INVESTMENT MANAGEMENT BULLETIN NATIONAL INSTRUMENT AT A GLANCE (UPDATED!*) APRIL 2016

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1 INVESTMENT MANAGEMENT BULLETIN APRIL 2016 NATIONAL INSTRUMENT AT A GLANCE (UPDATED!*) Since 2009, we have prepared an Investment Management Bulletin that sets out the main features of National Instrument in a style that allows for quick comprehension and understanding. Our most recent edition of National Instrument At a Glance has been updated to include all of the client relationship model changes that are now in force or will be in force by July 15, It also reflects other amendments made to NI in recent years, such as mandatory membership in OBSI and the use of Form F4 to report NAV adjustments to the members of the CSA. Please contact your usual lawyer in BLG s Investment Management Group if you have any questions about National Instrument and its application to your business. Please access a list of our lawyers here. Our Registrant Regulation and Compliance Practice is the largest practice of its kind in Canada, with recognized experts in this field. We work with Canadian and international advisers (portfolio managers and investment advisers), fund managers and dealers, including SRO members and exempt market dealers. We provide a full range of legal services, including advice and assistance on becoming and continuing to be registered with the Canadian securities regulators and/or members of the SROs. Our services for our clients have included developing and designing, as well as reviewing and assessing, compliance procedures and practices relating to regulatory and internal policy requirements, assisting in building or strengthening compliance capability, conducting audits and investigations, identifying operational problems and devising appropriate solutions and responding to regulatory developments. We also provide advice on structuring investment funds and offerings of investment funds, including hedge funds, pursuant to private placements and public offerings within Canada to comply with Canadian securities laws. We are counsel to the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada and are pleased to assist The s Institute of Canada, the Portfolio Management Association of Canada and the Investment Industry Association of Canada, along with other industry trade associations from time to time. We have excellent working relationships with the Canadian securities regulators and other government officials. * Including CRM-2 amendments in force July 15, 2016

2 2 3 DEALERS Investment Dealer IIROC Membership any securities and/or acting as underwriter of any securities Registration Requirements Dealing Representative UDP and CCO partner. Minimum Capital and Insurance Financial Reporting Account Opening Suitability KYC NI and supplemented by client disclosure NI Account Opening, Compliance and Internal Controls Recordkeeping Record keeping NI and supplemented by Accurately record business and demonstrate compliance Keep records for 7 years and in format so that they can be read by regulator in a reasonable period of time Compliance Systems NI and supplemented by System of controls and supervision: compliance with securities legislation and manage business risks Written policies and procedures Identify and respond to conflicts of interest Complaint Handling Complaint handling procedures and dispute resolution with membership in OBSI Specific rules also in Québec Mutual Fund Dealer MFDA Membership mutual fund securities CIFCE, CSCE or IFICCE or advising rep (portfolio manager) proficiency partner with (i) CIFCE, CSCE or IFICCE plus PDOE, MFDCE or CCOQE, or (ii) CCO proficiency Suitability KYC NI and client disclosure NI and except requirements except requirements, but complaint handling and dispute resolution under Scholarship Plan Dealer Business of trading in scholarship plan securities RESPDAC sales rep exam partner with (i) rep proficiency plus PDOE or CCOQE and (ii) RESPDAC Branch Manager Exam Capital $50K Insurance based on formula with minimum of $50K per employee, agent and dealing representative or $200K (whichever is less) Annual audited financial statements and 90 days of year end and quarterly unaudited financial statement and 30 days of quarter end KYC and suitability client disclosure No suitability for permitted clients who waive requirement Complaint handling procedures and dispute resolution with membership in OBSI mandated under NI Specific rules also in Québec Exempt Market Dealer prospectus exempt securities (including securities that are qualified under a prospectus, but could have been sold pursuant to exemptions) or acting as underwriter of prospectus exempt securities Restrictions on trading in listed securities in British Columbia, Alberta, Manitoba, Saskatchewan and the territories for EMDs entitled to rely on local exemptions known as the North-Western Exemptions CSCE, EMPE or advising rep (portfolio manager) proficiency or CFA + 1 year of sales experience in last 3 years partner with (i) rep proficiency plus PDOE or CCOQE, or (ii) CCO proficiency and 12 months relevant securities industry experience in past 36 months Annual audited financial statements and 90 days of year end

3 4 5 ADVISERS (PORTFOLIO MANAGERS) AND INVESTMENT FUND MANAGERS Adviser (Portfolio Manager) Business of advising others in securities Registration Requirements Advising Representative Advising Rep: (i) CFA plus 12 months relevant investment management experience in 36-month period preceding application or (ii) CIM plus 48 months (12 months of which is in 36-month period preceding application) of relevant investment management experience Associate Advising Rep: Level 1 of CFA or CIM plus 24 months relevant investment management experience UDP and CCO partner, with (i) CFA, CA, CGA, CMA, Québec Notary or lawyer with (a) CSCE (unless have CFA) and PDOE or CCOQE and 3 years specified experience or (ii) CSCE and PDOE or CCOQE and employed by (a) regis trant (adviser or investment dealer) for 5 years, including 3 years in compliance or (b) employed by financial institution for 5 years in portfolio management comp liance and 1 year by registered dealer or adviser or (iii) advising rep proficiency and PDOE or CCOQE Minimum Capital and Insurance Capital $25K Insurance $50K if not holding or having access to client assets. If hold or have access to client assets, based on formula with minimum of $200K Financial Reporting Annual audited financial statements and Form F1 within 90 days of year end Account Opening plan dealers Account Opening, Compliance and Internal Controls Recordkeeping Compliance Systems Complaint Handling Manager Acting as investment fund manager NOTE: Multilateral Policy Registration Requirement for Managers BC, Alberta, Saskatchewan, Manitoba, PEI, Nova Scotia, New Brunswick and the three territories and Multi-lateral Instrument Registration Exemptions for Non-Resident Investment Fund Managers Ontario, Quebec and Newfoundland and Labrador set different requirements for when registration as an IFM is required in the applicable provinces/territories. partner with (i) CFA, CA, CGA, CMA, Québec Notary or lawyer with CSCE (unless have CFA) and PDOE or CCOQE and specified investment management experience (of either 3 or 4 years) or (ii) CIFCE, CSCE or IFICCE, PDOE or CCOQE and 5 years experience with a registrant or an invest ment fund manager, including 3 consecutive years in compliance capacity or (iii) portfolio manager CCO proficiency Capital $100K Insurance based on formula with a minimum of $200K, with annual and quarterly description of any NAV adjustments using Form F4 None, other than in respect of referral arrangements and client disclosure

4 6 7 CLIENT RELATIONSHIP REQUIREMENTS (CRM)* Investment Dealer IIROC Membership and rules Relationship Disclosure Information RDI Exemption from certain RDI requirements for dealers acting on instructions of registered adviser (portfolio manager) Pre-Trade Disclosure Oral or written pre-trade disclosure relating to charges, DSC and trailing commissions Exemption for dealers acting on instructions of registered adviser who Trade Confirmations enhancements Mandated content and delivery of trade confirms New disclosure enhancements include (i) the annual yield for any debt securities (ii) specified disclosure regarding dealer compensation in connection with debt securities and (iii) the amount of each transaction charge, DSC or other charge for the transaction and total amount of such charges Account statements Nominee Name Required at least quarterly (monthly in certain prescribed circumstances) Disclosure to include (i) market value for each security (ii) ID securities subject to DSC (iii) specified information about the position cost of each security, which may be either book cost or original cost who regarding the mandated position cost information Account statements Client Name Required at least quarterly disclosure on (i) market value for each security (ii) name of the party that holds or controls each security and a description of how it is held (iii) ID which securities are subject to DSC (iv) specified information about the position cost of each security, which may be either book cost or original cost Requirements on how reporting on client name securities to be combined with reporting on nominee name securities who are not individuals IIROC exemptions granted to firms with offbook accounts Annual report of cost and compensation Mandated information about charges and compensation paid to the firm, including trailing commissions Report nominee name securities separately from client name securities Exemption for permitted clients who are not individuals Annual Investment Performance Report Mandated information about market value at various periods, and of activity in account, annual change in value, cumulative change in value, annualized total percentage return at specified periods Report nominee name securities separately from client name securities Information must be presented using text, tables, charts and notes who are not individuals IIROC exemptions granted to firms with offbook accounts Mutual fund dealer MFDA membership and rules Exemption from certain RDI requirements for dealers acting on instructions of registered adviser (portfolio manager) adding or increasing operating charges not applicable except that MFDs not required to provide monthly statements (except no exemptions granted) (except no exemptions granted) Scholarship Plan Dealer Disclosure of specified risks required, along with other enhancements adding or increasing operating charges Include the amount of each transaction charge, DSC or other charge for the transaction and total amount of such charges all scholarship plan securities held in client name, but annually only. Additional mandatory disclosure about enrolment fees and no requirement to provide position cost information., with additional mandatory disclosure about enrolment fees Mandated disclosure on amount invested to date, total amount that would be returned to client if plan cancelled, reasonable projection of future payments client may receive and summary of terms that affect whether or not client or beneficiary loses contributions, earnings or government contributions Information must be presented using text, tables, charts and notes Exempt Market Dealer Exemption for dealers acting on instructions of registered adviser Portfolio Manager Oral or written pre-trade disclosure relating to charges, DSC and trailing commissions for clients without managed accounts who. except that PMs must provide statements on a monthly basis if requested by client Manager IFMs must provide required information to dealers Provide annual report to orphan accounts IFM must provide required information to dealers and advisers * except for IIROC and MFDA members, all requirements under NI

5 INVESTMENT MANAGEMENT GROUP National Leader John E. Hall Toronto Regional Leaders Jonathan L. Doll Calgary Christian Faribault Montréal Lynn M. McGrade Toronto Jason J. Brooks Vancouver The Investment Management Group at Borden Ladner Gervais LLP consists of a team of over 50 lawyers located in offices across Canada who understand the business, regulatory and administrative issues that face participants in the Canadian investment management industry. We have the largest and most experienced investment management practice in Canada, having provided legal services to Canadian and international industry participants for over 50 years. Our clients, both Canadian and international, include open and closed-end investment fund complexes, providers of alternative investment, pooled and private equity products, investment advisers and dealers, financial institutions, service providers, securities regulators, self-regulatory organizations and industry trade associations. Our lawyers have long-standing working relationships with the Canadian securities regulators and other government officials, as well as with The s Institute of Canada and key industry leaders. National Instrument At a Glance is prepared by Rebecca Cowdery rcowdery@blg.com BORDEN LADNER GERVAIS LLP LAWYERS PATENT & TRADEMARK AGENTS Calgary Centennial Place, East Tower 1900, rd Ave S W, Calgary, AB, Canada T2P 0R3 T F Montréal 1000, De La Gauchetière St W, Suite 900 Montréal, QC, Canada H3B 5H4 T F Ottawa World Exchange Plaza, 100 Queen St, Suite 1300 Ottawa, ON, Canada K1P 1J9 T F (Legal) F (IP) ipinfo@blg.com (IP) Toronto Scotia Plaza, 40 King St W, Toronto, ON, Canada M5H 3Y4 T F Vancouver 1200 Waterfront Centre, 200 Burrard St, P.O. Box Vancouver, BC, Canada V7X 1T2 T F blg.com This bulletin is prepared as a service for our clients and other persons dealing with investment management issues. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered. No part of this publication may be reproduced without prior written permission of Borden Ladner Gervais LLP (BLG). This bulletin has been sent to you courtesy of BLG. We respect your privacy, and wish to point out that our privacy policy relative to alerts may be found at If you have received this alert in error, or if you do not wish to receive further alerts, you may ask to have your contact information removed from our mailing lists by phoning BLG.LAW1 or by ing unsubscribe@blg.com Borden Ladner Gervais LLP Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.