Answer: This question arises because OSC Staff have stated their position that a registered firm that plans to establish, manage, advise and/or trade in securities of investment funds with portfolios of cryptocurrencies or cryptocurrency assets are required to report these as changes in business activities on Form 33-109F5 Change of Registration Information and to update information previously provided on Form 33-109F6 Firm Registration (Form 33-109F5 requirement for registered firms that establish, manage, advise and/or trade in securities of cryptocurrency investment funds | OSC).
Based on our interactions with OSC Staff to date, we understand the following:
In the event the PM wishes to invest client accounts, including any investment fund managed by the PM, directly into crypto assets or cryptocurrencies then the PM would first be required to report this as a change in business activities per the above. It would then be prudent for the PM to first verify whether OSC Staff may have any concerns in this regard or expect any conditions to be met before proceeding further.
In the event the PM will limit the investment of client accounts, including any investment fund managed by the PM, to publicly-listed issuers, ETFs or investment funds that provide indirect crypto exposure, the PM would not be required to report this as a change in business activities per the above.
In either case, we would add that the PM should ensure that any crypto exposure, whether direct or indirect, is in line with a client’s IPS or an investment fund’s stated investment objectives, and the PM may wish to consider whether the client might want to be notified in advance depending on the level of direct or indirect crypto exposure contemplated. Additionally, we would encourage the PMs to have thorough documented KYP, KYC and suitability done in regard to these types of investments.
February 28, 2022