As outlined in a previous post, licensed exempt market dealers are subject to rigorous regulatory and training standards. Just how does one set up an exempt market dealer in Canada? Here’s an overview of the process:
First, a registrant must ensure that proficiency requirements for becoming an exempt market dealer have been met. These requirements include (but are not necessarily limited to):
- Registering one or more individuals as the exempt market dealer’s Chief Compliance Officer, Ultimate Designated Person, and Dealing Representative. Only individuals who meet certain conditions can be classified as such:
- A Dealing Representative must have: 1) passed the Canadian Securities Course Exam (current prices available here); 2) passed the Exempt Market Products Exam (current prices available here); 3) earned a CFA Charter (via the Chartered Financial Analyst program) and accrued 12 months of relevant securities industry experience in the 36-month period preceding their registration; 3) satisfied the conditions set out in section 3.11 [portfolio manager – advising representative] of National Instrument 31-103; and 4) either completed Level 1 of the Chartered Financial Analyst program and gained 24 months relevant management experience or been granted the Canadian Investment Manager designation and gained 24 months of relevant investment experience.
- A Chief Compliance Officer must have: 1) passed both the Canadian Securities Course Exam and the Exempt Market Products Exam (see above); 2) passed the PDO Exam (current prices available here) or the Compliance Officers Qualifying Exam (current prices available here); and 3) accrued 12 months of relevant securities industry experience in the 36-month period prior to registration. Alternately, the candidate must fulfil the list of requirements outlined in section 3.13 [portfolio manager – chief compliance officer].
- An Ultimate Designated Person is the CEO, sole proprietor, or officer in charge of the division seeking to set up an exempt market dealer as per section 11.2.
Second, a registrant must enroll in the National Registration Database (NRD). This involves sending original hardcopies and a $500 dollar cheque to cover NRD processing fees. For the most up-to-date application forms, please refer to the NRD’s website.
Third, a registrant must complete and submit Form 33-109F6 Firm Registration in order to register as a dealer, advisor, or investment fund manager, or to list additional Canadian jurisdictions on a pre-existing registration. Suitability is contingent on meeting certain criteria, including but not limited to:
- Fulfilling a minimum capital requirement of $50,000.
- Maintaining bonding or insurance that fulfils various coverage thresholds and requirements.
- Providing an application fee of $1,300 in Ontario (and potentially additional fees if applying for additional jurisdictions).
- Providing various supporting documentation such as business plan, organization chart, working capital calculations, audited financial statements, ownership chart, etc.
Fourth, a registrant must complete and submit Form 33-109F4 Registration of Individuals and Review of Permitted Individuals.
Fifth, if there’s any intention to work with individual investors, a registrant must seek membership within the Ombudsman for Banking Services and Investments (OBSI). Membership details can be found here, and a fee schedule here.
Finally, the Ontario Securities Commission provides a useful checklist outlining all necessary components of a successful exempt market dealer application. The checklist can be found here.
The process of registering as an exempt market dealer in Canada is changing all the time, and we strongly encourage that you consult with the relevant authorities to get the most up-to-date information. You can also book a telephone consultation to discuss how Wright Business Law can help you set up an exempt market dealer.