SAID Successes Archive

SAID Successes Archive





Retail and Institutional



CSA Accepts Key IIAC Recommendations on Early Warning Proposals

    On October 10, 2014 the CSA issued an update to market participants on the status of the Draft Amendments to National Instrument 62-103 Early Warning System and Related Take-Over Bid and Insider Reporting Issues. Consistent with IIAC recommendations made in the summer of 2013, the CSA has advised that it will not proceed with (A) the proposal to reduce the reporting threshold from 10% to 5%, and (B) the proposal to include “equity equivalent derivatives” for the purposes of determining the threshold for early warning reporting disclosure. The final amendments to the National Instrument are expected to be published in the second quarter of 2015.


OSC Adopts Existing Security Holder Prospectus Exemption as Strongly Advocated by the IIAC

    On November 27, 2014, the OSC announced that it will adopt the existing security holder prospectus exemption for reporting issuers listed on the TSX, TSXV, CSE or Aequitas NEO Exchange. Subject to Ministerial approval, the exemption will come into effect on February 11, 2015. The exemption will allow listed reporting issuers (excluding investment funds) to raise capital from existing security holders on a cost effective basis by permitting existing retail security holders to acquire securities of the issuer directly, rather than through the secondary market. The IIAC advocated for the creation of the exemption, which was adopted in other Canadian jurisdictions last year, and strongly encouraged the OSC to implement the exemption as part of its proposal to create new exemptions in Ontario.

Personal Financial Dealings

    As a result of IIAC advocacy, IIROC agreed to substantially revise its Personal Financial Dealings Rule, despite having been released in final form with set implementation dates. As a result of IIAC member firm concerns, IIROC agreed to narrow the scope of the rule so that some specific prohibited personal financial dealings and related exemptions will only apply to Registered Representatives (RRs) and Investment Representatives (IRs) (and not all member firm staff). In addition, IIROC has eliminated the requirement for an RR or IR to disclose to, and obtain pre-approval from the firm in the case of borrowing or lending with a client who is a related person. In addition, IIROC will now allow RRs and IRs to act as a client’s trustee or executor for not only related persons (previously permitted) but also for non-related clients, subject to some supervisory controls.

CRM Performance Reporting

    The IIAC won amendments from the Canadian Securities Administrators to its draft performance reporting proposal to allow use of both book and original cost, extend timelines for implementation, provide some exemptions for deferred sales charge disclosure and reflect other key recommendations.

    The IIAC convinced IIROC to delay implementation of the client relationship model enhanced suitability requirement until March 26, 2013.


    The IIAC held a nationwide webinar and a series of well-attended CRM events in Vancouver, Calgary, Toronto and Montreal, bringing additional clarity regarding CRM requirements to Member firms and enabling firms to share practices, in particular the enhanced suitability components.

    The IIAC helped Member firms prepare to meet the CRM requirements by:

  • Developing a relationship disclosure (RD) considerations document;
  • Sharing results of a Member firm survey on RD preparations to help firm decision-making;
  • Hosting an RD roundtable of IIAC members; and
  • Publishing a self-assessment tool to help Member firms identify material conflicts of interest, and develop methods to address conflicts, including disclosure.

CRM2 Disclosure Requirements

    With CRM2 disclosure and reporting rules to be implemented over three years, the IIAC developed an extensive Member Support program, including seminars, roundtables, surveys, working groups and an online CRM2 Toolkit featuring a Plan-on-a-Page, data maps, presentations, and more. The goal of this program is to provide additional support to Member firms, including reducing the cost of implementation and increasing the compliance comfort level.

Large Open Position Reporting (LOPR)

    The IIAC worked extensively with Member firms and the Bourse de Montréal Regulatory Division over several years to implement new large open position reporting (LOPR) requirements for options and futures. The IIAC successfully convinced the Montreal Exchange Regulatory Division of the privacy requirement to eliminate the need for Member firms to use segments of social insurance numbers as identifiers for LOPR requirements. Once there was agreement on detailed LOPR requirements, the IIAC achieved a much-needed eight-month implementation extension until the end of 2013. This helped members implement the rules more cost-efficiently and avoid reprimands for lack of compliance.

    Separately, the IIAC persuaded the Bourse de Montréal Regulatory Division to implement an IIAC request to make position limits available in Excel, thereby replacing uncopiable PDFs. This saved members time and the risk of error from having to manually input limits.

Registered Plans

    The IIAC persuaded the Canada Revenue Agency to delay RRSP and RRIF non-qualified investment reporting by three months.

    The IIAC successfully influenced the Department of Finance’s decision to provide investors with a six-month reprieve from penalties with respect to “prohibited” investments in RRSPs and the right to swap out these holdings for cash.

    The IIAC persuaded the CRA to formally advise Member firms who are unable to contact TFSA-holders to reconcile Member firm and CRA TFSA data, to de-register these TFSAs and issue tax slips for the income earned.

    The IIAC’s efforts led the CRA to eliminate new partnership filing requirements and agree that Member firms may re-use TFSA contract numbers by adding the account opening year to the number rather than expanding the numbers’ digits.

Tax Reporting

    The IIAC worked successfully with the fund and insurance associations to persuade tax authorities to postpone new requirements to issue potentially hundreds of thousands of additional foreign income and tax withheld slips to clients.

    CRA and Revenu Québec (RQ) withdrew proposals that would have reduced the number of tax slips combined on one printed page from three to two, and required the printing of 8½” x 14” (legal) size slips to accommodate increased Quebec reporting. The IIAC was successful in reversing these proposals. The IIAC persuaded the CRA to change the location and size of NR300-series form numbers to improve form usability.

    We estimate that system programing, printing and mailing cost savings derived from the above advocacy efforts resulted in $2 million dollars in savings to the industry.

U.S. Tax – Administrative Issues

    The IIAC worked with the IRS to solve a number of administrative issues related to complex IRS Form 3520 filings for U.S. persons who hold certain registered accounts in Canada (e.g. RESPs), and will continue to work with the IRS to simplify these filings in upcoming years as these accounts represent a very low risk of use for tax evasion purposes and the forms are extremely complex and confusing, which can result in potential IRS penalties to clients of IIAC member firms if filed incorrectly.

U.S. Tax – Cost Basis Reporting

    In February 2014, the IRS issued revised regulations coordinating the requirements of the existing Chapter 61 (existing U.S. tax reporting) and proposed Chapter 4 (FATCA reporting) regimes. These regulations clarified that non-U.S. payors (provided that they are reporting Model 1 FATCA IGA financial institutions (FIs) and complete the necessary FATCA reporting) will no longer be required to complete IRS Form 1099 reporting that would be duplicative for those accounts. This effectively means that Canadian brokers who choose to opt out of Form 1099 reporting will be able to avoid the onerous IRS cost basis reporting requirements under section 6045 of the Internal Revenue Code, including those that would require the cost basis of debt and options to be reported on Forms 1099 beginning on January 1, 2016. Implementing these changes would have been extremely costly to IIAC members.

CRA/Agence du Revenu Quebec

    The IIAC established a CRA point person to advance and expedite resolution of Member firms’ issues within the federal tax authority, the first industry association to have such a facilitator

    The IIAC co-ordinated a survey of Member firms with Montreal Exchange shares to facilitate a reasoned response to the questioning by CRA auditors in one region of Canada of the value of the shares.

    The IIAC facilitated challenging discussions among industry members, the CRA, service providers and infrastructure to better manage the combination and XML-ization of limited partnership unit tax reporting to clients. These efforts enabled Member firms to educate CRA on the complexities of systems changes and continue to press for early information regarding changing tax requirements.

    As IIAC Member firms can experience losses when trying to comply with a CRA “requirement to pay” (RTP), the IIAC successfully persuaded the CRA to provide significantly greater clarity regarding practices and procedures surrounding these demands to remit tax amounts owed by a client to the CRA, improving clarity and helping members avoid future losses.

    The IIAC posted on its members-only site Q&As and a CRA-approved IIAC template relating to a new streamlined process designed to help client recover withholding tax. This is necessary when a non-resident client moves from a higher- to a lower- withholding tax jurisdiction and only later advises the member firm of the move. Formerly, the CRA’s procedure required one NR7-R form per payment on which tax was over-withheld. The new process is faster, more efficient and less costly for investors, the CRA and IIAC member firms.

    The IIAC, working in conjunction with the Investment Funds Institute of Canada (IFIC), successfully lobbied Revenu Québec and the CRA to defer by at least another year any requirement to report on revenue and income by source country, avoiding unnecessary cost and client irritation and significant systems changes late in the tax season. These efforts saved member firms approximately $2 million.

    These efforts also resulted in the CRA ceasing its practice of automatically charging late filing penalties and interest, totalling more than $200,000 annually. The IIAC prepared a Member-firm only toolkit for easy bulk reclaiming of late filing penalties and interest, charged due to issues beyond dealers’ control.

    The IIAC and IFIC were successful in building a larger stakeholder group to expand the effectiveness of the relationship with the CRA and RQ at senior levels, leading to more timely answers, greater flexibility, earlier involvement in consultations and greater trust. CRA is seeking IIAC’s feedback on NR301 forms and other form changes and Revenu Quebec is doing the same.

    In addition, the IIAC persuaded the CRA to extend the timeline for addressing unmatched TFSAs by four months allowing Member firms to focus on completing the tax reporting season, avoiding overtime to meet requirements.

    Finally, the IIAC obtained CRA approval for non-qualified investment reporting to be made by CD-ROM rather than the CRA’s requiring a rushed move to XML.

Due Bills

    The IIAC played an instrumental role in implementing the ‘Due Bill’ framework, improving client holding valuation accuracy when securities undergo a major corporate action event (e.g., stock split or spin-off). The IIAC created a short document to explain the impact of the Due Bills initiative on holders of securities undergoing one of these events.

Non-Resident Tax Issues

    The IIAC provided non-resident tax certification wording that could be included, after internal review and approval, in members’ know your client – or other account opening – documentation.

    The IIAC led an initiative to develop single distributor and manufacturer agreements, and an agreement posting facility on the FundSERV website, for non-resident tax information collection to avoid costs and client service challenges of fund managers and dealers asking the same clients for tax certifications.

U.S. Snowbirds

    The IIAC published U.S. snowbird and temporary resident exemption guidance on U.S. states with regulatory relief for Canadian broker-dealers with Canadian clients who have self-directed retirement plans or are present temporarily in a particular state.

2014 CRA Form T1135 – Foreign Income Verification

    The IIAC relentlessly pursued the CRA to make changes to requirements for clients completing T1135s – Foreign Income Verification statement – with respect to their holdings of foreign securities. Despite every expectation that the CRA would not change its position, the Agency provided transitional relief for securities dealers, and a simplified reporting method for clients, in late February 2014. This saved member firms hundreds of thousands of dollars at a minimum. Although it’s anticipated that some reporting changes will be required, they will be substantially less onerous than what would have been originally required. This win is a direct result of the IIAC’s advocacy efforts.

    The IIAC’s standing with the Chartered Professional Accountants Canada (CPA Canada) increased significantly as a result of this process, as CPA Canada had unsuccessfully pursued a similar change. This relationship will be used to promote education of the accounting industry, in which a number of accounting firms criticize dealers for reporting delays beyond the dealers’ control. This will also help the IIAC communicate with CPA Canada regarding the challenges that accountants can help solve.


    The IIAC successfully co-ordinated ETF dealer interactions with regulators, ETF producers and vendors to achieve the most cost-effective implementation of new ETF Summary documents (similar to a mutual fund Fund Facts). The IIAC also managed the negotiation of a common rebate rate to be paid by ETF managers to dealers and the automatic charging of new ETF producers without market disruption. This new rebate set a precedent that dealers hope to use to change the fund manager/dealer compensation model.

2013 Adjusted Cost Basis Matrix/Asset Classification

    The IIAC publicized an industry adjusted cost basis matrix and an asset classification schema to promote greater consistency among Member firms and across the broader investment industry. These tools will be updated periodically.


BCSC Publishes Conditions of Registration for Firms Trading OTCBB Securities

    On December 18, 2014, the BCSC published the latest Conditions for Registration for firms that trade OTCBB. Consistent with the IIAC’s strong recommendations (made in December 2013) there is no longer a provision banning certain high-risk business with financial institutions in jurisdictions that are non-signatories to the IOSCO Multilateral Memorandum of Understanding.

Limitation of Permitted EMD Activities

    In the proposed amendments to NI 31-103 Registration Requirements and Exemptions, the CSA indicated its intention to significantly restrict the activities that can be undertaken by Exempt Market Dealers. The proposals would end the ability of EMDs to trade securities that are listed on exchanges, undertake underwritings. It also increases the proficiency requirements of EMD CCOs. These amendments are critical in recognizing the differences in standards between IIROC Dealers and EMDs, and establishing a more level playing field so that less-regulated entities cannot directly compete with IIROC dealers.


Advocacy Wins: Final 31-103 Amendments Reflect Several IIAC Recommendations

    Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, released October 16, reflect several IIAC recommendations made in March 2014.

    • EMD CCO Proficiency – The CSA accepted the IIAC’s position that EMD CCOs should meet certain experience and educational standards. NI 31-103 mandates 12 months of experience within the previous three years, and completion of the Exempt Market Products and PDO exam for CCOs.
    • EMD Permitted Market Activities – Exempt Market Dealers will be prohibited from undertaking certain “brokerage activities”. For example, EMDs will now be restricted from dealing in exchange-listed securities and cannot act or solicit in furtherance of selling a security by a client that acquired a security under a prospectus exemption. In addition, EMDs cannot participate in a prospectus distribution except under specific prospectus exemptions.
    • Activity of Non-Registered Foreign Dealers in Derivatives Curtailed – NI 31-103 amendments also include the removal of the “non-solicitation exemption” for trades in exchange contracts in Alberta, British Columbia, New Brunswick and Saskatchewan. These were previously widely used by U.S. FCMs to deal with Canadian investors in U.S.-listed derivatives and follow the release of a recent OSC staff notice that also limited the activities of non-registered dealers in Ontario. This is a very positive development for IIAC member firms. The IIAC has long advocated that these exemptions were antiquated and that IIROC-regulated dealers can provide Canadian investors access to listed derivatives markets across the globe.

    In addition, certain IIAC recommendations related to the activities of non-registered foreign dealers, filing of increased share ownership and outside business activities were also accepted by the CSA.

IIROC publishes final guidance on underwriting due diligence

    IIROC’s final guidance on underwriting due diligence outlines common due diligence practices and suggestions for IIROC dealers involved in offering securities to the public as underwriters. The final guidance reflects essentially all IIAC recommendations made in a submission from June 2014.


    Responding to pressure from the IIAC and its international association counterparts, U.S. Treasury extended FATCA’s general implementation and grandfathering dates from January 1 to July 1, 2014, averting major disruption to financial services and the capital markets.

    Through its ongoing dialogue with the Canadian Department of Finance and the CRA, the IIAC successfully argued for significant relief from onerous FATCA registration requirements for personal trusts, and for exemptive relief for registered savings plans and other types of low-risk accounts, thereby reducing significantly the scope and costs related to FATCA compliance for member firms.

Existing Security Shareholder Exemption

    The majority of CSA members (excluding Ontario) have approved a new prospectus exemption for existing security holders. The exemption is intended to assist smaller issuers to raise capital from existing shareholders on an expedited and cost efficient basis without the need for a disclosure document or onerous qualification criteria. Purchases in excess of $15,000 will require an IIROC dealer involvement to ensure investors are adequately protected.

IIROC Guidance on Outsourcing

    The proposed IIROC guidance on outsourcing was significantly scaled back and clarified to ensure that onerous restrictions and requirements did not apply to many activities to which dealers routinely outsource to third party providers. The initial proposal potentially restricted or created impractical supervision and verification requirements in respect of many activities that dealers do not undertake in house.

CDS Bond Pricing Service

    IIAC representation to CDS resulted in changes to the CDS Fixed Income Pricing Service. The changes addressed industry concerns pertaining to some market inefficiencies resulting from the Service.

Anti-Money Laundering

    The IIAC obtained relief from the Department of Finance for anti-money laundering identification and record-keeping requirements for listed corporations, which reduced the AML burden for member firms.

Anti-Spam Regulations

    On December 4, 2013, the federal government released its final Anti-Spam Regulations to the 2010 Legislation (known as CASL). The CASL Regulations contain significant concessions from what was proposed and reflects many of the IIAC’s comments in our submissions on this matter over the past number of years. The concessions in the Regulations represent a significant win for Canada’s investment industry. Most important, the CASL Regulations now provide an exemption which allows for referrals, meaning advisors can still contact potential clients when a specific referral is provided. There is also a provision for sharing contact lists. In addition, a business-to-business exemption has been included, which addresses many practical administrative difficulties proposed in the original Regulations.

    The Regulations also include a broadened definition of family and personal relationships, which more realistically reflects the nature of such relationships. Publication on social media sites was also specifically excluded from the Regulations and express consents, obtained in compliance with Privacy Regulation before the Regulations come into force, to collect or use electronic addresses to send commercial electronic messages will be recognized as being compliant with CASL.

    The IIAC has worked with counsel and IFIC to develop an industry wide compliance toolkit to assist members in complying with this regulation. We will be following up shortly with a webinar.

CTO Database

    The IIAC secured changes to the CSA’s Cease Trade Order (CTO) Database guidance that removes stock symbols of de-listed issuers and achieves standard formatting of CUSIPs and dates, and consistent and accurate company names.

Freedom of Information

    The IIAC’s co-ordination of a response to a Freedom of Information request for competitive data regarding Alberta-based firms successfully stopped securities commission disclosure of sensitive competitive information.

Shareholder Communications

    IIAC’s active involvement in modernizing CSA rules governing shareholder communications contributed to a revised National Instrument 54-101 creating a “notice-and-access” mechanism, promoting online access to proxy documents, and greatly reducing the volume of unwanted paper received by investors and related printing and mailing costs incurred by the investment industry.