Category: Regulatory Compliance

May an associate advising representative work remotely or in a one-person branch office?

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) prohibits an associate advising representative (AAR) from advising on securities unless that advice has been pre-approved by an advising representative (AR) designated by the firm to review that AAR’s advice.

There is no requirement for an AAR and the AR reviewing that AAR’s advice to work “side by side” in the same office. However, there are potentially greater compliance risks associated with having them work from separate locations, such as in the current environment where many people are working remotely from home. For example, the AR and AAR might be working somewhat different hours as they juggle professional and family responsibilities, and clients concerned about market volatility might be calling them at all hours for reassurance. These factors can make it more challenging for the AR to pre-clear the AAR’s advice to the client. Maintaining organized client files including documentation of the AR’s pre-approval of the AAR’s advice can also be more difficult when people are accessing files remotely.

Nevertheless, it is critical for the firm to have and maintain adequate controls and supervision to ensure compliance with the pre-clearance rule described above. The firm also should document how it has considered and addressed the risks that arise from the AAR and AR working from separate locations, as well as documenting on an ongoing basis the AR’s review and pre-approval of any advice to be provided by the AAR.

The COVID-19 pandemic continues to present regulatory challenges for firms as they operate in this “new normal”. AUM Law is helping clients assess whether their existing policies, procedures and controls address the emerging risks and we can help you too. Please do not hesitate to contact us.

May 29, 2020

OSC Takes Enforcement Action against Representative Who Agreed to Serve as Executor for Client’s Will

In January, we published an FAQ discussing the risks that advising representatives face if they accept an appointment as an executor of a client’s estate. We noted that securities regulators have concerns about the potential conflicts of interest arising in such arrangements. These kinds of concerns are reflected in the recent announcement by the Ontario Securities Commission (OSC) that it is taking enforcement action against a mutual fund dealing representative (M) who agreed to act as his elderly and terminally ill client’s attorney for personal care and property and as executor of her estate, even though he is alleged to have known that he was also a beneficiary under her will.

According to the statement of allegations, M did not comply with his employer’s specific prohibition on accepting powers of attorney from clients such as the client in this case or its requirement to disclose to the firm any actual or potential conflict of interest. The OSC is alleging, among other things, that M failed to deal honestly, fairly and in good faith with the client contrary to subsection 2.1(2) of OSC Rule 31-505 Conditions of Registration and that his conduct was contrary to the rules of the Mutual Fund Dealers Association (MFDA), his employer’s policies and procedures, and the public interest.

AUM Law can assess and, if necessary, help you enhance your firm’s policies, procedures and practices regarding potential conflicts of interest like this. We can also conduct training with your employees to sensitize them to the legal, regulatory and reputational risks associated with accepting such appointments. Please do not hesitate to contact us.

CSA Extends Deadline to Implement Conflicts-Related Client-Focused Reforms by 6 Months

As we discussed in our October 2019 special bulletin, the Canadian Securities Administrators (CSA) have finalized their client-focused reforms (CFRs) to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103). The CSA initially set an implementation deadline of December 31, 2020 for the conflict of interest provisions and related relationship disclosure information (RDI) requirements in the CFRs.

On April 16, CSA members announced that they are shifting that implementation deadline to June 30, 2021. Registrants will have to comply in the interim period with the comparable provisions in NI 31-103, as they read on December 20, 2020.

Although we expect registrants to welcome this extension of the deadline, we encourage firms to continue making steady progress toward implementation of the new requirements. In the current environment, where so many registrants and their service providers have their employees working remotely and are dealing with emerging risks resulting from the COVID-19 pandemic, projects like these may take longer than expected to complete. AUM Law is already helping many of our clients systematically prepare for the new regime and we can help you, too. Please do not hesitate to contact us.

April 30, 2020

CSA and FSRA Extend Timeline for Implementing Changes to Syndicated Mortgages Regime

As we discussed in our March 2019 bulletin and December 2019 bulletin, the Canadian Securities Administrators (CSA) have proposed changes to the securities regulatory framework affecting participants in syndicated mortgage markets. Last December, the CSA announced that they expected the proposed changes to take effect in July 2020. On April 16, 2020, the CSA disclosed that in light of COVID-19, they now expect the amendments to take effect on January 1, 2021. They haven’t published final rules yet, stating only that additional details will be published later this year.

As well, on April 16 the Financial Services Regulatory Authority of Ontario (FSRA) and the Ontario Securities Commission (OSC) announced a corresponding delay in the transfer of regulatory oversight over non-qualifying syndicated mortgages from FSRA to the OSC. The regulators now expect the transfer to take effect on January 1, 2021.

AUM Law is assisting clients affected by the evolving regulatory framework for mortgage investments. Please do not hesitate to contact us if you have any questions about how the proposed changes and/or delays in implementation timelines will affect your business.

April 30, 2020

Cyber-Security During the COVID-19 Pandemic and Beyond

As we mentioned in last month’s article on business continuity plans (BCPs), the COVID-19 pandemic has brought with it heightened cyber-security risks. Now more than ever, registered firms need to maintain robust cyber-security policies and procedures, monitor employees’ compliance with them, and adapt their policies and procedures to address emerging or changing risks. Recently, financial sector regulators have published warnings and guidance for firms about how to address cyber-security risks. This article highlights several publications that we think our readers will find useful.

  • IIROC Offers Practical Tips: On April 21, the Investment Industry Regulatory Organization of Canada (IIROC) published a notice with practical tips for advisory firms and their employees regarding the kinds of cyber-security risks they face while operating remotely during the COVID-19 pandemic. Among other things, it describes common, COVID-19 relate phishing and social engineering attacks that some firms are observing.
  • FSB Consults on Cyber Incident Response and Recovery (CIRR): On April 20, the Financial Stability Board (FSB) published a consultation paper outlining 46 effective CIRR practices for financial institutions to consider. Although the FSB tends to focus more on systemically important financial institutions, we think that all capital markets participants will find it worthwhile to skim the consultation paper. The recommended CIRR practices relate to such topics as how firms organize and manage CIRR, how they ensure effective response, mitigation and recovery activities, how to coordinate and communicate with stakeholders, and how to establish processes to learn from past cyber incidents. In addition to requesting feedback on the specific practices described in its consultation paper, the FSB wants to know what firms are learning from their response to the COVID-19 pandemic. Comments are requested by July 20.
  • Updated Baseline Controls for Small and Medium-sized Enterprises (SMEs): The Canadian Centre for Cyber Security (Centre), established by the federal government, updated its Baseline Controls for Small and Medium Organizations (Baseline Controls) earlier this year. Noting that some of national and global cyber-security standards likely are beyond the financial and human resource means of most SMEs, the Centre developed the Baseline Controls with the 80/20 rule (i.e. that 80% of the benefit can be achieved through 20% of the effort) in mind. We recommend that firms read Annex A, which summarizes the Baseline Controls.

Given the regulators’ growing concerns about pandemic-related cyber-threats, we believe that cyber-security is likely to become a focus area for securities regulators in compliance reviews. AUM Law can help you assess and enhance your cybersecurity policies and procedures and conduct training in this area for your employees. Please contact us to find out more about our services in this area.

April 30, 2020

Get Ready to Report Suspicious Transactions “As Soon As Practicable”

In July 2019, we reported that the Canadian Government had finalized amendments (Amendments) to regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA Regulations). The Amendments provided for implementation in phases. The burden-relieving amendments (such as those permitting the use of electronic means to verify identity) came into effect in July 2019. A second set of amendments is scheduled to come into effect on June 1. These include, among other things, amendments that tighten up the deadline for submitting suspicious transaction reports (STRs) to FINTRAC.

  • Out with the Old: Currently, a reporting entity has 30 days to file an STR, measured from the day it detects a fact about a financial transaction or attempted financial transaction that constitutes reasonable grounds for suspicion (RGS) that the transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence.
  • In with the New: Effective June 1, a reporting entity will have to file the STR as soon as practicable after it has taken measures enabling it to establish that it has reached the RGS threshold.

FINTRAC has revised its guidance What is a Suspicious Transaction Report? and Reporting Suspicious Transactions to FINTRAC (collectively, the New Guidance). Set to take effect on June 1, the New Guidance states that:

As soon as practicable should be interpreted to mean that you have completed the measures that have allowed you to determine that you reached the RGS threshold and as such the development and submission of that STR must be treated as a priority report. FINTRAC expects that you are not giving unreasonable priority to other transaction monitoring tasks and may question delayed reports. The greater the delay, the greater the need for a suitable explanation.

Other changes in the New Guidance are primarily stylistic or provide more detailed explanations of such matters as the importance of STRs to FINTRAC’s mandate (and why they need to be detailed and timely), examples of how context affects an assessment of potentially suspicious transactions, and the factors that FINTRAC is likely to consider if it reviews a reporting entity’s practices to determine whether it submitted an STR or STRs as soon as practicable.

AUM Law can help you implement the new requirements by, for example, updating your compliance manual to reflect the new requirements and providing training to your employees. Please do not hesitate to contact us.

April 30, 2020

OSC Revises Certain Registration Processes as Part of Its Burden Reduction Initiative

April 15, the Compliance and Registrant Regulation (CRR) Branch at the Ontario Securities Commission (OSC) emailed registrants to indicate that it had enhanced and clarified its processes to lift close supervision and strict supervision terms and conditions (T&Cs) imposed on individual registrants at firms. This initiative is part of the OSC’s regulatory burden reduction program. Sponsoring firms will be able to submit requests to remove such T&Cs through an online portal. The OSC has published guidance describing the process and indicating the types of information a firm should submit to support a request for expedited review.

On the same day, the CRR Branch also released guidance on its process to reactivate the registration of an individual coming off a suspension imposed by the Mutual Fund Dealers Association (MFDA). CRR staff indicated that, provided certain criteria are met, they will apply an expedited review process that does not re-examine the facts giving rise to the MFDA’s disciplinary action and that aims to process the request within five business days of its receipt.

AUM Law has substantial experience handling individual applications for registration (including reactivations) and engaging with regulators with respect to T&Cs that have been or may be imposed on individuals. We can help you prepare submissions to have T&Cs lifted or re-activate registration. Please contact us to discuss how we can help.

April 30, 2020

Can Our Firm Use Electronic Signatures for Subscription Documents, Investment Management Agreements and Similar Agreements with the Firm’s Clients?

With so many registered firms operating remotely and avoiding in-person meetings with potential clients wherever possible during the COVID-19 pandemic, the question has arisen again whether electronic signatures (e-signatures) are acceptable for various agreements with the firm’s clients. The answer depends on several factors:

  • What the law says: In Canada, all the provinces and territories except Québec have adopted legislation based on the Uniform Electronic Commerce Act (UCEA), which provides, in effect, that a contract, record or signature will not be unenforceable solely because it is electronic. (Québec’s legislation incorporates many of the same principles but doesn’t follow the UCEA model.) There are some provincial variations in the legislation, with some provinces having stricter requirements regarding, for example, the type of e-signature that is acceptable. For contracts governed by Ontario law, the Electronic Commerce Act (Ontario) (OECA) provides that an e-signature is acceptable if it is reliable for purposes of identifying the person signing the document and the association of the e-signature with the relevant document is reliable.
  • What the parties to the contract agree to: The UCEA and similar legislation facilitate electronic contracts and e-signatures but do not require them. The parties to a contract can agree to a different arrangement. Therefore, registrants that, to date, haven’t been using e-signatures in particular contracts should check that the contract in question provides for the contract to be in electronic form and signed with e-signatures.
  • The contract’s subject matter: Certain categories of contracts, such as negotiable instruments, some types of real estate agreements and some types of powers of attorney, may require a “wet ink” signature (although some of these restrictions have been relaxed during the pandemic). In Ontario, there is no prohibition on subscription agreements, investment management agreements and similar client relationship agreements using e-signatures.
  • What the firm’s articles, by-laws, policies and procedures say: The registered firm should confirm that its articles, by-laws, policies and procedures do not restrict the use of e-signatures and determine if any particular form of e-signature is required. Although such restrictions are rare, it is important to verify that neither the registered firm nor any client that is an entity is subject to any restrictions on the proposed form of e-signature to be used, especially when a change in firm practice is being considered.

Of course, firms should maintain fully signed and complete electronic contracts just as they would for paper contracts with wet signatures, and they should have a contract execution policy that expressly provides for electronic contracts and e-signatures. It’s also especially important these days, when so many people are working remotely, to organize the firm’s executed contracts so that they can be easily found.

If you have any questions about whether an e-signature is acceptable for a particular type of contract or wish to update your policies and procedures to provide for electronic contracts and e-signatures, please do not hesitate to contact us.

April 30, 2020

OSC Temporarily Waives Late Fees for All Market Participants

On April 17, the Ontario Securities Commission (OSC) announced that it is waiving all late fees that would otherwise accumulate between April 17 and June 1, 2020. The OSC also signalled its willingness to consider ad hoc requests for late fee relief for the pandemic period before April 17, 2020. If your firm is interested in obtaining late fee relief for the pandemic period before April 17, please contact us to discuss your options.

April 30, 2020

OSC Scales Back Its Consultation on Business Priorities

This is the time of year when the Ontario Securities Commission (OSC) usually publishes a substantive consultation paper requesting feedback on its proposed statement of priorities (SOP) for the coming fiscal year. On April 30, the OSC announced that, in light of the COVID-19 outbreak and related financial market uncertainty, it has decided not to consult on a detailed SOP right now. Instead, it is using its 2019-20 SOP, its 2019 Report on Reducing Regulatory Burden in Ontario’s Capital Markets, and its ongoing engagement with stakeholders to inform its 2020-21 business plan.

People are invited, however, to provide comments by June 1 on the OSC’s current priorities. The OSC expects to publish a progress report relating to those priorities in June 2020. It also plans to conduct a substantive consultation on business priorities in the fall of 2020 to inform its 2021-22 business plan.

April 30, 2020

Regulators Plan Three-Year Moratorium on Trade Matching Exception Reporting

In late March, the Ontario Securities Commission (OSC) submitted to the Minister of Finance amendments to National Instrument 24-101 Institutional Trade Matching and Settlements (NI 24-101) to provide for a three-year moratorium on the trade match exception reporting requirement (Exception Reporting Requirement). Currently, registered dealers and advisers must file Form 24-101F if less than 90% of trades executed by or for the firm in the preceding quarter matched within the time required in NI 24-101. The OSC’s decision flows from its regulatory burden reduction initiative. OSC staff agreed with a number of commentators who viewed the Exception Reporting Requirement as burdensome and no longer a meaningful contributor to regulatory oversight.

The OSC intends that the moratorium will take effect on July 1, 2020 and run until July 1, 2023. During the moratorium, the OSC will consider whether the moratorium should become permanent and whether any other changes to NI 24-101 are appropriate. In addition, staff of other members of the Canadian Securities Administrators are recommending that the same three-year moratorium be implemented through blanket orders. If you have any questions about the impact of this amendment on your operations, please contact your usual lawyer at AUM Law.

April 30, 2020

AUM Law Participates in CAASA Webinar and Podcast

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.

You’ve Activated Your Business Continuity Plan. What’s Next?

In light of the COVID-19 outbreak, many registered firms are implementing their business continuity plans (BCPs) and having their employees work from home, except where certain individuals need to access office facilities to ensure continued service to clients. In this article, we’ll address some issues for registered firms to consider in the short and medium term while operating in such conditions. We emphasize that firms and regulators are facing an unprecedented and constantly changing situation, and so our initial views on the issues below may change as circumstances evolve and regulators issue new or updated guidance or rules.

If my firm is covered by an “essential service” exemption from a government order to close businesses, why not carry on as usual from our office? Workplaces can contribute to the spread of the virus that causes COVID-19, and so a firm needs to evaluate the occupational health and safety, public health and litigation risks of having employees work from its offices or meet physically with clients, etc. The Government of Canada has published Risk-Informed Decision-Making Guidelines for workplaces and businesses during the pandemic. If you need legal advice on employment or occupational health and safety matters, AUM Law can source, evaluate and help you retain appropriate counsel and then manage the provision of that advice so that you can focus on running your business. From a securities regulatory compliance perspective, we think that a registered firm that requires all or most of its employees to work onsite instead of working from home could attract scrutiny from securities regulators due to concerns that the firm’s BCP is not functioning effectively.

Should my firm contact the securities regulator because we have activated our BCP? Activating your BCP does not, in itself, trigger an obligation to notify the Ontario Securities Commission (OSC). If, however, your firm finds that it might not be able to meet one or more of its regulatory obligations on a timely basis because of the pandemic, then that might trigger a filing obligation and we encourage you to speak to your usual lawyer at AUM Law as soon as possible. (See also our article in this bulletin on the blanket orders issued by members of the Canadian Securities Administrators (CSA) extending certain filing deadlines for registrants, investment funds and others.) We can advise you on your options and liaise with regulators on your behalf.

Do the home offices of registered individuals need to be approved as branch offices? Technically, having registered employees work from a location other than the address indicated on their Form 33-109F4 (Form F4), could be viewed as requiring an updated filing and/or approval of new “branch offices”. However, in light of the recent government orders and recommendations requiring or asking people to stay at home as much as practicable, we believe that at least in the short term, it is unlikely that OSC staff will expect registered firms to update Form F4s or seek approval for branch offices, provided that registered individuals are not meeting with clients in their homes or bringing home physical files that contain sensitive client information.

Cross-training: Are there functions at your firm that only one or two employees know how to perform? If you haven’t done so lately, we encourage you to review and update your list of key tasks and deadlines and the individuals responsible for performing those tasks. Identify a back-up person for each task and deadline (or group of related tasks and deadlines) and, if necessary, train that back-up person.

BCP considerations for “one-registrant” firms: If a registered firm has only one registered individual (One-Registrant Firm) to serve clients, we encourage the firm to have a plan to address a scenario where that individual is absent or incapacitated for weeks or months. We recommend that One-Registrant Firms, at a minimum, prepare standing instructions for the firm’s administrative staff and legal representatives to follow if the registered individual is absent or incapacitated for more than a brief period. Such firms also might wish to explore the feasibility of negotiating, in advance, a formal agreement with another registered firm (Temporary Successor). Such an arrangement could be a reciprocal one between two One-Registrant Firms seeking to address the same business continuity issue. Under such an agreement, the Temporary Successor would step into the shoes of the registered individual, for certain purposes, if that individual was unable to perform their duties for more than a brief period. The purpose of the agreement would only be to communicate with service providers and clients as the clients decide how best to address their account assets.

Technology risks including cyber-security and privacy risks: The rapid shift to remote work arrangements has resulted in some issues arising with respect to technology slowdowns, disruptions and hacking. Some firms are deploying new software or devices (including virtual meeting systems) that employees are having to become familiar with quickly, and many employees are dealing with the challenge of handling matters discreetly with family members or roommates present. There also are reports of some public, virtual meetings and conferences conducted over Zoom and similar systems being hacked. Finally, some employees are experiencing anxiety and confusion because of the pandemic. All these circumstances increase the risks of inadvertent cyber-security failures and opportunities for hacking. Maintaining robust cyber-security policies and procedures, adapting them as needed to address emerging or changing risks, reminding employees of the need to take precautions, and monitoring employees’ compliance with such policies and procedures are essential actions at this time both from a regulatory compliance and litigation risk perspective.

Communications with clients: Pandemic conditions and their knock-on effects in financial markets may result in a significant increase in customer call volumes or online account usage. Registered firms should review their BCPs and assess the effectiveness of their systems and processes to handle this level of increased activity. If your firm is experiencing difficulty serving customers in a timely way, please contact us to discuss measures you should undertake (including communication strategies) to address the situation. (On a related subject, please see our FAQ in this bulletin focused on ensuring that you’ve got current know-your-client (KYC) information for clients whose life situations may be changing dramatically.)

Supervision, compliance and internal controls during the new “work from home” normal: As we all adjust over the next month or so to the “new normal” of working remotely as much as practicable for an unknown period of time, we think that regulators will begin expecting to see registered firms consider whether they need to adapt their policies, procedures and controls to address any new or magnified regulatory compliance risks. AUM Law can help you assess whether  your existing supervisory system, compliance manual, procedures and internal controls should be revised to ensure compliance while many employees are operating from remote locations.

We can help: At AUM Law, we are experienced in reviewing BCPs from a regulatory compliance perspective. We can draft or update your BCP to ensure that it addresses a scenario like this one. Please don’t hesitate to contact us.

March 31, 2020

CSA and OSC Extend Certain Deadlines for Registrants and Investment Funds and Postpone Certain Initiatives

In light of the COVID-19 pandemic, the Canadian Securities Administrators (CSA), including the Ontario Securities Commission (OSC), have been providing blanket exemptive relief and taking other steps to relieve burdens for market participants. The situation is fluid and additional actions are being taken as new challenges arise, so the summary below can only be a snapshot as of the publication date of this bulletin.

Compliance Reviews: In its March 16 news release, the OSC stated that its on-site compliance reviews have been postponed until further notice. Its normal course compliance activities are continuing as planned but the OSC has signalled its willingness to be flexible on deadlines for information.

CSA Extends Certain Filing Deadlines: On March 23, the OSC and other CSA members published blanket orders providing temporary relief from certain filing requirements. We have summarized below key provisions in the OSC blanket orders concerning registered firms and investment funds.

Fee Filings and Payments

  • Who: Registered firms and unregistered capital markets participants that are required to pay capital markets participation fees to the OSC.
  • What: If the firm paid its 2019 capital markets participation fee based on an estimate of its 2019 specified Ontario revenues, it ordinarily would have to re-calculate those revenues and the relevant participation fee based on its final 2019 financial information. If the recalculated fee exceeded the estimated fee paid at the end of 2019, the firm ordinarily would have to pay the balance owing and file an updated Form 13-502F4 Capital Markets Participation Fee Calculation or Form 13-503F1 (Commodity Futures Act) Participation Fee Calculation by March 30, 2020.
  • Extension: The deadline has been extended for 45 days from the original deadline.

Financial Statements / Calculations of Excess Working Capital

  • CSA members have issued substantially harmonized blanket orders providing registered dealers, advisers and investment fund managers (IFMs) with a 45-day extension from the original deadline for certain financial statements if the deadline originally fell between March 23 and June 1. The extension applies automatically, without any terms and conditions.
    • Dealers: annual financial statements, completed Form 31-103F1 Calculation of Excess Working Capital (Form 31-103F1), and interim financial information;
    • Advisers: annual financial statements and completed Form 31-103F1; and
    • IFMs: annual financial statements, completed Form 31-103F1, completed Form 31-103F4 Net Asset Value Adjustments (Form 31-103F4), and interim financial information.
  • IIROC and MFDA Firms: Firms that are members of the Investment Industry Regulatory Organization of Canada (IIROC) or the Mutual Fund Dealers Association of Canada (MFDA) have been granted similar relief in respect of the regulatory financial questionnaires coming due.

Investment Fund Filing, Delivery and Prospectus Renewal Requirements (Funds Blanket Order)

  • Filing and Delivery Deadlines Extended 45 days: CSA members have issued substantially harmonized blanket orders providing investment funds with a 45-day extension on various filing and delivery deadlines for materials such as annual financial statements and auditor reports, interim financial statements, annual custodian compliance reports, annual mutual fund compliance reports, annual information forms, independent review committee (IRC) reports to securityholders, and annual and interim management reports of fund performance.
  • Prospectus Renewals: An investment fund distributing securities under a prospectus with a lapse date that occurs between March 23 and June 1, 2020 may add 45 days to that lapse date.
  • Fund Must Notify Regulator and Public: If an investment fund wishes to rely upon the Funds Blanket Order, it must, as soon as reasonably practicable and in advance the relevant delivery, filing or renewal deadline:
    • Notify its regulator by email that it is relying upon the Funds Blanket Order and each requirement for which it is relying upon that order; and
    • Post a statement on its public website or public website of its investment fund manager that it is relying upon the Funds Blanket Order and each requirement for which it is relying on upon that order.

Requests for Comment: The CSA indicated in their March 18 news release that all CSA proposals currently out for comment will have their comment periods extended by 45 days.

Risk Assessment Questionnaire (RAQ): In its March 16 news release, the OSC indicated that the RAQ is postponed until further notice.

Other Exemptive Relief: CSA members have also granted temporary relief to other categories of market participants (e.g. such as reporting issuers) and signalled regulatory flexibility regarding certain other requirements (such as the operation of annual general meetings).

Please contact us if you have any questions about the blanket orders described above, other requirements and temporary exemptions, and/or other operational changes adopted by CSA members that may affect your business. We can help you assess your options and, if necessary, engage with regulators on your behalf.

March 31, 2020

FINTRAC Signals Flexibility to Reporting Entities Affected by COVID-19

On March 25, FINTRAC issued a notice (Notice) indicating that it is committed to working constructively with businesses (Reporting Entities) subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to minimize the impact of ongoing anti-money laundering and anti-terrorist financing (AMLTF) requirements while Reporting Entities are experiencing challenges due to the disruptions caused by COVID-19. FINTRAC had four main messages:

  • Reporting: Reporting Entities should give priority to submitting suspicious transaction reports (STRs), as required.
  • Verification of Identity: Some provincial governments are extending the validity of various identification documents to avoid in-personal renewal visits. If a person presents a document or information affected by such a decision, the Reporting Entity must still determine the authenticity of that document or information but can, until further notice, consider the document or information valid and current.
  • Compliance Assessment and Enforcement: For now, FINTRAC does not plan to initiate any new examinations and plans to limit its other interactions with Reporting Entities to: (1) completion of existing examinations situations relating to reporting issues; and (2) requests for guidance.
  • If Non-Compliance Is Unavoidable: In the Notice, FINTRAC stressed the importance for Reporting Entities of documenting the reasons for any situation where the Reporting Entity cannot meet a reporting or other regulatory obligation for reasons beyond its control. The Reporting Entity should document the reason for not meeting the obligation (g. employee responsible for fulfilling an obligation affected by COVID-19) and, where possible, any measures taken to mitigate the non-compliance. Firms are also encouraged to submit a voluntary self-declaration of non-compliance via email, when they can, and such a notification will be taken into account in future compliance activities.

If your firm is experiencing challenges complying with your obligations under the PCMLTFA or your monthly AMLTF reporting obligations to securities regulators, AUM Law can help. For example, we can prepare and file on your behalf your monthly AMLTF reports with securities regulators. And if you are facing an instance of potential or actual non-compliance with your obligations, we can advise you on how to document the issues, develop mitigation strategies and liaise with regulators on your behalf as needed.

March 31, 2020