Portfolio Summaries

(Updated April 9, 2018)

This Notice is being issued to clarify the requirements for Members and their Approved Persons that wish to issue consolidated information to clients.

Current Rules

MFDA Rule 5.3 (Client Reporting) sets out delivery and content requirements for account statements. Account statements required to be delivered under the Rule may only reflect transactions executed by the Member and investment positions held in an account at the Member.

Members and their Approved Persons may provide consolidated information or portfolio summaries to clients in addition to, but not in place of, the account statements required by Rule 5.3. Such additional documentation or information is considered a “client communication” under Rule 2.8 (Client Communications). A “client communication” is defined as any written communication by a Member or Approved Person to a client of the Member, including account statements and trade confirmations, other than an advertisement or sales communication. Rule 2.8.2(e) states that no client communication shall be inconsistent or confusing with any information provided by the Member or Approved Person in any notice, statement, confirmation, report, disclosure or other information either required or permitted to be given to the client by a Member or Approved Person under the By-laws, Rules, Policies or Forms.

Requirements for Portfolio Summaries

Members are required to comply with their obligations under MFDA Rule 5.3 by sending account statements to clients that reflect only those transactions executed by the Member. In order to balance regulatory concerns with client needs for consolidated information, Members and their Approved Persons may also provide consolidated information or portfolio summaries to clients in addition to, but not in place of, the account statements required by MFDA Rule 5.3.

Consolidated information or portfolio summaries must meet the following standards:

1. They must include a prominently displayed disclaimer that they are not official account statements and that they are supplemental to the legal entity statements delivered to the client for each account with the Member or by other entities where the transaction occurred or the positions are held.
2. They must clearly identify the legal entity at which each transaction occurred or which is holding each asset or money balance.
3. There must be a statement explaining that the MFDA’s Investor Protection Corporation (“MFDA IPC”) does not necessarily apply to all of the positions disclosed and that the client should refer to the Member’s official account statement for disclosure respecting MFDA IPC coverage.
4. There must be a statement which communicates that the Member cannot verify the accuracy of information relating to other financial service products that are not offered through or held by the Member or a related company of the Member.

Members must have policies and procedures in place for the review of all client communications, including portfolio summaries, to ensure that they are not misleading and are otherwise in compliance with MFDA Rules.

Account Statements of Members with Related Financial Service Entities

Members with related financial services entities have expressed an interest in providing their clients with the account statements of the Member together with the account statements of the related financial service entity (or entities) in one document. This would not be a consolidated account statement, but separate legal entity statements formatted as one document and sent out in a single mailing. For the purpose of this Notice, a “related financial service entity” would include an entity that is licensed or registered in another category pursuant to applicable securities legislation, a bank or a trust company or an insurance company.

The MFDA will permit Members with related financial service entities to provide clients with the account statement of the Member together with the account statements of related financial service entities in one document provided the following conditions are met:

1. The account statement of the Member must be clearly separated or segmented from the account statements of the related financial service entities within the document, which will require at a minimum:
   • A separate section within the document for each legal entity with separate pagination; and
   • A separate heading clearly identifying the legal entity that is responsible for the transactions or assets shown on the account statement.
2. In accordance with MFDA Rule 5.3, as noted above, the account statement of the Member is only permitted to reflect transactions executed by the Member and investment positions held in an account at the member, and cannot, as a result, include transactions executed on behalf of related financial service entities. This restriction applies to information regarding segregated fund transactions executed by an affiliated insurance agency of the Member.
3. In accordance with Rule 5.3.2, the account statement of the Member must include disclosure, as established by the MFDA IPC, respecting MFDA IPC coverage.
4. The document must include a disclosure statement outlining the relationship between the Member and the financial services entity and advising that the Member is a separate entity from the financial services entity.
5. The document may include a portfolio summary that summarizes the client’s total investments and holdings across multiple related financial service entities. The portfolio summary must be clearly separated from the official account statement of the Member and comply with the requirements set out above.