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Notice of BCSC Non-Objection to Proposed Amendments to MFDA Rule 2.4.1 - Payment of Commissions to Unregistered Corporation

View PDF of Blackline Amendments to MFDA Rule 2.4.1 Payment of Commissions to Unregistered Corporation PDF
View PDF of Summary of Public Comments PDF

On March 5, 2010, the BCSC did not object to the MFDA's proposed amendments to Rule 2.4.1 - Payment of Commissions to Unregistered Corporation. The Alberta Securities Commission, Saskatchewan Financial Services Commission, Manitoba Securities Commission, Ontario Securities Commission, New Brunswick Securities Commission and Nova Scotia Securities Commission have approved the amendments.

The amendments allow approved persons of MFDA member firms to have remuneration from the member paid directly to an unregistered corporation, subject to certain conditions.  This does not apply, however, in respect of any remuneration derived from a client in Alberta.

The Commission staff reminds all MFDA members and their approved persons that they are responsible for complying with any and all applicable tax legislation when any portion of an approved person's remuneration in respect of business conducted by the approved person on behalf of a member firm, is being directed to an unregistered corporation.

The amendments are subject to the condition that the MFDA amends the prescribed form of agreement included in MFDA Member Regulation Notice MR0002 so that it reflects the terms required in Rule 2.4.1, and obtains new signed agreements within one year of the publication of this notice. 

The BCSC published the amendments for comment on its website on June 19, 2009 for a 90-day comment period.   Some changes have been made to the proposal since it was initially published for comment.  These changes include a limitation of the application of paragraph (b) of Rule 2.4.1 to approved persons that act as agents of the member in compliance with MFDA Rule 1.1.5, and the addition of a provision to deny the application of that paragraph for remuneration derived from a client in Alberta. 

The MFDA received six comment letters on the proposed amendments.  The MFDA summarized the comments it received on the proposal and provided responses. We attach a copy of the summary and MFDA responses, as well as a blacklined copy of Rule 2.4.1 showing the changes to the version published in June 2009.

March 26, 2010

Ref: Request for Comment: MFDA Rule 2.4.1 - Payment of Commissions to Unregistered Corporation
This Notice may refer to other documents.  You can find these documents at the B.C. Securities Commission public website at www.bcsc.bc.cain the section Securities Law & Policy: Policies & Instruments.