WHAT IS THE PRIVATE CAPITAL MARKET
The public and private capital markets in Canada are regulated by the securities commissions / regulatory authorities in each province and territory through securities legislation, regulations, rules and national or multilateral instruments. Securities regulators are responsible for the administration and enforcement of securities laws including the regulation of securities as products and regulation of securities dealers and advisers as market participants.
Working together as the Canadian Securities Administrators (the CSA) provincial/territorial regulators have developed harmonized multilateral or national rules for the securities industry. Key areas where national rules have been enacted include: 1) disclosure and conduct of public companies, 2) distribution of securities, 3) the operation of securities exchange marketplaces, and 4) registration and compliance obligations of dealers and advisers in the capital markets.
The National Registration and Compliance Regime
National Instrument 31-103 Registration Requirements, Exemptions and Continuing Obligations (NI 31-103) established a consistent registration and compliance regime across Canada. NI 31-103 harmonized the registration, conduct and ongoing compliance requirements for dealers and advisers across Canada however some local exemptions were retained. One of the most significant changes introduced by NI 31-103 was the introduction of the Exempt Market Dealer (EMD) category of registration in all jurisdictions across Canada.
Unlike the predecessor category of Limited Market Dealer (in Ontario and Newfoundland only), the new EMD category is a comprehensive registration category where firms must comply with the full regulatory requirements of securities dealer regulation, including:
- educational proficiency for its registered individuals and its chief compliance officer minimum capital and excess working capital
- annual audited financial statements
- maintenance of proper books and records
- compliance systems and internal control mechanisms
- disclosure of referral arrangements
- comprehensive policies and procedures manuals
- trade confirmations and regular client statements
- procedures for client complaint handling
- an independent dispute resolution service
- holding client assets in trust and separate from the firm's assets
- maintaining adequate insurance coverage to protect the firm and its clients.
EMDs must follow the same "Know Your Client" and "Know Your Product" procedures and carry the same "Suitability" obligations as other registered dealers (e.g. investment dealers, mutual fund dealers and scholarship plan dealers). These requirements ensure that each client's personal, financial and investment profile is understood and confirmed prior to any trading activity. EMDs must also ensure that any security they recommend is suitable for a particular client by considering the particular investment product as well as each individual client's investment goals and profile.
INDUSTRY TOOLS FOR THE CANADIAN INVESTOR
Get Smarter About Money
GetSmarterAboutMoney.ca was awarded the 2017 Web Marketing Association Award for Best Information Services Mobile site. Following a successful relaunch this year, GetSmarterAboutMoney.ca was awarded the 2017 Web Marketing Association Award for Best Information Services Mobile Website.
The website was developed from the ground up to enable investors using mobile devices and tablets to better access articles, videos, tools and calculators.
The Investor Office also expanded its suite of investor education resources. A series of short animations reminding investors of the importance of checking registration was created. A new tool, Scam Spotter, was developed to help investors recognize the red flags of fraud. The Exchange Traded Funds (ETF) Facts interactive tool helps investors understand each section of an ETF Facts document using plain language. New articles and features on timely and relevant investor issues were released throughout the year, including topics on investing in real estate investment products, investing in the marijuana industry, millennials and the markets, and cryptocurrency basics and offerings.
The OSC's Scam Spotter tool will help you recognize the red flags of fraud.
GetSmarterAboutRealEstate.ca, combines information and design to guide readers through several types of common real estate investment securities, including real estate investment trusts and limited partnerships, mortgage investment entities and syndicated mortgages, and uses video interviews with Ontario Securities Commission (OSC) staff members to help explain the topic.
GetSmarterAboutRealEstate.ca guides you through common real estate investment products.
To make financial literacy seem less daunting, and to bring humour to what many perceive as a dry topic, the Alberta Securities Commission (ASC) launched an online campaign called The F-Word (Finance). The campaign featured a tongue-in-cheek video and social media messaging to encourage Albertans to visit the newly re-launched CheckFirst.ca. The website recently received a makeover and now features a wide range of tools and resources including six new educational videos (Investing 101) featuring personal finance expert Kelley Keehn. As a way to test what Albertans have learned through the month, the ASC hosted a Facebook live game show, Fraud or Fact.
In addition to our online campaign during Fraud Prevention Month, the CheckFirst Café popped up at the Edmonton Boat & Sportsmen’s Show and the Calgary Outdoor Adventure & Travel Show. We served free coffee and spoke to approximately 6,000 booth visitors, highlighting the resources available to help Albertans increase their financial literacy and avoid investment fraud.
Clever web ads direct Alberta investors to the CheckFirst.ca site.
This year the ASC also ran a social media campaign called #ASKASC. The campaign encouraged Albertans to get curious about investing and ask their questions about the stock market and investing.
Responses were developed with the assistance of ASC subject matter experts and posted weekly throughout the campaign. All eligible questions were entered into a draw to win a smartwatch at the end of the campaign. The ASC continues to run cost-effective television and radio advertisements across Alberta during limited periods to heighten awareness of securities fraud, how Albertans can protect themselves, and the financial literacy resources available through the ASC.
Saskatchewan investors were targeted by a number of suspicious unregistered companies this past year.
MPower Technologies, Melnic Group, FM Trader, UK-based Weber Finance, Fluid FX Inc., Capital Force Ltd., and USI-TECH Limited solicited money from Saskatchewan residents, persuading them to invest in binary options, FOREX, derivatives and other investments. Financial and Consumer Affairs Authority (FCAA) used Facebook, Twitter and the media to inform people about the unregistered companies. Multiple news outlets ran the stories, which included tips from our Enforcement Director on how people could protect their money. Throughout the year, FCAA also delivered financial literacy presentations to the public, highlighting common frauds and scams, red flags and what to watch out for. In the fall, FCAA developed a financial literacy retirement campaign, reminding people that it’s never too early to start thinking about saving and figuring out where your sources of income might come from.
FCAA also undertook a website re-design project to modernize and streamline the website for investors, the general public and industry. By making the website mobile friendly, changing the navigation so it’s more intuitive and adding a robust search functionality, investors will be able to easily and effortlessly find information at home, work or on the go. It will now be easier for investors to find:
- Investor alerts
- Enforcement actions
- Fraud and scam information
- Investor videos
- Search functions to find out if individuals and companies are registered to sell securities and registrant’s discipline history
The newly redesigned FCAA website efficiently streamlines information to the investing public