On September 28, 2009, National Instrument 31-103 Registration Requirements, Exemptions and Continuing Obligations (NI 31-103) was first implemented and established a consistent registration and compliance regime across Canada.
NI 31-103 harmonized the registration, conduct and ongoing compliance requirements for dealers and advisers across Canada - some local exemptions were retained. One of the most significant changes introduced by NI 31-103 was the introduction of the Exempt Market Dealer (EMD) category of registration in all jurisdictions across Canada.
Unlike the predessor category of Limited Market Dealer (in Ontario and NFLD only), the new EMD category is a comprehensive registration category where firms must comply with the full regulatory requirements of securities dealer regulation, including:
- educational proficiency for its registered individuals and its chief compliance officer
minimum capital and excess working capital
- annual audited financial statements
- maintenance of proper books and records
- compliance systems and internal control mechanisms
- disclosure of referral arrangements
- comprehensive policies and procedures manuals
- trade confirmations and regular client statements
- procedures for client complaint handling
- an independent dispute resolution service
- holding client assets in trust and separate from the firms assets
- maintaining adequate insurance coverage to protect the firm and its clients.
EMDs must follow the same "Know Your Client" and "Know Your Product" procedures and carry the same "Suitability" obligations as other registered dealers. These requirements ensure that each client's personal, financial and investment profile is understood and confirmed prior to any trading activity. EMDs must also ensure that any security they recomend is suitable for a particular client by considering the particular investment product as well as each individual client's investment goals and profile.