Approval of Housekeeping Amendments to MFDA Rule 5.3 (Client Reporting) and MFDA Policy No. 7 (Performance Reporting)

On July 27, 2017, the CSA published, in final form, certain amendments to National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31- 103”), and related Instruments. Among other things, the NI 31-103 amendments make permanent certain relief set out under CSA Staff Notice 31-341 – Omnibus/Blanket Orders Exempting Registrants from Certain CRM2 Provisions of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, clarify existing requirements under the Instrument, and deal with other housekeeping matters. Conforming changes were necessary to MFDA Rule 5.3 and MFDA Policy No. 7 to ensure that requirements under MFDA regulatory instruments remain consistent with those under securities legislation.

The proposed housekeeping amendments to Rule 5.3 and Policy No. 7 were reviewed by the Regulatory Issues Committee of the MFDA Board of Directors on November 15, 2017, approved by the full MFDA Board of Directors on November 29, 2017, have received all other required regulatory approvals, and are now in effect. A summary of these changes is set out below.

Summary of Housekeeping Amendments to Rule 5.3

Client Reporting – Definitions (Rule 5.3(1)(j) / Rule 5.3(1)(c)(i)):

The definition of “similar clients”, which was adopted into MFDA Rules on a transitional basis, has been deleted. Corresponding revisions have been made to Rule 5.3(1)(c)(i) to replace the reference to “similar clients” with revised wording adopted under Policy No. 7;

Content of Account Statement – Market Value and Cost Reporting, Cost of Each Investment Position (Rule 5.3.2(c)(ii)(C)):

When market value is being used to determine the cost of an investment position, the Rule now requires disclosure of that fact in the account statement. These changes are based on similar revisions made under NI 31-103, section 14.14.2(2.1), regarding account statement disclosure of the cost of security positions, and also formalize guidance previously provided under the MFDA’s CRM2 Implementation Guide and Tips, respecting account statement disclosure that may be used when market value is used to calculate position cost information (see Bulletin #0657-C, published on September 14, 2015);

Content of Account Statement – Market Value and Cost Reporting, How Investments are Held (Rule 5.3.2(c)(ii)(H)):

The Rule has been amended to permit more general disclosure in respect of the party that holds or controls each investment. This change has been adopted directly from NI 31-103, section 14.14.1(2)(f) and is consistent with guidance previously provided to Members, respecting the permissibility of more general disclosure (see Bulletin #0689-P, published on May 13, 2016);

Policy No. 7

Requirements under NI 31-103, section 14.19 have been reordered. Appropriate amendments have been made to Policy No. 7 to reflect such changes.

Attached as Schedule “A” are housekeeping amendments to MFDA Rule 5.3 and Policy No. 7. The current versions of the Rule and Policy have been blacklined to show changes introduced by the amendments.