Form 65 - Managed accounts disclosure document (exchange contracts) [F - Rescinded]
| Published Date: | 1995-12-15 |
|---|---|
| Effective Date: | 1996-01-01 |
| Rescinded Date: | 1999-06-30 |
This is the form of managed accounts disclosure form for brokers, investment dealers and portfolio mangers required under section 35 of the Securities Rules.
FORM 65
Securities Act
MANAGED ACCOUNTS DISCLOSURE DOCUMENT (EXCHANGE CONTRACTS)
INSTRUCTIONS
Brokers, investment dealers and portfolio managers are required to furnish each prospective client with a copy of the registrant's Managed Accounts Disclosure Document (Exchange Contracts), prior to opening the client's account, where the proposed account will be used to manage a portfolio that includes exchange contracts.
No dealer or adviser is permitted to manage investment portfolios consisting of securities, exchange contracts or both unless the dealer or adviser is expressly registered under the SecuritiesAct, or otherwise authorized by the Vancouver Stock Exchange ("VSE") or Investment Dealers Association of Canada ("IDA"), to do so.
Brokers and investment dealers are permitted to manage investment portfolios containing exchange contracts only if expressly registered as portfolio managers to manage portfolios containing exchange contracts, or expressly authorized pursuant to section 86 of the Securities Rules to manage portfolios containing exchange contracts, by the VSE or IDA. Similarly, portfolio managers are permitted to manage investment portfolios containing exchange contracts only if expressly registered to manage portfolios containing exchange contracts.
CONTENTS OF FORM
The Managed Accounts Disclosure Document (Exchange Contracts) must, at a minimum, contain the following information:
1) the date of the disclosure document,
2) the name, main business address and phone number of the broker, investment dealer or portfolio manager,
3) the name of each registered individual who will be handling client accounts,
4) a statement as to whether the broker, investment dealer, portfolio manager or any of the individuals referred to in subsection 3 will trade in exchange contracts for their own accounts and, if so, whether clients will be permitted to inspect the records of such trades,
5) the name of the carrying dealer at which an introducing broker, investment dealer or portfolio manger will require its clients to maintain accounts and a description of memberships held with regulatory agencies by the carrying dealer,
6) a full and specific description of any actual or potential conflicts of interest on the part of the broker, investment dealer, portfolio manager and carrying dealer referred to in subsection 5 or any of their partners, directors, officers, salespersons or advising employees, such conflicts of interest to include:
a) any circumstances in which a personal or financial interest of these persons, including the interest of other accounts or businesses they may manage, might influence decisions made in the course of handling clients' accounts; and
b) any arrangements whereby the broker, investment dealer or portfolio manager or any of its partners, directors or officers benefit directly or indirectly from the introduction or maintenance of accounts with the carrying dealer referred to in subsection 5,
7) a description of the trading program, the types of exchange contracts and the trading strategies that the broker, investment dealer or portfolio manager intends to trade and any restrictions or limitations with regard to such trades,
8) a complete and detailed description of all fees that the broker, investment dealer or portfolio manager will charge its clients,
9) the term of discretionary trading authority granted and any predetermined conditions that will automatically revoke that authority.
The disclosure document must contain the following statements, in capital letters and bold face type:
1) on the cover page of the disclosure document: THE EXECUTIVE DIRECTOR OF THE BRITISH COLUMBIA SECURITIES COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR HAS THE EXECUTIVE DIRECTOR PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE.",
2) on the first page of the disclosure document: "THE RISK OF LOSS IN TRADING EXCHANGE CONTRACTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING:
A) IF YOU PURCHASE AN EXCHANGE OPTION OR AN EXCHANGE FUTURES OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS.
B) IF YOU PURCHASE OR SELL AN EXCHANGE FUTURES CONTRACT OR SELL AN EXCHANGE OPTION OR EXCHANGE FUTURES OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER, INVESTMENT DEALER OR PORTFOLIO MANAGER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER, INVESTMENT DEALER OR PORTFOLIO MANAGER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUIRED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT.
C) UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET REACHES A DAILY PRICE FLUCTUATION LIMIT ('LIMIT MOVE').
D) THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR BROKER, INVESTMENT DEALER OR PORTFOLIO MANAGER, SUCH AS A 'STOP-LOSS' OR 'STOP-LIMIT' ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.
E) A 'SPREAD' POSITION MAY NOT BE LESS RISKY THAN A SIMPLE 'LONG' OR 'SHORT' POSITION.
F) THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN EXCHANGE CONTRACTS TRADING BECAUSE OF THE SMALL MARGIN REQUIREMENTS CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.
IN SOME CASES, MANAGED EXCHANGE CONTRACTS ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE BROKER, INVESTMENT DEALER, CARRYING DEALER OR PORTFOLIO MANAGER.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE EXCHANGE CONTRACTS MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND EXCHANGE CONTRACTS TRADING IN GENERAL BEFORE YOU TRADE. YOU SHOULD ALSO CONTACT YOUR BROKER, INVESTMENT DEALER OR PORTFOLIO MANAGER CONCERNING THE NATURE OF PROTECTIONS AVAILABLE TO SAFEGUARD FUNDS OR PROPERTY DEPOSITED IN YOUR ACCOUNT".