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CSA Proposed Amendments to NI 33-109
Letter Summary:
As part of its regulatory burden reduction initiative, the CSA has proposed amendments to NI 33-109 in order to make it easier for registrants (and applicants for registration) to complete the registration forms more accurately and require less duplicative information. The CSA also has proposed a new framework for reporting outside business activities, reduce the scope of activities caught and extend the filing deadlines for informing regulators of such activities. Deadlines for reporting changes in certain other registration information are also proposed to be extended (from 10 to 15 days for some information and from 10 to 30 days for others, including other outside activities). The proposed rule would also allow corporate groups to consolidate some of the reporting of changes. Additional clarification would be provided for certain information requested in the forms, such as more specificity in termination forms on expectations for disclosure of allegations of non-compliance with standards of conduct. A new requirement to collect the professional titles used by registrants is also being proposed
Overview of the Council’s Comments:
We are generally supportive of efforts to lessen unnecessary regulatory reporting obligations. We agree that the current requirement to report all outside business activities, regardless of whether they have a business purpose or a nexus to a potential or actual conflict of interest, is overly broad and we support a more principled, consistent and risk-based reporting framework. We are concerned, however, that the Proposed Amendments are potentially problematic and may result in gaps and underreporting of positions or activity that could raise conflict of interest issues. In our view, the Proposed Amendments go too far with respect to lessening the reporting requirements for Outside Activities. We believe the proposed changes may result in disclosure of fewer positions or activity that can give rise to conflict of interest issues, resulting in potential investor harm. We do not agree with what appears to be a change in the onus of disclosure, from one where registrants must consider a wide array of potential disclosure triggers, to one where registrants are only required to disclose certain activities in the narrower enumerated categories and/or if an aggregate hours threshold has been reached. We believe this change is inherently problematic and that the temporal threshold proposed has not yet been adequately explained by a data-driven or analytical case. In our view, an Outside Activity should always be required as reportable if it relates to an existing or reasonably foreseeable material conflict of interest that would be required to be identified and/or inventoried by registrants under NI 31-103. This would include all conflicts where the interests of a client and those of the registrant are inconsistent or divergent. With respect to other general comments, we welcome additional reporting requirements regarding business/professional title(s), simplifying changes to firm-level reporting, clarity on required disclosure of registrant information relating to professional bodies’ standards of conduct and related investigations/processes/sanctions, and the codification of the rules relating to the client base of registrants whose Outside Activities would include positions of influence. We believe that this criteria in combination with the other proposed categories and clarifications should serve to provide registrants and regulators with a more functional, useful, and principles-based outside business activity reporting framework.