Nick Wright, BA JD MBA LLM (Tax)

Wright Business Law

Record-keeping is one of the most consequential, and most frequently misunderstood, compliance obligations affecting private investment funds and their sponsors in Ontario and across Canada. The applicable requirements vary depending on the fund’s structure, activities, and regulatory status. Registered firms, including investment fund managers (IFMs), portfolio managers (PMs), and exempt market dealers (EMDs), are subject to the books-and-records requirements set out in National Instrument 31-103 ‘Registration Requirements, Exemptions and Ongoing Registrant Obligations’. Non-registered fund sponsors and issuers conducting exempt distributions are generally not subject to NI 31-103’s registrant record-keeping regime. However, they must still maintain records sufficient to demonstrate compliance with securities laws, support reliance on prospectus exemptions under National Instrument 45-106 ‘Prospectus Exemptions’, satisfy corporate and tax obligations, and respond to regulatory inquiries.

Ontario Securities Commission (OSC) and other provincial regulatory compliance reviews and enforcement matters frequently identify deficiencies relating to investor qualification, exempt distribution documentation, supervisory oversight, and record retention. These issues are often most pronounced among emerging fund sponsors and general partners (GPs) that have not yet implemented formal compliance systems, document management procedures, and governance controls.

This article examines the record-keeping obligations applicable to both registered and non-registered fund participants, including the records that should be maintained, the legal authorities that give rise to those obligations, and practical approaches to retention, accessibility, and regulatory preparedness. It also examines areas that continue to attract regulatory attention, including electronic record storage, cloud-based and cross-border retention practices, and oversight of third-party service providers responsible for maintaining fund records.

Regulatory Framework & Sources of Law

Record-keeping obligations affecting private investment funds and their sponsors in Ontario arise from several overlapping legal and regulatory regimes. The nature and scope of those obligations depend in part on whether the entity is registered under securities legislation.

NI 31-103 – Registrant Record-Keeping Requirements

Sections 11.5 and 11.6 of NI 31-103 impose detailed books-and-records obligations on registered firms, including investment fund managers (IFMs), portfolio managers (PMs), exempt market dealers (EMDs), and other registrants. These provisions require registrants to maintain records necessary to demonstrate compliance with securities legislation, support client and transaction activity, and facilitate regulatory reviews and audits. Subject to certain exceptions, records generally must be retained for seven years, with the most recent two years maintained in a readily accessible location.

Securities Act (Ontario)

The Securities Act (Ontario) grants the OSC broad authority to require the production of records and to inspect books and records relevant to compliance with securities laws. These powers extend beyond registrants and may apply to issuers, fund sponsors, and other market participants where records are relevant to compliance with Ontario securities law. As a practical matter, entities relying on prospectus exemptions should maintain records sufficient to substantiate compliance if requested by regulators.

NI 45-106 – Prospectus Exemption Compliance

National Instrument 45-106 Prospectus Exemptions does not establish a comprehensive books-and-records regime. However, issuers relying on prospectus exemptions should maintain documentation supporting exemption eligibility, investor qualification, subscription acceptance, and exempt distribution reporting. These records are critical for demonstrating compliance with exemption requirements and supporting information reported in Form 45-106F1 Reports of Exempt Distribution.

Anti-Money Laundering Requirements

Where a fund sponsor, manager, dealer, adviser, or other participant qualifies as a reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (PCMLTFA) and related regulations, additional record-keeping obligations may apply. These obligations can include client identification records, beneficial ownership information, transaction records, compliance documentation, and other prescribed records. The scope of these requirements depends on the entity’s activities and regulatory status under the PCMLTFA.

Corporate, Tax and Privacy Requirements

Additional record-retention obligations arise under corporate, tax, and privacy legislation. Corporate statutes such as the Business Corporations Act (Ontario) (OBCA) and the Canada Business Corporations Act (CBCA) require corporations to maintain prescribed corporate records. Tax legislation requires retention of records supporting tax filings, partnership allocations, and other reporting obligations. Privacy legislation, including the Personal Information Protection and Electronic Documents Act (PIPEDA), imposes requirements relating to the collection, safeguarding, retention, and destruction of personal information.

Together, these regimes create a layered record-keeping framework for private investment funds, fund sponsors, and registrants operating in Ontario. Although the specific legal obligations differ depending on the entity’s registration status and activities, maintaining complete, accessible, and well-organized records is fundamental to demonstrating compliance across all regulatory regimes.

Application in Practice

Effective record-keeping should be integrated into a fund’s day-to-day operations rather than treated as a standalone compliance function. Whether the fund sponsor is registered or non-registered, maintaining complete and accessible records is critical to demonstrating compliance with securities laws, supporting exempt distributions, responding to regulatory inquiries, and managing operational risk.

Investor onboarding records typically include subscription agreements, investor questionnaires, accredited investor or other exemption-related documentation, beneficial ownership information, side letters, and supporting materials used to verify investor eligibility. Where applicable, onboarding records may also include know-your-client (KYC) and anti-money laundering (AML) documentation.

Fundraising records should include offering documents, pitch decks, marketing materials, investor correspondence, meeting notes, diligence requests, and related communications. Maintaining a clear record of materials provided to prospective investors helps demonstrate that disclosure was accurate, balanced, and consistent with the fund’s offering documents.

Issuers relying on prospectus exemptions should maintain records supporting exempt distributions, including investor qualification, exemption categories relied upon, subscription acceptance records, and information reported in Form 45-106F1 Reports of Exempt Distribution.

Investment and portfolio management records may include investment memoranda, due diligence materials, valuation analyses, investment committee materials, conflict-of-interest assessments, and records documenting significant investment decisions. For registered firms, these records may also support compliance with registrant obligations relating to supervision, suitability, and conflict management.

Financial and tax records should support audited financial statements, management fee calculations, carried interest allocations, capital account balances, partnership allocations, distributions, and tax filings. Records should be sufficiently detailed to support both regulatory inquiries and tax audits.

Registered firms are subject to additional books-and-records requirements under NI 31-103 and should maintain compliance manuals, supervisory records, complaint files, compliance testing documentation, annual compliance reports, and other records demonstrating adherence to registrant obligations.

Digital Record-Keeping and Regulatory Focus

Electronic record-keeping is widely accepted and often preferable to paper-based systems, provided records remain complete, accessible, secure, and capable of being produced promptly upon request. Fund sponsors should implement documented policies addressing access controls, version management, backup procedures, cybersecurity safeguards, and record retention schedules.

Regulators also focus on record-keeping arrangements involving third-party service providers such as fund administrators, custodians, exempt market dealers, and fund accountants. Even where records are maintained by a service provider, the fund sponsor remains responsible for ensuring that required records can be accessed and produced when needed. Service agreements should clearly address record retention, ownership, accessibility, and regulatory cooperation.

Cross-border and cloud-based storage arrangements require particular attention. Although records may be stored outside Canada, fund sponsors should ensure they retain prompt and unrestricted access to all information necessary to respond to regulatory reviews, audits, investor inquiries, and legal proceedings.

A recurring source of regulatory concern is the existence of incomplete, inconsistent, or outdated records. Deficiencies involving investor qualification, exempt distribution documentation, valuation support, conflict management records, and investment decision-making materials can undermine a fund’s ability to demonstrate compliance and may result in regulatory findings or remediation requirements.

Illustrative Scenarios

A private fund conducting ongoing exempt distributions relies on investor questionnaires completed several years earlier and retains little supporting evidence regarding accredited investor status. During a regulatory review, the fund is asked to substantiate the prospectus exemptions relied upon for a number of investors. Because supporting documentation is incomplete, the fund faces questions regarding exemption eligibility and must undertake a costly remediation process, including updating investor records and strengthening onboarding procedures.

In another scenario, an emerging private credit fund stores investment memoranda, valuation analyses, committee materials, and due diligence records across multiple email accounts, shared drives, and personal devices. When regulators request documentation supporting certain investment decisions, the fund struggles to locate complete records. The review identifies deficiencies in the fund’s document management practices and highlights the importance of maintaining centralized and accessible records.

A third scenario involves a real estate fund that outsources investor administration and record retention to a third-party service provider. The fund assumes the service provider maintains all required subscription, identification, and compliance records. When records are requested during a regulatory review, the fund discovers that certain documents were never retained or are not readily accessible. The fund remains responsible for producing the records and must implement enhanced oversight procedures and contractual controls governing record retention and access.

Compliance Checklist 

A defensible record-keeping program should:

• Identify and catalogue records required under applicable securities, anti-money laundering, corporate, tax, and privacy laws.
• Establish documented procedures for retaining records generated through investor onboarding, fundraising, investment management, valuation, reporting, and compliance activities.
• Maintain records in a centralized, secure, and searchable system.
• Implement documented controls governing version management, user access, encryption, and data backups.
• Assign clear responsibility for record creation, maintenance, retention, and retrieval across internal personnel and third-party service providers.
• Conduct periodic reviews or audits to verify record completeness, accuracy, and accessibility.
• Maintain retention schedules that satisfy applicable statutory and regulatory requirements.
• Implement document destruction procedures that are consistent with privacy and data protection obligations.
• Ensure records can be produced promptly in response to regulatory reviews, audits, litigation, investor inquiries, or other information requests.
• Regularly assess record-keeping policies and procedures to identify gaps, address operational risks, and support ongoing compliance.

Conclusion & Next Steps

Effective record-keeping is a core component of a private fund’s governance and compliance framework. The specific legal requirements will vary depending on the fund’s structure, activities, and registration status, but all fund sponsors should maintain records that are complete, accurate, accessible, and capable of demonstrating compliance with applicable securities, corporate, tax, anti-money laundering, and privacy obligations.

Regulatory reviews frequently focus on the quality, accessibility, and completeness of a firm’s records. Well-organized record-keeping systems can help support exempt distribution compliance, facilitate regulatory inquiries, reduce operational risk, and strengthen governance oversight. Fund sponsors should periodically review their record-retention policies, document management practices, and service provider arrangements to ensure they remain aligned with evolving regulatory expectations and operational requirements.

As a practical next step, fund sponsors should assess whether their current record-keeping framework clearly identifies required records, assigns responsibility for maintaining them, and provides timely access to documentation needed to support exempt distributions, regulatory reviews, audits, and investor inquiries. Emerging managers, in particular, should consider conducting a periodic records audit to identify gaps in onboarding files, exempt distribution records, valuation materials, and service provider oversight before those deficiencies become regulatory issues.

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If you are forming, restructuring, or operating a private investment fund in Canada, contact us to schedule an initial consultation with Nick Wright.