Category: FAQs

FAQ Corner: What are some things to watch out for when we describe our firm and its representatives in marketing materials or on social media?

Answer:  Registrants have an obligation to deal fairly, honestly and in good faith with their clients. Among other things, this means that registrants must ensure that their marketing materials (and any representations that they make in social media) are clear, accurate and non-misleading and that any claims made in such materials are substantiated. In our experience, securities regulators continue to be concerned about:

  • Performance data (including use of hypothetical performance data, benchmarks, and performance composites);
  • Exaggerated and unsubstantiated claims (g. “We are a leading investment management firm”);
  • Holding out and the use of names (g. unregistered individuals using business titles that imply they are registered, failing to use the firm’s full legal name or registered trade name in marketing materials, or misleading, inaccurate or hard-to-substantiate testimonials); and
  • Inadequate policies, procedures and records in relation to marketing activities and social media.

Registrants also should be aware that there are specific rules about how they represent their registration status. In particular, subsection 44(1) of the Ontario Securities Act (Act) prohibits any person or company from representing that they are registered under the Act unless the representation is true and the representation specifies the relevant registration category or categories. OSC staff have emphasized that firms also should specify in which jurisdictions they are registered. In addition, section 46 of the Act prohibits everyone from representing that the Commission has passed in any way on the financial standing, fitness or conduct of a registrant.

AUM Law can help you stay on top of these requirements and regulators’ evolving expectations. For example, we can review your marketing materials and social media activities on an ad hoc or regular basis, review your marketing, social media and record-keeping policies and enhance them as needed, and provide compliance training to your staff. Please contact us if you would like to learn more.

February 28, 2020

FAQ Corner: Can an advising representative act as the executor of an estate on behalf of a client?

Answer: The Investment Industry Regulator Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) have rules against such arrangements. Although these rules do not apply to non-member firms and their employees, they reflect a general concern on the part of securities regulators about such arrangements. In particular, they are concerned about the potential conflicts of interest associated with one person performing both roles.

For example, if the client of the advising representative (Representative) passed away, the Representative could find themselves in the situation where they were expected to act as the executor of the estate and as the portfolio manager for the account now held by the estate, and these roles could come into conflict. As executor, the Representative would be expected to act in the best interests of the estate, but as portfolio manager, they would be interested in continuing to manage the portfolio. This potential conflict might cause the estate’s beneficiaries (or regulators) to smell a rat if the Representative maintained their appointment as portfolio manager in such circumstances.

Before deciding to accept an appointment as executor for a client, a registrant should consider whether the underlying exposure from a legal, regulatory and reputational perspective is worth providing such a service to clients. Similar considerations would arise if a registrant is asked to act as a trustee, hold a power of attorney or otherwise take control or authority over a client’s financial affairs outside the scope of a traditional, managed account relationship. AUM Law can help you evaluate your options and, if you decide to proceed with such an arrangement, we can draft the appropriate agreement, disclosures and protocols to manage such arrangements.

January 31, 2020