Enquirica Research - Exempt Market Dealers – A Brief Backgrounder

Oct. 10, 2011 - PRLog -- Canadian securities legislation creates two categories of securities that may be sold: (i) prospectus securities; and (ii) securities issued under prospectus exemption. Securities issued under the prospectus exemptions, otherwise known as non-reporting issuers, are typically considered to form the “exempt market”. Under NI 31-103, a new dealer registration category is introduced in all jurisdictions across Canada to regulate the sale of securities in the exempt market — the exempt market dealer (EMD).

A critical change under NI 31-103 is the introduction of the “business trigger” for dealer registration. Prior to September 28, 2010, the requirement to be registered as a dealer is triggered by a person engaging in a “trade” of securities. With the new rules introduced in 31-103, the “trade trigger” is replaced with a “business trigger”, so the dealer registration requirement will only apply to those whose trading in securities amounts to carrying on the business of trading in securities. Companion Policy 31-103CP provides guidance on what acts are deemed to be sufficient to trip the “business trigger”.

NI 31-103 introduces consistent rules concerning proficiency, conduct, capital and compliance requirements and makes it clear that EMDs are subject to the same know-your-client (“KYC”) and suitability requirements as other dealer categories.

A number of registration exemptions are being maintained in certain jurisdictions – particularly in Alberta, British Columbia, Manitoba, the Northwest Territories, Nunavut and the Yukon Territory. These jurisdictions have indicated that they will each pass a blanket order exempting individuals and firms from the EMD registration requirement created in NI 31-103. Presently the Blanket Order would provide an exemption to a firm or person that trades in securities under one of the following capital-raising exemptions in National Instrument 45-106 – Prospectus and Registration Exemptions:
•   accredited investor;
•   family, friends and business associates;
•   offering memorandum; or
•   CAD$150,000 minimum purchase.

Some example EMDs include:
- Raintree Financial Solutions
- Frank Capital
- Accilent Financial
- Privest
- Blackbridge Wealth

Enquirica Research is a Calgary based research firm focusing on independent analysis of alternative asset classes and investment opportunities in exempt securities that target investments in western Canada. For copies of Enquirica research register at www.enquirica.com.

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Enquirica Research is a Calgary based research firm focusing on analysis of alternative asset classes and investment opportunities that target western Canada. For copies of Enquirica research register at www.enquirica.com.