CanadaNational Instrument 31-103, relationship disclosure information
National Instrument 31-103, s. 14.2
In force since .
An AI sector rules rule binding private bodies.
- Instrument type
- a regulation made under an act
- Obligation class
- Disclosure
- Audit expectation
- none
As of .
What it requires
- It reaches you if you are a registered firm, meaning a registered dealer, a registered adviser or a registered investment fund manager, other than a firm exempted from subsections 14.2(2) to (6) by Part 9 as a member of a self-regulatory organization: deliver to each client all information that a reasonable investor would consider important about the client's relationship with the registrant (section 14.2(1)).
- Include in that information a description of the nature or type of the client's account; a general description of the products and services you will offer, including restrictions on the client's ability to liquidate or resell a security; and a general description of any limits on the products and services you will offer, including whether you will primarily or exclusively offer proprietary products (section 14.2(2)(a), (b) and (b.1)).
- Include in that information a general description of the types of risks a client should consider when making an investment decision, and a description of the conflicts of interest you are required to disclose to a client under securities legislation (section 14.2(2)(c) and (e)).
- Include in that information a statement that you must determine that any investment action you take, recommend or decide on, for the client is suitable for the client and puts the client's interest first, and the information you have collected about the client under section 13.2 (section 14.2(2)(k) and (l)).
- Include in that information the content and frequency of reporting for each account or portfolio, disclosure of the operating charges the client might be required to pay, a general description of the types of transaction charges, and a general description of any benefits received from a person other than the client in connection with the client's purchase or ownership of a security (section 14.2(2)(f), (g), (h) and (i)).
- Deliver the information in writing, except that the description of products and services may be provided orally or in writing, before you first purchase or sell a security for the client or advise the client to purchase, sell or hold a security (section 14.2(3)).
- If there is a significant change in the information delivered, take reasonable steps to notify the client of the change in a timely manner (section 14.2(4)).
If you get it wrong
Criminal exposureYes
Criminal exposure note
Contravening Ontario securities law is an offence under clause 122(1)(c) of the Securities Act (Ontario), punishable on conviction by a fine of not more than $10 million or imprisonment for a term of not more than five years less a day, or both.
Penalty structure
Administrative penalty of not more than $5 million for each failure to comply with Ontario securities law, under the Securities Act (Ontario).
- Rule
- Per violation only
- As of
- Currency
- CAD
- Per violation unit
- Violation
- Per violation amount
- 5,000,000
Who enforces it
Enforcement body
The securities regulatory authority of each province and territory, listed in Appendix C of National Instrument 14-101 (in Ontario, the Ontario Securities Commission)
What this law does
Section 14.2 of National Instrument 31-103 requires a registered firm to deliver to a client all information that a reasonable investor would consider important about the client's relationship with the registrant. That information must include a statement that the registered firm must determine that any investment action it takes, recommends or decides on, for the client is suitable for the client and puts the client's interest first.
It must also include a general description of any limits on the products and services the registered firm will offer to the client, including whether the firm will primarily or exclusively offer proprietary products to the client. It must include a description of the conflicts of interest that the registered firm is required to disclose to a client under securities legislation, and the information the registered firm has collected about the client under section 13.2.
The firm must deliver the information in writing, except that the description of products and services may be provided orally or in writing, before the firm first purchases or sells a security for the client or advises the client to purchase, sell or hold a security. If there is a significant change in the information delivered, the registered firm must take reasonable steps to notify the client of the change in a timely manner.
The text current to exempts an investment dealer that is a member of IIROC, unless it is also registered as an investment fund manager, from subsections 14.2(2) to (6). A registered firm is a registered dealer, a registered adviser or a registered investment fund manager. The 2019 amending instrument amended section 14.2.
The Ontario Securities Commission ordered, in parallel with the other jurisdictions of the Canadian Securities Administrators, that the day by which a registrant must comply with the relationship disclosure information reforms be postponed to .
The Canadian Securities Administrators stated in 2019 that amendments to National Instrument 31-103 would be implemented as a rule in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island and Yukon. In Québec the amendments were to be adopted as a regulation made under section 331.1 of the Securities Act (Québec). In Saskatchewan they were to be implemented as a commission regulation.
Section 143 of the Securities Act (Ontario) lets the Commission make rules prescribing requirements for registrants, including standards of practice and business conduct in dealing with clients and requirements for the prevention or regulation of conflicts of interest. The Act defines regulations as the regulations made under the Act and, unless the context otherwise indicates, the rules.
The Act defines Ontario securities law as the Act, the regulations and, in respect of a person or company, a decision of the Commission, the Tribunal or a Director to which the person or company is subject. A person or company that contravenes Ontario securities law is guilty of an offence and on conviction is liable to a fine of not more than $10 million or to imprisonment for a term of not more than five years less a day, or to both.
The Act provides for an order requiring a person or company that has not complied with Ontario securities law to pay an administrative penalty of not more than $5 million for each failure to comply. The offence and penalty amounts above are those of the Securities Act (Ontario), and National Instrument 14-101 lists a separate securities act for each other province and territory.
When LexLint raises it
When your app profile says your app provides financial services.