Exemption Orders (Discretionary)
SCOTIA DISCOUNT BROKERAGE INC.
2001 BCSECCOM 302
Headnote
Mutual Reliance System for Exemptive Relief Applications – relief granted from certain suitability requirements of the Securities Rules and the Investment Dealers Association (IDA) in connection with dealers who provide an order execution service without any advice or recommendations to customers, subject to the terms and conditions set out in the decision document.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 27, 48
Securities Rules, B.C. Reg. 194/97, s. 48(1)(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, NEWFOUNDLAND NOVA SCOTIA AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF SCOTIA DISCOUNT BROKERAGE INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Newfoundland, Nova Scotia and Ontario (collectively, the "Jurisdictions") has received an application from Scotia Discount Brokerage Inc. (the "Filer") regarding the operation of the separate division, Scotia Discount Brokerage Direct (the "Division") for:
1. a decision under the securities legislation of the Jurisdictions (the "Legislation") that the requirements of the Legislation requiring the Division and its registered salespersons, partners, officers and directors ("Registered Representatives") to make inquiries of each client of the Division as are appropriate, in view of the nature of the client’s investments and of the type of transaction being effected for the client’s account, to determine (a) the general investment needs and objectives of the client and (b) the suitability of a proposed purchase or sale of a security for the client (such requirements, the "Suitability Requirements") do not apply to the Division and its Registered Representatives; and
2. a decision under the Legislation, other than the securities legislation of Newfoundland and Nova Scotia, that the requirements of the Investment Dealers Association of Canada (the "IDA"), in particular IDA Regulation 1300.1(b), 1800.5(b) and 1900.4, requiring the Division and its Registered Representatives to make inquiries of each client of the Division as are appropriate, in view of the nature of the client’s investments and of the type of transaction being effected for the client’s account, to determine (a) the general investment needs and objectives of the client and (b) the suitability of a proposed purchase or sale of a security for the client (such requirements, the "IDA Suitability Requirements") do not apply to the Division and its Registered Representatives;
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Filer and the Division have represented to the Decision Makers that:
1. the Filer is a corporation incorporated under the Canada Business Corporations Act and is a wholly-owned subsidiary of The Bank of Nova Scotia;
2. the Division is a distinct internal operating division of the Filer;
3. the Filer has branches and/or call centres located in Montreal, Quebec (servicing Quebec); Halifax, Nova Scotia (servicing New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island); Toronto, Ontario (servicing Ontario, as well as electronic trading across Canada); and Calgary, Alberta (servicing Manitoba, Saskatchewan, Alberta, British Columbia and the Yukon, the Northwest Territories and Nunavut). In addition, the Filer has a number of sub-branches that act as client service centres but which do not open accounts and do not accept orders;
4. the Filer is registered under the Legislation as an investment dealer or equivalent and is a member of the IDA;
5. Scotia Discount Brokerage Direct is a trade name of the Filer registered with each of the Jurisdictions;
6. the Division operates independently using its own letterhead, accounts, Registered Representatives and account documentation;
7. the Division and its Registered Representatives do not and will not provide advice or recommendations regarding the purchase or sale of any security and the Filer and the Division will adopt, prior to accepting clients, policies and procedures to ensure the Division and the
Division’s Registered Representatives do not and will not provide advice or recommendations regarding the purchase or sale of any security;
8. when the Division provides trade execution services to clients it would, in the absence of this Decision, be required to comply with the Suitability Requirements and IDA Suitability Requirements;
9. clients who request the Division or its Registered Representatives to provide advice or recommendations or advice as to suitability will be referred to another division of the Filer or another dealer;
10. the Division does not and will not compensate its Registered Representatives on the basis of transactional values;
11. each client of the Filer will be advised of the Decision of the Decision Makers and, if the client wishes to transfer an existing account to the Division, the client will be requested to acknowledge that:
(a) the Division and its Registered Representatives shall not provide advice or recommendations regarding the purchase or sale of any security, and
(b) the Division and its Registered Representatives will not assess the general investment needs and objectives of the client or the suitability of a proposed purchase or sale of a security for the client; (both (a) and (b) shall constitute the "Client Acknowledgement");
12. the Client Acknowledgement will provide the client with sufficient detail and will explain to each client the significance of not receiving either investment advice or a recommendation from the Division, including the significance of the Division not assessing the general investment needs and objectives of the client, or the suitability of a proposed purchase or sale of a security for a client;
13. all prospective clients of the Division will be advised and required to acknowledge that:
(a) the Division and its Registered Representatives shall not provide advice or recommendations regarding the purchase or sale of any security, and
(b) the Division and its Registered Representatives will not assess the general investment needs and objectives of the client or the suitability of a proposed purchase or sale of a security for the client, (both (a) and (b) shall constitute the "Prospective Client Acknowledgement"),
- prior to the Division opening an account for such prospective client;
14. the Prospective Client Acknowledgement will provide the client with sufficient detail and will explain to each client the significance of not receiving either investment advice or a recommendation from the Division, including the significance of the Division not assessing the general investment needs and objectives of the client, or the suitability of a proposed purchase or sale of a security for the client;
15. the Filer and the Division will adopt, prior to the Division accepting clients, policies and procedures to ensure:
(a) that evidence of all Client Acknowledgements and Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA, and
(b) all client accounts of the Filer are appropriately designated as being a client account to which a Client Acknowledgement or Prospective Client Acknowledgement has been received or being a client account to which a Client Acknowledgement has not been received;
16. the Filer will adopt, prior to the Division accepting clients, policies and procedures to ensure that:
(a) the Division operates separately from any other division of the Filer using its own letterhead, accounts, account documentation and Registered Representatives,
(b) Registered Representatives of the Division will be clearly employed by the Division and will not handle the business or clients of any other division of the Filer, and
(c) a list of Registered Representatives of the Division is maintained at all times;
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers under the Legislation is that the Suitability Requirements contained in the Legislation shall not apply to the Division and its Registered Representatives so long as:
1. the Division and its Registered Representatives do not provide any advice or recommendations regarding the purchase or sale of any security;
2. clients who request the Division or its Registered Representatives to provide advice or recommendations or advice as to suitability are referred to another division of the Filer or another dealer;
3. the Division operates independently using its own letterhead, accounts, Registered Representatives and account documentation;
4. the Division does not compensate its Registered Representatives on the basis of transactional values;
5. each client of the Filer is advised of the Decision of the Decision Makers and, if the client wishes to transfer an existing account to the Division, the client will be requested to make a Client Acknowledgement;
6. each prospective client of the Division is advised of the Decision of the Decision Makers and required to make a Prospective Client Acknowledgement prior to the Division or its Registered Representation servicing such prospective client;
7. evidence of all Client Acknowledgements and Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA;
8. the Filer accurately identifies and distinguishes client accounts for which a Client Acknowledgement or Prospective Client Acknowledgement has been provided and client accounts for which no Client Acknowledgement has been provided;
9. the Filer has in force policies and procedures to ensure that:
(a) the Division operates separately from any other division of the Filer using its own letterhead, accounts, Registered Representatives and account documentation,
(b) Registered Representatives of the Division are clearly employed by the Division and do not handle the business or clients of any other division of the Filer, and
(c) a list of Registered Representatives of the Division is maintained at all times; and
10. if an IDA rule addressing the IDA Suitability Requirements comes into effect, the Decision with respect to the Suitability Requirements will terminate one year following the date such rule comes into force, unless the Decision Maker determines otherwise.
January 17, 2001
William Gazzard
THE DECISION of the Decisions Makers, other than Newfoundland and Nova Scotia, is that the
IDA Suitability Requirements do not apply to the Division and its Registered Representatives so long as:
1. the Division and its Registered Representatives do not provide any advice or recommendations regarding the purchase or sale of any security;
2. clients who request the Division or its Registered Representatives to provide advice or recommendations or advice as to suitability are referred to another division of the Filer or another dealer;
3. the Division operates independently using its own letterhead, accounts, Registered Representatives and account documentation;
4. the Division does not compensate its Registered Representatives on the basis of transactional values;
5. each client of the Filer is advised of the Decision of the Decision Makers and, if the client wishes to transfer an existing account to the Division, the client will be requested to make a Client Acknowledgement;
6. each prospective client of the Division is advised of the Decision of the Decision Makers and required to make a Prospective Client Acknowledgement prior to the Division or its Registered Representation servicing such prospective client;
7. evidence of all Client Acknowledgements and Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA;
8. the Filer accurately identifies and distinguishes client accounts for which a Client Acknowledgement or Prospective Client Acknowledgement has been provided and client accounts for which no Client Acknowledgement has been provided;
9. the Filer has in force policies and procedures to ensure that
(a) the Division operates separately from any other division of the Filer using its own letterhead, accounts, Registered Representatives and account documentation,
(b) Registered Representatives of the Division are clearly employed by the Division and do not handle the business or clients of any other division of the Filer, and
(c) a list of Registered Representatives of the Division is maintained at all times; and
10. if an IDA rule addressing the IDA Suitability Requirements comes into effect, the Decision with respect to the Suitability Requirements will terminate one year following the date such rule comes into force, unless the Decision Maker determines otherwise.
January 17, 2001.
Howard Wetston R. Stephen Paddon