BCN 2001/81 - Publication for Comment of Proposed Multilateral Instrument 31-102 and Related Documents [BCN - Rescinded]

Publication for comment

The British Columbia Securities Commission is publishing for comment Multilateral Instrument 31-102 National Registration Database (NRD) (MI 31-102), its companion policy, and related forms that, together, would implement a Canadian Securities Administrators initiative called the National Registration Database (the NRD). The documents accompanying this notice are:

• MI 31-102
• Forms 31-102F1 to 31-102F3
• Companion Policy 31-102CP National Registration Database (NRD)

Collectively, the Canadian Securities Administrators (the CSA) refer to these as the proposed instruments.

Concurrently with this publication for comment, we are publishing for comment a notice related to NRD, Multilateral Instrument 33-109 Registration Information Requirements (MI 33-109), which concerns the information that registrants would have to submit to regulators, with its associated documents.

Substance and purpose of the proposed multilateral instrument

NRD would be an electronic database that contains detailed registration information about individuals and limited information about dealer, underwriter, and adviser firms. NRD would also allow registrants to submit certain registration applications and notices to securities regulatory authorities and self-regulatory organizations¹ over the Internet using commonly available web browsers. NRD firm filers would be able to view information on the database that was filed on behalf of the firm and its sponsored individuals.

^{1The Investment Dealers Association of Canada will participate in NRD.}

NRD filers would be able to use NRD to:

1. submit applications for registration by individuals

2. submit changes to individuals’ registration information

3. submit information regarding firms’ business locations

4. submit information regarding non-registered individuals²

5. pay fees related to registration and NRD

6. search for and retrieve registration information recorded on NRD

^{2The term “non-registered individual” is defined in proposed MI 33-109, which the British Columbia Securities Commission is publishing for comment concurrently with this Notice. For more information about MI 33-109, see BC Notice 2001/82 and its related documents.}

For a more detailed description of NRD, staff strongly encourage commenters to review the NRD Filer Manual. The CSA are publishing it for information only. A copy of the draft Filer Manual is located at:

http://www.osc.gov.on.ca/en/HotTopics/nrd.html#expanded

All of the jurisdictions represented by the CSA, except Québec, expect to implement MI 31-102 as a rule, regulation or other appropriate instrument.

Summary of the proposed multilateral instrument

The proposed MI 31-102 sets out the principal requirements and procedures relating to the electronic submission of registration information. Details about particular requirements follow.

NRD submission requirements
Both the proposed MI 31-102 and MI 33-109 would require firms or individuals to submit the following registration information to the regulator electronically using NRD:

1. Form 33-109F1 Notice of Termination

2. Form 33-109F2 Change of Individual Categories

3. Form 33-109F3 Business Locations other than Head Office

4. Form 33-109F4 Registration Information for an Individual, and any changes to that information

In order to use NRD to submit these forms, a firm would have to:

• enrol with the NRD administrator
• have one chief authorized firm representative (AFR)
• maintain a bank account from which NRD fees will be paid by electronic pre-authorized debit

NRD Enrolment
In order to enrol to use NRD, a firm would have to send a completed Form 31-102F1 Enrolment Form - Firm Filer and a completed Form 31-102F3 Account Holder Authorization to the NRD administrator.

Form 31-102F1 would require an enrolling firm to identify the chief AFR appointed by the firm and the account that the firm will use to pay fees through NRD. This form must be delivered to the NRD administrator in paper form accompanied by a copy of the firm’s incorporating documents and a cheque for the NRD enrolment fee.

A firm might have to submit a completed Form 31-102F2 Enrolment of Chief Authorized Firm Representative to the NRD administrator. This form would not be required if the chief AFR appointed by the firm is acting as a chief AFR for another firm.

Authorized firm representative
All NRD filers would have to make all NRD submissions through an AFR. The proposed MI 31-102 defines an AFR as an individual whom a firm authorizes to use NRD to access information and make submissions to regulators regarding the firm and individuals associated with the firm. The NRD Filer Manual includes a chapter describing the role of AFRs.

Fee payment
The holder of the account from which a firm will pay fees through NRD would authorize payment by electronic pre-authorized debit by submitting Form 31-102F3. Staff expect that in most cases the account holder would be the firm.

Enrolment fees
Firms that are already registered when proposed MI 31-102 comes into effect would have to pay an enrolment fee based on the number of registered individuals with the firm, as described in the following table:

Firms that are not registered when the proposed MI 31-102 comes into effect and that enrol to use NRD would be charged an NRD enrolment fee that is the same irrespective of the firm’s size. Currently, the CSA are considering an enrolment fee of $500.

Electronic payment of fees
Proposed MI 31-102 would require firms to pay the following fees by electronic pre-authorized debit from the account identified in Forms 31-102F1 and 31-102F3:

1. annual NRD filer fees

2. any fee required under securities legislation for a submission made in NRD format

3. annual registration fees

The annual NRD filer fees and the NRD submission fees are intended to cover the cost of developing and operating NRD.

Annual NRD filer fees
To maintain its category of registration, a firm would have to pay an annual NRD filer fee on December 15 of each year. Firms would pay $75 for each registered individual sponsored by the firm and registered in a single jurisdiction. For each additional jurisdiction in which an individual is registered, the firm would be charged $50. A firm would be charged $50 for each of the firm’s non-registered individuals irrespective of the number of jurisdictions in which the firm is registered.

NRD submission fee
In addition to the fees currently prescribed under securities legislation, a firm would pay $75 for each individual whom the firm sponsors for registration in a single jurisdiction. For each additional jurisdiction to which the individual applies, the fee would be $50. When a firm submits a Form 33-109F4 for a non-registered individual, a firm would be charged $50 irrespective of the number of jurisdictions in which the firm is registered.

Temporary hardship exemption
Proposed MI 31-102 contains a temporary hardship exemption that would permit firms and individuals using NRD to submit information in paper form if technical difficulties prevent the submission from being made in NRD format. Firms and individuals that make paper-form submissions under this exemption would have to make the same submission in NRD format once the technical difficulties are resolved.

Transition to NRD
Proposed MI 31-102 sets out several milestones in the NRD transition, which are the:

• effective date. The day on which the MI 31-102 comes into force.
• data transfer date. The day on which the regulator would begin transferring certain registration information, which the regulator currently maintains in electronic format, to the NRD system. The data transfer date is significant to a firm filer because if a regulator receives certain registration information in paper form after the data transfer date, then the firm filer would also have to submit that information electronically through NRD shortly after the firm is able to make NRD submissions.
• NRD access date. The date on which a firm filer would first have access to NRD to make NRD submissions.
• NRD launch date. The first day NRD would be available for any NRD filer to make an NRD submission.

Firms would have to enrol in NRD before they can gain access to the system. Proposed MI 31-102 also defines the concept of transition firm, which is related to these milestones and which is discussed below.

Proposed MI 31-102 sets out a number of transitional requirements for firms and individuals in Part 8. Many of the transitional provisions relate to information from transition firms, which are firms that are registered on the effective date of MI 31-102 or that have applied for registration before the NRD launch date, but that are not registered by the NRD launch date. The detailed provisions for individual filers, firm filers, and transition firms set out what the filer would have to do, with deadlines, if specified types of information arrive after various milestone dates, including those above.

Timetables for the transition to NRD
Staff are currently considering two plans for implementing NRD as set out in this table.

Staff request comment regarding when securities regulators should implement NRD.

Exemptive relief
Proposed MI 31-102 provides that in all jurisdictions except Ontario either the regulator or the securities regulatory authority could grant an exemption to MI 31-102.

Systems requirements
In order to effectively use NRD to make NRD submissions, a firm filer’s hardware and software should meet or exceed the following specifications:

1. personal computer with a 133 MHz Pentium processor and 32MB of RAM

2. Internet connection and Hayes compatible modem with a minimum speed of 56,000 bps

3. Adobe Acrobat reader 4.x

NRD would support the following Internet browser software:

1. Microsoft Internet Explorer versions 5.0 and 5.5

2. Netscape version 4.7

Effective date
Currently, MI 31-102 is scheduled to come into force on September 1, 2002.

Related instruments

Proposed MI 31-102, its companion policy, and related forms relate to proposed MI 33-109, its companion policy and related forms, which the CSA are publishing for comment concurrently with this notice. Staff intends to have the all of these proposed instruments come into force concurrently.

Amendments to other rules

We propose the following consequential amendments to the Securities Rules and to the Registration Transfer Rules:

• Amend various sections to make references to registration, renewal, amendment, and reinstatement consistent.
• Add a section to allow exchange contracts dealers to sell commodity pool securities.
• Add a section to allow mutual fund dealers to sell scholarship plan securities.
• Amend various sections to remove the requirement for a securities adviser to have a compliance officer or a branch manager.
• Give the executive director greater discretion to permit off-site branch supervision.
• Repeal section 68 of the Rules as a consequence of a proposal to repeal section 42 of the Securities Act, and because proposed MI 33-109 will set out notice and time requirements.
• Require a firm or an individual registered under the Act that is applying to surrender registration to also consent to a suspension of registration.
• Remove the requirement for written confirmation of registration.
• Clarify which firms and individuals must file registration-related information with the Investment Dealers Association of Canada.
• Delegate the power to exempt Investment Dealers Association of Canada member firms, their representatives, and non-registered persons from MI 31-102 and MI 33-109.

The Commission may mandate NRD-related fees under sections 183(33) and 184(2)(c) of the Act.

Anticipated costs and benefits

The Chief Economist’s Office of the Ontario Securities Commission conducted an extensive survey of registered firms to determine the economic benefits of NRD to the industry. The results of the survey indicate that the expected benefit to registered firms over the first five years, discounted at a rate of 8 percent per year, has a present value of $85 million. The present value of the projected cost of developing and operating NRD over the same five-year period is $47 million. The annual NRD filer fees and NRD submission fees (described above) are intended to cover this cost. The survey results are available at:

• http://www.osc.gov.on.ca/en/HotTopics/nrd.html#expanded

The CSA believe that implementing NRD would provide significant benefits to registrants as well as to the securities regulators participating in the proposed instruments by:

• permitting firms to send a single submission to multiple regulators
• permitting firms to view the registration information that they submitted to regulators, allowing firms to easily find out whether their submissions have been received and processed
• permitting firms to print certain reports, including an individual’s Form 33-109F4
• automating processes that were previously manual (such as reviewing submissions for completeness and validation checks), thereby permitting the CSA to focus regulatory resources on substantive review
• significantly reducing the volume of physical correspondence between registrants and regulators
• pre-populating forms with information already within NRD

Comments

The CSA jurisdictions participating in NRD invite interested parties to make written submissions about the proposed instruments. Securities regulatory authorities will consider submissions received by March 18, 2002.

Submissions should be sent to all securities regulatory authorities listed below in care of the Ontario Securities Commission, in duplicate:

• British Columbia Securities Commission
• Alberta Securities Commission
• Saskatchewan Securities Commission
• The Manitoba Securities Commission
• Ontario Securities Commission
• Office of the Administrator, New Brunswick
• Registrar of Securities, Prince Edward Island
• Nova Scotia Securities Commission
• Securities Commission of Newfoundland
• Registrar of Securities, Northwest Territories
• Registrar of Securities, Nunavut
• Registrar of Securities, Yukon Territory

c/o John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario
M5H 3S8
jstevenson@osc.gov.on.ca

Commenters should also include a diskette containing the submissions (in DOS or Windows format, preferably WordPerfect). Since securities legislation in certain jurisdictions requires some securities regulatory authorities to publish summaries of written comments received during the comment period, submissions cannot be kept confidential.

Questions may be referred to:

Dirk de Lint
Legal Counsel
Ontario Securities Commission
(416) 593-8090
ddelint@osc.gov.on.ca

Natalie Marshall
NRD Project Group
Ontario Securities Commission
(416) 593-8303
nmarshall@osc.gov.on.ca

Melinda Ando
Legal Counsel
Alberta Securities Commission
(403) 297-7274
melinda.ando@seccom.ab.ca

Kathleen Blevins
Legal Counsel
Alberta Securities Commission
(403) 297-3308
kathleen.blevins@seccom.ab.ca

David McKellar
Manager, Registration & Compliance
Alberta Securities Commission
(403) 297-4281
david.mckellar@seccom.ab.ca

Anthony Wong
Senior Legal Counsel, Legal and Market Initiatives
British Columbia Securities Commission
(604) 899-6777 or (800) 373-6393 (in BC)
awong@bcsc.bc.ca

Gayle Carlson
Supervisor Registration and Market Regulation Branch
Capital Markets Regulation Division
British Columbia Securities Commission
(604) 899-6796 or (800) 373-6393 (in BC)
gcarlson@bcsc.bc.ca

Proposed instruments

The text of the proposed multilateral instrument, companion policy, and forms follow. The footnotes are not part of proposed MI 31-102, but have been included to provide background and explanation.

December 13, 2001

Douglas M. Hyndman
Chair

Ref: MI 31-102
 Form 31-102F1
 Form 31-102F2
 Form 31-102F3
 CP 31-102
 MI 33-109
 Form 33-109F1
 Form 33-109F2
 Form 33-109F3
 Form 33-109F4
 Consequential Amendments
 Securities Act, section 42
 Securities Rules, section 68
 Registration Transfer Rules
 Securities Regulation

This Notice may refer to other documents. These documents can be found at the B.C. Securities Commission public website at www.bcsc.bc.ca in the Commission Documents database or the Historical Documents database.

Multilateral Instrument 31-102 National Registration Database
Multilateral Instrument 33-109 Registration Information Requirements

Proposed Amendments to the Registration Transfer Rules

1 Section 1 of the Registration Transfer Rules, B.C. Reg. 193/97, is amended by adding the following definition:

“non-registered individual” has the meaning defined in Multilateral Instrument 33-109;.

2 Section 4 is amended by repealing subsection (5).

3 Section 8 is repealed and replaced by the following:

8. A person referred to in section 3(1) and, with respect to a person referred to in section 3(1), a non-registered individual must submit the information required by Multilateral Instrument 33-109 to the designated organization instead of to the executive director.

4 Section 9 is amended by repealing paragraph (1)(b).

5 The following section is added:

Powers under multilateral instruments

10. A designated organization, with respect to any person referred to in section 8, may exercise the executive director’s powers under
(a) section 7.1(1) of Multilateral Instrument 31-102, and
(b) section 7.1(1) of Multilateral Instrument 33-109.

Multilateral Instrument 31-102 National Registration Database
Multilateral Instrument 33-109 Registration Information Requirements
 
Proposed Amendments to the Securities Rules

1 Section 1(1) of the Securities Rules, B.C. Reg. 194/97, is amended by adding the following definitions:

 “commodity pool” has the meaning defined in National Instrument 81-104.

2 Sections 6 is amended by adding the following subsections:

(3) Despite subparagraph (2)(d)(i), a person that is registered to trade in exchange contracts, forward contracts or both may trade in securities of commodity pools.

(4) Despite subparagraph (2)(d)(ii), a person that is registered to trade in the securities of mutual funds may trade in securities of a scholarship or educational plan or trust.

3 Section 13 is amended:

(a) in the head note by striking out “or to renew” and substituting “, renew or reinstate”, and

(b) by striking out “or renew” and substituting “, renew or reinstate”.

4 Section 60(2)(b) is amended by striking out “an adviser,” and substituting “, a portfolio manager or investment counsel”.

5 Section 65 is amended by striking out “or adviser” and substituting “, portfolio manager or investment counsel”.

6 Section 66 is amended:

(a) in subsection (1) by striking out “or adviser” and substituting
  “, portfolio manager or investment counsel”,
(b) in subsection (2) by striking out “or adviser” and substituting    “, portfolio manager or investment counsel”, and
(c) in subsection (3) by adding “or if the executive director is satisfied that a branch manager in another branch office is able to ensure that the branch office without a branch manager complies with the Act and the regulations” after “basis”.

7 Section 67 is repealed and the following substituted:

67 Unless earlier suspended or canceled and subject to section 36(1) of the Act, registration expires on December 31 of the year in which the registration was granted, renewed or reinstated.

8 Section 68 is repealed and the following substituted:

Surrender of registration

68 If a registrant files an application to surrender registration, the registrant must also consent to a suspension of registration.