Giving Investment Advice to Canadian Clients -- Volume 1, Number 5 - August 19, 2013

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U.S. and other non-Canadian investment advisers can easily become qualified to give investment advice to Canadian clients under Canada’s international adviser exemption. Only a few simple steps need to be taken before starting to use the exemption.

How Does Canada Regulate Investment Advisers?

Under Canadian securities laws, you need to be registered as an adviser if you are in the business of advising anyone in Canada about investing in securities or buying or selling securities or derivatives. However, even if the adviser registration requirement is triggered, a number of exemptions are available, including one for international advisers.

What Kinds of Advisers Must Register?

The Canadian securities regulators have said that financial advisers to the parties in an M&A transaction are not normally required to register as advisers, even though the M&A transaction may result in trades in securities as a result of their advice. Further, professionals such as lawyers, accountants, engineers, geologists and teachers who provide advice on securities in the normal course of their professional activities are not required to register.

There is also an exemption for giving general advice that is not tailored to a specific recipient, as long as the adviser discloses any financial interest or other potentially conflicting interest it may have. So, providing information through newsletters, articles in newspapers or magazines, or on websites, over the Internet or by radio or television would generally be exempt from the adviser registration requirement if the required disclosure of financial or other interests is made.

What Does the International Adviser Exemption Allow?

Even if an adviser registration requirement is triggered, a non-Canadian adviser can still advise Canadian clients without registering as an adviser in Canada by using the international adviser exemption. Under that exemption, an adviser can provide advice to Canadian permitted clients – a category that includes institutional investors as well as high net worth individuals. The advice must relate primarily to securities of non-Canadian issuers, but may also include incidental advice about securities of Canadian issuers.

Who Can Qualify as an International Adviser?

An international adviser must have its head office or principal place of business outside Canada, must be in business as an adviser in its home country and must either be registered as an adviser or be able to rely on an adviser registration exemption in its home country. International advisers may not earn more than 10% of their gross worldwide revenue from their activities in Canada.

What Must Be Done Before Using the International Adviser Exemption?

Before it can use the international adviser exemption, the adviser must appoint an agent for service of process – typically a Canadian law firm – in each province where it will be providing advice. The adviser must also file a notice with the securities regulator in that province, stating that it will be relying on the exemption. Finally, each Canadian client must receive a notice containing prescribed information, including the name and address of the agent for service of process in Canada and a warning that the adviser is not registered as an adviser in Canada.

Are There Ongoing Reporting or Other Obligations?

An adviser relying on the international adviser exemption must file a monthly report with the Canadian securities regulators under the reporting rules relating to terrorist financing and United Nations sanctions.

The adviser must also give an annual notice to the Canadian securities regulators stating that it is relying on the international adviser exemption. In the province of Ontario, the adviser must pay an annual fee, which is based on the amount of revenue the adviser has earned during the year through its activities in Ontario.

 

Topics:  Canada, Investment Adviser

Published In: Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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