During the Spring Regulatory and Compliance Webinar organized by the Portfolio Management Association of Canada (PMAC) on May 27, a member of the Compliance and Registrant Regulation Branch (Branch) at the Ontario Securities Commission (OSC) updated attendees on the Branch’s programs and what registrants can expect in the coming months. We think that our readers will be interested in the following:
- Compliance audits re-booted:The Branch is re-starting regulatory compliance audits this week. They will be conducted remotely, and firms can expect to have more time (e.g. 45 days as opposed to 30 days) to respond to deficiencies.
- Privacy and cyber security risks arising from the shift to remote work during the pandemic will be an area of regulatory focus in compliance audits. (See our March 2020 and April 2020 bulletin articles, which discussed these risks.) Among other things, if firms haven’t already done so, they should consider arranging for secure document removal from employees’ homes and destruction of files as appropriate.
- Working capital: Registered firms should stay on top of their working capital. If there are potential issues resulting from COVID-19, firms should engage proactively with their regulators.
- Are you registered everywhere you need to be? Branch staff have observed an uptick in registrable activity by registrants in jurisdictions where the firms and relevant individuals are not registered. OSC staff will report such activity to the local regulator.
- Some CCO reports need improvement: Branch staff have observed that some chief compliance officers (CCOs) are not complying with the requirement in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Requirements to provide the registrant’s board of directors with an annual compliance report (CCO Report) or are preparing only a cursory report. Branch staff expect all firms, even one-person firms, to produce comprehensive CCO Reports every year describing how their firms are meeting their securities law obligations.
- Registration of client relationship managers: We expect the OSC to announce very soon a protocol for registering client relationship managers as Associate Advising Representatives subject to certain terms and conditions.
Post-COVID work arrangements: Although the topic did not come up during the PMAC conference, it is our understanding that, to date, registered firms have not been expected to register any remote work locations (such as home offices) that have been set up in response to the authorities’ COVID 19-related restrictions or recommendations for workplaces. As COVID-19 goes on for an extended period, as well as Post-COVID-19, if any of a firm’s individuals make working from home, or another location that isn’t already approved as a branch office, more permanent, the firm should consider whether it needs to register new branch offices.
As the OSC moves toward a “business almost as usual” state, AUM Law stands ready to help registered firms meet their existing obligations and address emerging risks and evolving regulatory expectations. For example, we can conduct focused compliance risk assessments in areas of interest to the regulators and help draft (or improve) your CCO Report. We are also helping firms and individuals with registration applications, and we can help you, too. Please do not hesitate to contact us.
Correction: The paragraph on Post-COVID work arrangements reflects our understanding of expectations for registered firms on this topic. However, in an earlier version of this article (published on May 29), we incorrectly attributed those views to the OSC representative who spoke at the webinar.
June 9, 2020
In March, the Ontario Securities Commission (OSC) announced that due to COVID-19, it was postponing the 2020 Risk Assessment Questionnaire (RAQ) cycle until further notice. On May 28, chief compliance officers (CCOs) of registrants were notified that they will receive the RAQ on June 11, with responses due on August 6. The 2020 RAQ will ask for information for the periods ending December 31, 2018 and December 31, 2019.
In our January 2020 bulletin, we highlighted a number of changes that the OSC is introducing for the 2020 RAQ, including pre-population of the questionnaire with some of the answers from firms’ 2018 RAQ responses and data security enhancements.
But wait, there’s more: Because the 2020 RAQ will not cover the period when registrants were dealing with COVID-19, the OSC also will send out a short survey (Survey) on July 9, 2020 to gather information from January 1 to June 30, 2020 regarding COVID-19’s impact on each registered firm. The Survey will be sent to firms domiciled in Ontario, as well as to some firms where the OSC is not the principal regulator because the OSC is collecting the information for those other regulators. The deadline for completion also will be August 6, 2020.
We encourage firms to re-start their planning for this exercise now, if they haven’t already done so, and to schedule time with key individuals including the ultimate designated person (UDP) to review and sign off on the completed questionnaire. AUM Law has had extensive experience helping firms prepare their RAQs. If you would like us to help you complete this year’s RAQ and the Survey, please contact us for a fixed-fee quote.
May 29, 2020
As a proud member of the Canadian Association of Alternative Strategies and Assets (CAASA), AUM Law is pleased to contribute to CAASA’s ongoing educational programming. On April 21, our very own Stacey Long contributed her expertise to CAASA’s webinar Marketing Your Liquid Alternative Fund. And our very own Chris von Boetticher teamed up with Jason Russell, ReSolve Asset Management’s Chief Operating Officer and Chief Compliance Officer, and CAASA President James Burron for a podcast discussing regulatory compliance and operational issues for asset managers to consider while operating remotely during this “new normal” of the COVID-19 pandemic. The podcast is part of CAASA’s ongoing series Alternative Thinking: Both Sides of the Investment Coin, available on Spotify and Apple.
We are pleased to have been recognized once again by Lexology as the exclusive Legal Influencer for financial services commentary in Canada for the first quarter of 2020. These awards are designed to recognize law firms that provide subscribers with relevant, high-quality legal updates and are determined based on an algorithm that takes into account reader engagement with the law firm’s publications on Lexology. This is the fifth time that AUM Law has received the award, which has existed for seven quarters.
In light of the continued spread of COVID-19, we want our clients to know that we have business continuity plans in place that enable us to operate with as little disruption as possible as the situation changes. Our lawyers and clerks are working remotely, enabling us to provide uninterrupted service to our clients.
Clients should not hesitate to contact their primary lawyer or any of Kevin Cohen, Erez Blumberger or Kim Poster if they have any questions about these matters. At AUM Law, we remain focused on providing high quality, practical and efficient advice and services to address your business needs, including matters arising from COVID-19.
We appreciate that this is an extraordinarily challenging time and we are here to help in any way possible.
To make your life easier, we have consolidated the articles we’ve written to date on the client-focused reforms (CFRs) to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations into a snappy, little(ish) guide, Client-Focused Reforms in a Nutshell. If you would like to receive a copy, please contact us and we’ll subscribe you to our publications (if you haven’t already signed up).
February 28, 2020
Ontario Securities Commission (OSC) staff have begun notifying registrants that they will receive a risk assessment questionnaire (RAQ) on April 15. The OSC uses the information collected from these bi-annual questionnaires as part of its risk-based supervision program. Registrants must submit the completed questionnaire to the OSC by May 27, 2020, after their Ultimate Designated Person (UDP) has certified the contents as complete, accurate, free from any misstatements and not misleading in any respect. The RAQ will ask for information for the period ending December 31, 2019.
The OSC is making some changes to the RAQ process and questions. Some of these changes are part of its burden reduction initiative. For example:
- For firms that completed the 2018 RAQ, some questions in the 2020 RAQ will be pre-populated with the firm’s 2018 answers (which of course, should be reviewed and revised if necessary).
- Some questions have been deleted from the 2020 RAQ (e.g. Question G18 on other business activities).
Changes to the RAQ process include the following:
- Authentication to enhance data security: On April 15, CCOs will receive an email from the OSC with a link asking them to create an account that is unique to the firm in the OSC’s system. Once the account is created, the CCO will be granted access to the 2020 RAQ through this account.
- Fund Form Separated from the RAQ: The Prospectus-Exempt Fund Form, which used to be sent to investment fund managers who manage prospectus-exempt funds at the same time as the RAQ, has been removed from the 2020 RAQ. Going forward, it will be sent separately from the RAQ.
We encourage registrants to start planning for this exercise now by allocating resources to gather the needed information and draft responses, as well as scheduling time with key individuals including the UDP to review and sign off on the completed questionnaire. AUM Law has had extensive experience helping firms prepare their RAQs. If you would like us to help you complete this year’s RAQ, please contact us for a fixed-fee quote.
January 31, 2020
Did you know that AUM Law makes our bulletins available through Lexology, a resource that aggregates and organizes legal updates, analysis and insights from over 900 law firms worldwide? We are pleased to announce that AUM Law has received the “Legal Influencer” title for Financial Services in Canada for the fourth quarter of 2019. Lexology has been granting these awards for six quarters and this is the fourth time that AUM Law has received this firm-level award, which is calculated based on an algorithm that takes into account the number of reads our articles receive and how readers engage with our content. If you aren’t already a subscriber to our publications, click here to sign up.
January 31, 2020