, company performance, prospectuses

The Fund Fact Document

• Ni 81-101 requires mutual funds to have a prospectus or AIF
• Provides details of the series or each value of the fund
• Has to delivered and must be available a website before purchase and has the following
• It must summarize the key facts in no more than two pages
• Written language that is easier to understand
• Includes historical data/holdings/ratings
• Fees for buying and redeeming funds

Use of Performance Data

• Includes performance data for ratings, volatility, and return must be prominently printed
• Standard form consists of 2 forms market or current yield depending on investment type
• Mutual funds has standard form that follows the NI 81-102

Dealing With Clients

• Conflicts arise when interest of different properties aren't consistent
• Actual and potentials may occur, if so must be handled
• Prohibited certain conflicts by regulatory
• Must solve effectively as problems occur
• It is not acceptable to rely on disclosure without first addressing the conflict

Personal Financial Dealings and Outside Activities

• Rules from CIRO deal with RR and outside activities which is prohibited, may engage with specific conditions
• The consideration must be other the be member approved
• Settling with out a dealer member or loss out of personal funds
• Borrowing and lending must be with the income act
• A power or attorney unless with a family

Privacy and Cybersecurity

• The Personal Information Protection and Electronic Documents Act (PIPEDA) sets out the rules for the collection, use, or disclosure of personal information in the course of commercial activities in Canada
• Registrants are to keep each client information confidential and not share to 3rd party
• The disclosure has consent
• Concerns of cybersecurity as financial operations in similar to fraud
• Senior management that implements fraud protection at all staff levels
• With guidance a security program can augment a firms program against fraud.
• They are to be noted if there's a risk to clients or any cyber threats
• Must report a 3rd party day of discovery within a report to CIRO

Overview of registration requirements for dealing and advising representatives in Canada, as mandated by National Instrument 31-103. Covers CIRO approval for investment dealer representatives. Focuses on trading and securities regulations.