Securities Industry Regulations and Materials

• The securities industry is heavily regulated with rules governing client contact through telephone, electronic communication, sales literature, and advertising.
• Understanding communication permissions with new and prospective clients is essential, along with standard business conduct like knowing the client and suitability of product recommendations.

Material Distribution

• Exercise care when distributing materials to clients because securities regulators consider such activities registrable.

• Written materials recommending a specific security are sales literature needing proper authorization before distribution.

• Employees must not share dealer member-provided materials about securities without permission. Materials for internal use should not be shown to clients for convenience.

• Mutual funds have detailed legislation and guidelines for sales literature, especially regarding performance data.

• Distributing information on mutual funds, specifically performance, needs authorization from someone familiar with regulatory requirements for mutual fund disclosure.

• Awareness of rules regarding conflicts of interest, personal dealings with clients, and data handling is key to upholding regulations.

Registration Requirements

• Registration involves permitted activities and strict communication rules.
• Good communication skills and a compliant value proposition are key when dealing with clients.
• Compliance is critical due to increasingly stringent requirements.
• National Instrument (NI) 31-103 mandates approval and registration for those trading or advising on securities purchase or sale in Canada.

Dealing and advising representatives

• Categories generally depends on the firm type
• A representative of an investment dealer (CIRO member) needs CIRO approval before registration with provincial securities administrators.

CIRO Registration Categories

• Registered Representatives (RRs) & Investment Representatives (IRs) must register geographically and notify CIRO of customer type (retail or institutional) and traded products.
• Neither RR or IR needs to be employed full-time, but must state their working hours.
• Securities regulators in Canada have stringent registrant requirements that must be followed.

CIRO member firms

Must adhere to SRO rules and provincial securities law.

Engaging in outside business activities

• Possible with applicable regulator approval
• Registrants must observe dealer member policies, applying the stricter rule if policies conflict with rules.
• Disclosure of outside occupations is required to avoid disrepute to the securities industry.
• Pre-approval from the dealer member is needed before engaging, regardless

Proficiency Requirements

• Provincial securities administrators and CIRO provide rules on initial and ongoing proficiency for RRs and IRs, including education, experience, supervision periods and time limits for valid proficiencies.

Registered Representatives

• Permitted to advise on a full range of equity and fixed-income securities products.
• Additional proficiency needed to solicit orders or advise on options, futures contracts, and options on futures contracts
• Registered Representatives are known as investment advisors or brokers, but these are not official registration categories.
• Requires extensive broad industry knowledge, communication skills, and ethical decision-making.
• Unlike a dealing representative selling mutual funds only, RRs can sell most products from a full-service dealer.

Formal RR Training

• Canadian Securities Course (CSC) and Conduct and Practices Handbook Course (CPH) completion, administered by the Canadian Securities Institute (CSI), is needed

RR 90-Day Restriction

• During the 90-day training period, RR cannot contact customers or prospects to obtain/solicit orders for securities or advise on trades, including via electronic platforms/social media.
• Receiving commission splits is prohibited. Allowable activities include gathering client information for another RR,assisting with inquiries and providing quotes (if no client accounts are opened)

RR Additional Restrictions

• Contacting the public through introductory letters/seminars, forwarding non-securities information (with restrictions).
• Creating/researching potential client lists for future follow-up.

RR Six-Month Supervision Period

• Following approval as an RR, there is a six-month supervision, unless the RR/IR was previously approved for 6 months with a self-regulatory organization (SRO) member or recognized foreign SRO.

RR 30-Month Requirement

• RR Must complete the Wealth Management Essentials (WME) course within 30 months after approval to deal w/ retail customers.

RR Continuing Education

• Participation in industry's CE program needed to maintain license, satisfying professional development and compliance portions of the CE program for the cycle.

RR Additional proficiency requirements

• Additional proficiency necessary to solicit or advise trades for options/futures contracts/futures contract options.

To deal in options trading

• Must complete the Derivatives Fundamentals and Options Licensing Course or the Derivatives Fundamentals Course (DFC) and the Options Licensing Course (OLC).

To deal in futures and futures options

• Must complete the DFC and the Futures Licensing Course.

Portfolio Managers (PMs) & Associate Portfolio Managers (APMs)

• Full-service dealers moving toward holistic wealth management services
• Individuals dealing with or providing discretionary portfolio management for managed accounts must be approved.
• PMs and APMs must meet proficiency requirements and demonstrate relevant investment management experience (RIME) plus strong research, analysis, and portfolio construction skills.

CIRO's RIME Approach

• Assesses each exemption application on its own merits case-by-case
• Holistic approach in review (no single disqualifying factor) descriptions should be unique to the applicant, providing specific, relevant information.
• Applicants should draw out common and specific factors in each application.

Registration Requirements for PMs

Requires CPH and Chartered Investment Manager designation, CIM designation, or CFA Charter.

Registration Requirements for APMs

Must successfully complete the CPH and Canadian Investment Manager designation, or the CIM Designation, or Level 1 or higher of the CFA Program

For Canadian Investment Manager Designations

• At least four years of RIME, with one within three years before CIRO approval

For a CFA Charter

• One year of RIME within three years before CIRO approval

Experience and other requirements for APMs

• Two years of RIME acceptable to CIRO within three years before requesting approval.

Investment Representatives

• Irs are registered to take or submit client orders for execution only and must not provide investment advice.
• Irs like RRs, are registered provincially as dealing representatives.

IRs must complete

• CSC
• CPH
• 30-day training program

RR six-month supervision & compliance requirements

• IRs are not required to fulfil the 30-month WME requirement.

IR Roles

Sales Assistant or IR at an Order Execution Only (discount broker) firm.

Registered sales assistants

They are IRs helping RRs manage business with administrative tasks including organizing sales records, application & client documentation. Sales assistants can speak with clients but cannot give advice. They also take unsolicited orders.

Skills for Sales Assistants

• Possess strong organizational and communication skills
• Good industry knowledge
• Familiarity of back-office operations

Ir at Order Execution Only Firms

• Registered to take orders (clients) and submit for execution.
• Irs must recognize to elevate an order beyond their authority and pass it on to the appropriately licensed.
• An Ontario-licensed Ir cannot accept an order from a Manitoba client, likewise cannot accept options orders without meeting additional proficiency requirements + licensing

Rules Restricting activities of non-registered personnel

• This include administrative assistants, office managers, and mailroom clerks, who cannot open client accounts, complete KYC information in an account application, provide advice or solicit securities transactions, or assist clients in completing orders

Non-registered staff can

• Advertise products and services, contact clients for appointments, deliver/release securities or securities deficiencies in completed forms. However, only a registered person can assist in completing account applications. A supervisor must review the new account documentation to comply with KYC and suitability obligations before trades are conducted.

Individuals in training program (30-90 days) restricted from engaging in trade activities including

Providing recommendations,Opinions or advice regarding security as defined in provincial security acts (either writing or orally)

• Soliciting, accepting or processing any orders, including unsolicited orders

Dealing registrants dealing in funds can continue their dealings w/ existing client based

• Must can only purchase and sell mutual funds
• Must update CSC and CPH to the date.

Rr Referral

• May may receive a referral from someone not in the same registration category such as a mutual funds registered individual.
• Must carefully evaluate their suitability to perform the tasks and functions of the dealer member.

CIRO performs suitability (fit and proper) reviews for registrants + individuals

• Conducted in jurisdictions which have been delegated statutory authority for individual registration by a securities commission.

CIRO also evaluates

• Termination
• Regulatory
• Criminal
• Financial disclosures on the National Registration Database (NRD) + guidance on best hiring practices that CIRO regulated firms may want to consider adopting.

All regulatory filings

Completed NRD.

The process

• A submission is Form 33109F4 registered and non registered when applying for registration thru the NRD for the first time.

• This submission is used during transfer/getting registration with an additional firm/in additional jurisdiction and when reactivating.

• A notice of change needs to be submitted when registration info changes to their dealer within 2 days so that the report on the NRD within the prescribed timeline.

• To register integrity, financial solvency, + competence are accessed to fit the role. Screening begins before entering + during transfers, such as between investment dealers. CIRO can reject under certain situations.

CIRO Registration Reviews: The Fit and Proper Test

• Involves examining an applicant’s integrity, financial solvency, and competence.

CIRO Deny

• CIRO has that authority & may do so if: applicant doesnt meet requiremnts prescribed by CIRO, doesnt comply with rules and rulings, unqualified for approval relating to integrity, training, solvenvcy and expirence and public interest.

Continuing Education (CE)

Fundamental in many knowledge/based industries (including securities, is required Ce ensures you maintain proficiency + necessary to stay up to date to industry trends + capital market

Continuing education

Dealer members can design professional + compliance accreditation. Rrs are the approved programs and are 20 hours professional dev and 10 hours compliance

Five hours of the compliance course

Is related to Canadian Compliance issues. Member must obtain and maintain record of completion of program

Registration suspended during course

• If you dont complete requirements courses - cycle, registration is suspended and member may have to pay a fine. Partial credits are transferable, so consult with your compliance department.

Communication with the Public

• Registrants need to be aware of whats permitted with contacting
• CIRO governs phone, + internet ways to contact. Rules around from client, advertising are there as well

CRTC framework

• The Canadian Radio-television and telecommunications and communications commissions creates and enforces a regulatory framework for telemarkting + other communications created.

Rules for Telemarketing and the National Do Not Call List

CANADIAN SPAM LEGISLATION

The CRTC help enforce this by following:

• Canada's ANTI spam legislation
• Similar legislation applies to commerical electronic messages

Opt-in/Opt Out/Information

• Business email must be sent to express/ implied consent. Messages need to identify sender and contact

Risk of Violating Spam Legislation

• The is risk of monetary action, civil, criminal penalty and/or loss of license.

Rules for marketing materials

• Trade under provincial securities legislation
• The rule that sales materials to be used ,fair and balanced view the benefit s products for sale. material fact/ qualification is that may be misleading- CIRO or the state's regulatory.

Advertisings CIRO rule

• Advertisements, Sales and trading with security

• Typically, dealer member provide material with below on investment material

• Report, Affect of News, Info Product

• One can take the recommendation they need. One should take care that you treat material for internal use only. supervisory personnel + retained agreement

• Member must design a supervisor that person make they are approving follow the rule which meet following standard Untrue. un justified -Un representation with Unwarrant with what label/ risk to client

Mutual fund sales communications

Rules governing the permissible content of mutual fund and sales communications are here in which NI 102 Investment funds,

• A sales communication is a sum that: Contains no untrue misleading statement.
• Make no statement that conflict with info in the fund's prospectus, annual form AFT fund or Fact document.

Fund Facts Document

• NI 81-101 requires facts and annual information form (AIF) in Funds Fact document . facts provides website must. delivered it make a knowledgeable - risk rating/cost

Performance Data

• All NI must included, unless stand

Performance data includes

Standard Money market, Total, Same base to investors Data cannot mis leaders Data in sales follows contains only and all public Prospectus relate same index clearly indicate update also data

• Can only created org and created by the most
• Is rated lowest fund
• Not is broadcast

Dealing with client Rules

• registrant. handling with you client

Conflict of Interest

Arises then its diverent/inconsistent and or actual Potential - reasonable observer, with none

• Must not in the improper way Many arises normal . Not that exist, not appropriately

• In the the best interest must, Equitable, Transparent, and not avoidance's (disclose)

• Registrant must must conflict

• Process ident, best cannot to open , for that

• To Disclosure is not good enough must

• Activity approval to to the member must, before to do their rule 33109

What should the RR be careful on

That family it you a is not fully

• Rules for other to must the in and

• CSA - are team or no

• The are to on is to

Carry - Can to be member. , non

Privacy & Cyber

• Rules client as Rrs - all you rule

• Collection Commercial PIPEDA governs is

• May 3 party is they debt - require

• The if this will

Cyber

Member data from for To

• Guide for risk or a their

Conclusion

• Communication and to PIPEDA to these to firm.