MFDA Rule 2

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2.1	GENERAL
2.1.1	Standard of Conduct. Each Member and each Approved Person of a Member shall:
	(a)	deal fairly, honestly and in good faith with its clients;
	(b)	observe high standards of ethics and conduct in the transaction of business;
	(c)	not engage in any business conduct or practice which is unbecoming or detrimental to the public interest; and
	(d)	be of such character and business repute and have such experience and training as is consistent with the standards described in this Rule 2.1.1, or as may be prescribed by the Corporation.

Related Notices

MR-0047 – Personal Financial Dealings With Clients (Issued October 3, 2005)

MR-0065 – Churning (issued October 4, 2007)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

2.1.2	Member Responsible. Each Member shall be responsible for the acts and omissions of each of its Approved Persons and other employees and agents relating to its business for all purposes under the By-laws and Rules.
2.1.3	Confidential Information
	(a)	All information received by a Member relating to a client or the business and affairs of a client shall be maintained in confidence by the Member and its Approved Persons and other employees and agents. No such information shall be disclosed to any other person or used for the advantage of the Member or its Approved Persons or other employees or agents without the prior written consent of the client or as required or authorized by legal process or statutory authority or where such information is reasonably necessary to provide a product or service that the client has requested.
	(b)	Each Member shall develop and maintain written policies and procedures relating to confidentiality and the protection of information held by it in respect of clients.

Related Notices

MR-0017 – Transfer of Client Accounts (Issued March 28, 2003)

2.1.4	Conflicts of Interest
	(a)	Each Member and Approved Person shall be aware of the possibility of conflicts of interest arising between the interests of the Member or Approved Person and the interests of the client. Where an Approved Person becomes aware of any conflict or potential conflict of interest, the Approved Person shall immediately disclose such conflict or potential conflict of interest to the Member.
	(b)	In the event that such a conflict or potential conflict of interest arises, the Member and the Approved Person shall ensure that it is addressed by the exercise of responsible business judgment influenced only by the best interests of the client and in compliance with Rules 2.1.4(c) and (d).
	(c)	Any conflict or potential conflict of interest that arises as referred to in Rule 2.1.4(a) shall be immediately disclosed in writing to the client by the Member, or by the Approved Person as the Member directs, prior to the Member or Approved Person proceeding with the proposed transaction giving rise to the conflict or potential conflict of interest.
	(d)	Each Member shall develop and maintain written policies and procedures to ensure compliance with Rules 2.1.4(a), (b) and (c).

History	Bulletin #0186-P – Amendments to MFDA Rule 2.1.4 (Conflicts of Interest)
Related Policy	MFDA Policy No. 2 – Minimum Standards for Account Supervision (issued February 23, 2001)
Related Notices	MR-0047 – Personal Financial Dealings with Clients (issued October 3, 2005) MR-0054 – Conflicts of Interest – MFDA Rule 2.1.4 (issued June 22, 2006) MR-0062 – Exempt Securities of Non-arm's Length Issuers (issued May 24, 2007) MR-0064 – Maintaining Evidence of Disclosure (issued August 22, 2007) MR-0065 – Churning (issued October 4, 2007)
Related Bulletins	#0149-P – Argyle funds SPC Inc. (issued July 7, 2005)

2.2	CLIENT ACCOUNTS
2.2.1	"Know-Your-Client". Each Member and Approved Person shall use due diligence:
	(a)	to learn the essential facts relative to each client and to each order or account accepted;
	(b)	to ensure that the acceptance of any order for any account is within the bounds of good business practice; and
	(c)	to ensure that each order accepted or recommendation made for any account of a client is suitable for the client and in keeping with the client's investment objectives; and
	(d)	to ensure that, notwithstanding the provisions of paragraph (c), where a transaction proposed by a client is not suitable for the client and in keeping with the client’s investment objectives, the Member has so advised the client before execution thereof.

History	Bulletin #0050-M – Amendments to MFDA Rules and MFDA Policy No. 3 (Handling Client Complaints) (issued February 3, 2004) Bulletin #0178-P – Housekeeping Amendments to MFDA Rule 2.2.1: Section 23 of MFDA By-Law No. 1: MFDA Financial Questionnaire and Report (Part 1 Auditor's Report) and MFDA Internal Control Policy Statements (issued December 13, 2005)
Related Policy	MFDA Policy No. 2 - Minimum Standards for Account Supervision (Issued February 23, 2001)
Related Notices	MR-0025 – Suitability Obligations for Unsolicited Orders (issued February 24, 2004) MR-0041 – Automatic Conversion of Deferred Sales Charge to 0% Front End Load Untis Without Client Knowledge or Consent (issued June 8, 2005) MR-0045 – Joint Representative Codes (issued September 19, 2005) MR-0048 – Know-Your-Product (issued October 31, 2005) MR-0049 – Charitable Donation Programs (issued December 5, 2005) MR-0069 – Suitability Guidelines (issued April 14, 2008)
Related Bulletins	#0056-C – Common Deficiencies Noted during On-site Examinations of Members (issued February 9, 2004) #0149-P – Argyle Funds SPC Inc. (issued July 7, 2005) #0160-C – Misleading Communications Regarding Investment Loans by Loan Providers (August 18, 2005) #0183-C – Second Round of Compliance Examinations (issued January 27, 2006) #0273-M – The Proceeds of Crime (Money Laundering) and terrorist Financing Act ("Act") and Regulations ("Regulations") – Changes to Obligations for Reporting Entities (Securities Dealers) (issued August 8, 2007) #0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009) #0431-C - Leverage Guide, Leverage Review Worksheet & Approved Person Leveraging Analysis Template

2.2.2

New Account Application Form. A New Account Application Form must be completed for each new account of a client. If the New Account Application Form does not include know-your-client information, this must be documented on a separate Know-Your-Client form. Such form or forms shall be duly completed to conform with the requirements of Rule 2.2.1 and shall be signed by the client and dated. Account numbers must not be assigned unless they are accompanied by the proper name and address for the client and such name and address must be supported by the New Account Application Form.

Related Policy

MFDA Policy No. 2 – Minimum Standards for Account Supervision (issued February 23, 2001)

Related Bulletins

#0029-M – Client Identification requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (issued August 20, 2003)

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0147-P – Revised FINTRAC Guideline 6E: Record Keeping and Client Identification for Securities Dealers (issued June 24, 2005)

#0182-P – FINTRAC Interpretation Notice No. 3: Opening an Account for a Person or Entity Engaged in the Business of Dealing in Securities Only Outside of Canada (issued January 20, 2006)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

#0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009)

2.2.3

New Account Approval. Each Member shall designate a trading partner, director or officer or, in the case of a branch office, a branch manager reporting directly to the designated partner, director or officer, who shall be responsible for approval of the opening of new accounts and the supervision of account activity. The designated person shall prior to or promptly after the completion of any initial transaction specifically approve the opening of such account in writing and a record of such approval shall be maintained in accordance with Rule 5.

History

Bulletin #0050-M – Amendments to MFDA Rules and MFDA Policy No. 3 (Handling Client Complaints) (issued February 3, 2004)

Related Policy

MFDA Policy No. 2 – Minimum Standards for Account Supervision (issued March 16, 2001)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

2.2.4	Updating Know-Your-Client Information
	(a)	The Form documenting know-your-client information must be updated to include any material change in client information whenever a Member or Approved Person or other employee or agent becomes aware of such change including pursuant to Rule 2.2.4(b).
	(b)	Without reducing the responsibility of Members in Rule 2.2.1, all Members must at least annually, in writing, request each client to notify the Member if the know-your-client information previously provided to the Member or the client’s circumstances have materially changed. The date of such request and the date upon which any such client information is received and recorded or amended must be retained.
	(c)	Written authorization must be obtained from the client for any change in a client name.

Related Policy	MFDA Policy No. 2 – Minimum Standards for Account Supervision (issued March 16, 2001)
Related Bulletin	#0056-C – Common Deficiencies Noted During On-Site Examinations of Members (issued February 9, 2004)
Related Notice	MR-0069 – Suitability Guidelines (issued April 14, 2008)

2.3

POWER OF ATTORNEY/LIMITED TRADING AUTHORIZATION/DISCRETIONARY TRADING

Related Bulletin

#0346-P – Housekeeping Amendments to MFDA Rules, Policies and Form 1 – Financial Questionnaire and Report and Other Amendments (issued December 11, 2008)

2.3.1	(a)	Prohibition. No Member or Approved Person shall accept or act upon a general power of attorney or other similar authorization from a client in favour of the Member or Approved Person or engage in any discretionary trading.
	(b)	Exception. Notwithstanding the provisions of paragraph (a), an Approved Person may accept or act upon a general power of attorney or similar authorization from a client in favour of the Approved Person where such client is a spouse, parent or child of the Approved Person and provided that:
		(i)	the Approved Person notifies the Member of the acceptance of the general power of attorney or similar authorization;
		(ii)	an Approved Person other than the Approved Person holding the general power of attorney must be the Approved Person of record on the account; and
		(iii)	such other conditions as prescribed by the Corporation are met.

History	#0050-M – Amendments to MFDA Rules and MFDA Policy No. 3 (Handling Client Complaints) (issued February 3, 2004
Related Notice	MR-0031 – Powers of Attorney – Rule 2.3.1. – Exception for Family Members of Approved Persons (issued October 29, 2004)
Related Bulletin	#0346-P – Housekeeping Amendments to MFDA Rules, Policies and Form 1 – Financial Questionnaire and Report and Other Amendments (issued December 11, 2008)

2.3.2

Limited Trading Authorization. A Member or Approved Person may accept a limited trading authorization from a client for the express purpose of facilitating trade execution. In such circumstances a form of limited trading authorization as prescribed by the Corporation must be completed and approved by the compliance officer or branch manager, and retained in the client’s file.

Related Notices

MR-0038 – Revised Limited Trading Authorization Form and Guidelines for Individual and Joint Accounts (issued April 15, 2005)

MR-0039 – Implementation Date for Revised Limited Trading Authorization for New Accounts (Individual and Joint) (issued April 26, 2005)

MR-0042 – Limited Trading Authorizations and Intermediary Accounts (issued June 16, 2005)

2.3.3

Designation. Each trade made pursuant to a limited trading authorization and its corresponding account must be identified as such in the books and records of the Member and on any order documentation.

Related Notices

MR-0035 – Recording and Maintaining Evidence of Client Trade Instructions (issued December 10, 2004)

MR-0041 – Automatic Conversion of Deferred Sales Charge to 0% Front End Load Untis without Client Knowledge or Consent (issued June 8, 2005)

MR-0066 – Prohibition on Use of Pre-Signed Forms (issued October 31, 2007)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0346-P – Housekeeping Amendments to MFDA Rules, Policies and Form 1 – Financial Questionnaire and Report and Other Amendments (issued December 11, 2008)

2.4

REMUNERATION, COMMISSIONS AND FEES

2.4.1

(a)

Payable by Member Only. Any remuneration in respect of business conducted by an Approved Person on behalf of a Member must be paid by the Member (or its affiliates or its related Members which have received it from the Member) directly to and in the name of the Approved Person.

No Approved Person in respect of a Member shall accept or permit any associate to accept directly or indirectly, any remuneration, gratuity, benefit or any other consideration from any person other than the Member or its affiliates or its related Members, in respect of the business carried out by such Approved Person on behalf of the Member or its affiliates or its related Members.

(b)

Payment of Commissions to Unregistered Corporation. For the purpose of this Rule, "unregistered corporation" shall be understood to mean a corporation that is, itself, not registered under securities legislation. Notwithstanding paragraph (a), where an Approved Person acts as an agent of the Member in compliance with MFDA Rule 1.1.5, any remuneration, gratuity, benefit or other consideration in respect of business conducted by the Approved Person on behalf of a Member may be paid by the Member to an unregistered corporation provided that:

(i)

such arrangements are not prohibited or otherwise limited by the relevant securities legislation or securities regulatory authorities;

(ii)

the corporation is incorporated under the laws of Canada or a province or territory of Canada;

(iii)

the Member, Approved Person and the unregistered corporation have entered into an Agreement in writing, in a form prescribed by the Corporation, in favour of the Corporation, the terms of which provide that:

(A)	the Member and Approved Person shall comply with applicable MFDA By-laws and Rules and securities legislation and remain liable to third parties, including clients, irrespective of whether any remuneration, gratuity, benefit or any other consideration is paid to an unregistered corporation and no such payment shall, in and of itself, in any way limit or affect the duties, obligations or liability of the Member or Approved Person under MFDA Rules and applicable securities legislation;
(B)	the Member shall engage in appropriate supervision with respect to the conduct of the Approved Person and the unregistered corporation to ensure such compliance as referred to in (A), above; and
(C)	the Approved Person and the unregistered corporation shall provide the Member, the applicable securities commission and the MFDA with access to all books and records maintained by or on behalf of either of them for the purpose of determining compliance with MFDA Rules and applicable securities legislation.

(c)

Arrangements Prohibited. Paragraph (b) does not apply in respect of any such remuneration, gratuity, benefit or other consideration derived from a client in Alberta.

Related Notices

MR-0001 – Transition Periods (Replaced by MR-0026) (issued March 16, 2001)

MR-0026 – Transition Periods (issued February 27, 2004)

MR-0072 - Payment of Commissions to Unregistered Corporation (issued March 29, 2010)

Related Bulletins

#0030-M – Payment of commissions to Non-Registered Entities in British Columbia (issued August 20, 2003)

#0234-M – Rule 2.4.1 (Payment of commissions to Non-Registered Entities) – Extension of transition Period to December 31, 2008 (issued November 17, 2006)

#0280-P – Manitoba Securities Commission ("MSC") Staff Notice 2007-37 and Order No. 5494 – Registration Exemption for Salespersons' Corporations (issued October 10, 2007)

#0310-P – MFDA Rule 2.4.1 (Payment of Commissions to Non-Registered Entities) – Suspension in New Brunswick (issued June 2, 2008)

#0327-P – MFDA Rule 2.4.1 (Payment of Commissions to Non-Registered Entities) – Suspension in Manitoba (issued September 16, 2008)

#0350-P – Rule 2.4.1 (Payment of Commissions to Non-Registered Entities) - Extension of Suspension to March 31, 2010 (issued December 22, 2008)

#0429-P – Approval of Proposed Amendments to MFDA Rule 2.4.1 (Payment of Commissions to Unregistered Corporation) (issued March 29, 2010)

2.4.2	Referral Arrangements
	(a)	Definitions. For the purpose of this Rule 2.4.2
		(i)	a "referral arrangement" is an arrangement whereby a Member is paid or pays a fee, including fees based on commissions or sharing a commission, for the referral of a client to or from another person; and
		(ii)	a referral arrangement does not include any payment to a third party service provider where the service provider has no direct contact with clients and where the services do not constitute securities related business.
	(b)	Permitted Arrangements. Referral arrangements may only be entered into on the following basis:
		(i)	the referral arrangement is only between a Member and another Member or between a Member and an entity that is (A) licensed or registered in another category pursuant to applicable securities legislation, (B) a Canadian financial institution for the purposes of National Instrument 14-101, (C) insurance agents or brokers, or (D) subject to such other regulatory system as may be prescribed by the Corporation;
		(ii)	there is a written agreement governing the referral arrangement prior to implementation;
		(iii)	all fees or other form of compensation paid as part of the referral arrangement, to or by the Member, must be recorded on the books and records of the Member; and
		(iv)	written disclosure of referral arrangements must be made to clients prior to any transactions taking place. The disclosure document must include an explanation or an example of how the referral fee is calculated, the name of the parties receiving and paying the fee, and a statement that it is illegal for the party receiving the fee to trade or advise in respect of securities if it is not duly licensed or registered under applicable securities legislation to so trade or advise.

Related Notices

MR-0030 – Referral Arrangements (issued September 20, 2004)

MR-0043 – Referral Arrangements in Respect of Specific Securities (issued July 5, 2005)

MR-0055 – Undivided Interests in Land (issued July 6, 2006)

MR-0064 – Maintaining Evidence of Disclosure (issued August 22, 2007)

MR-0071 – Referral Arrangements with Other Securities Registrants (issued February 10, 2009)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0124-C – Temporary Orders – Portus Alternative Asset Management Inc. (issued February 3, 2005)

#0125-C – Portus Alternative Asset Management Inc. – Additional Temporary Orders (issued February 4, 2005)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

#0228-M – Referral Arrangements with Lakeshore Asset Management Inc. and Meridian Global Investors Inc. (issued October 25, 2006)

#0431-C - Leverage Guide, Leverage Review Worksheet & Approved Person Leveraging Analysis Template

2.4.3

Service Fees or Charges. No Member shall impose on any client or deduct from the account of any client any service fee or service charge relating to services provided by the Member in connection with the client's account unless written notice shall have been given to the client on the opening of the account or not less than 60 days prior to the imposition or revision of the fee or charge. For the purposes of this Rule, service fees or charges shall not include any commissions charged for executing trades.

Related Notice

MR-0041 – Automatic Conversion of Deferred Sales Charge to 0% Front End Load Units Without Client Knowledge or Consent (issued June 8, 2005)

2.5

MINIMUM STANDARDS OF SUPERVISION

Related Policies

MFDA Policy No. 2 – Minimum Standards for Account Supervision (issued March 16, 2001)

MFDA Policy No. 5 – Branch Review Requirements (issued July 24, 2006)

Related Bulletin

#0210-P – MFDA Policy 5 – Branch Review Requirements (issued July 24, 2006)

2.5.1

Member Responsibilities. Each Member is responsible for establishing, implementing and maintaining policies and procedures to ensure the handling of its business is in accordance with the By-laws, Rules and Policies and with applicable securities legislation.

Related Notices

MR-0037 – Compliance Responsibilities (issued March 16, 2005)

MR-0057 – Joint Regulatory Notice on the Role of Compliance and Supervision (issued December 5, 2006)

2.5.2	Compliance Officer
	(a)	Designation. Each Member must designate a trading officer as a "compliance officer" who shall be or report to a member of senior management such as the Member's chief executive officer, chief operating officer or chief financial officer.
	(b)	Responsibilities. The compliance officer shall be responsible for monitoring adherence by the Member and any person conducting business on account of the Member to the By-laws, Rules and Policies, including, without limitation, standards of business conduct under Rule 2 and applicable securities legislation requirements. The compliance officer or the individual to whom the compliance officer reports is required to report on the status of compliance at the Member to the board of directors or partners of the Member as necessary, and at least on an annual basis. It shall be the responsibility of the board of directors or partners of the Member to act on the annual report and to rectify any compliance deficiencies noted in the report.
	(c)	Alternates. In the event that a compliance officer is temporarily absent or unable to perform his or her responsibilities, a Member shall designate one or more alternates who must be qualified as compliance officers pursuant to Rule 1.2.3 and who shall carry out the responsibilities of the compliance officer.

Related Notice

MR-0037 – Compliance Responsiblities (issued March 16, 2005)

Related Bulletin

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

#0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009)

2.5.3	Branch Manager
	(a)	Designation. Each Member shall designate a person qualified as a branch manager pursuant to Rule 1.2.2 for each branch office (as defined in By-law 1.1) of the Member. The Member is not required to designate a branch manager for a sub-branch office who is normally present at the office, provided that a branch manager who is not normally present at such sub-branch office, or a trading partner, director or officer or a compliance officer designated as the branch manager for such sub-branch office, supervises its business at the sub-branch office in accordance with the By-laws and Rules.
	(b)	Responsibilities. It is the responsibility of a branch manager to:
		(i)	ensure that the business conducted on behalf of the Member by an Approved Person and other employees and agents at the branch is in compliance with applicable securities legislation and the By-laws and Rules;
		(ii)	supervise the opening of new accounts and trading activity at the branch office.
	(c)	Alternates. In the event that a branch manager is temporarily absent or unable to perform his or her responsibilities, a Member shall designate one or more alternate branch managers who must be qualified as branch managers pursuant to Rule 1.2.2(a) and who shall carry out the responsibilities of the branch manager, but are not required to be normally present at the branch office.

Related Notice	MR-0014 – Supervision Requirements for Licensed Assistants at Branch Offices (issued October 2, 2002)
Related Bulletin	#0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009)

2.5.4

Maintenance of Supervisory Review Documentation. The Member must maintain records of all compliance and supervisory activities undertaken by it and its partners, directors, officers, compliance officers and branch managers pursuant to the By-laws and Rules.

Related Bulletin

#0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009)

2.5.5	No Delegation. No Member or director, officer, partner, compliance officer, branch manager or alternate branch manager shall be permitted to delegate any supervision or compliance responsibility under the By-laws or Rules in respect of any business of the Member, except as expressly permitted pursuant to the By-laws and Rules.
2.6	BORROWING FOR SECURITIES PURCHASES
	Each Member shall provide to each client a risk disclosure document containing the information prescribed by the Corporation when
	(a)	a new account is opened for the client; and
	(b)	when an Approved Person makes a recommendation for purchasing securities by borrowing, or otherwise becomes aware of a client borrowing monies for the purpose of investment,
	provided that a Member is not required to comply with paragraph (b) if such a risk disclosure document has been provided to the client by the Member within the six month period prior to such recommendation or becoming so aware.

Related Notices

MR-0064 – Maintaining Evidence of Disclosure (issued August 22, 2007)

MR-0070 – Misleading Communications Regarding Leverage (issued May 12, 2008)

MR-0074 - Leverage Risk Disclosure (issued April 6, 2010)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0160-C – Misleading Communications Regarding Investment Loans by Loan Providers (issued August 18, 2005)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

2.7

ADVERTISING AND SALES COMMUNICATIONS

Related Notice

MR-0070 – Misleading Communications Regarding Leverage (issued May 12, 2008)

2.7.1	Definitions. For the purposes of the By-laws and Rules:
	(a)	"advertisement" includes television or radio commercials or commentaries, billboards, internet websites, newspapers and magazine advertisements or commentaries and any published material promoting the business of a Member and any other sales literature disseminated through the communications media; and
	(b)	"sales communication" includes records, video tapes and similar material, market letters, research reports, and all other published material, except preliminary prospectuses and prospectuses, designed for or use in presentation to a client or a prospective client whether such material is given or shown to them and which includes a recommendation in respect of a security.

Related Notices

MR-0033 – Websites of Approved Persons of MFDA Members (issued November 22, 2004)

MR-0060 – Penalty Guidelines (issued January 18, 2007)

2.7.2	General Restrictions. No Member shall issue to the public, participate in or knowingly allow its name to be used in respect of any advertisement or sales communication in connection with its business which:
	(a)	contains any untrue statement or omission of a material fact or is otherwise false or misleading, including the use of a visual image such as a photograph, sketch, drawing, logo or graph which conveys a misleading impression;
	(b)	contains an unjustified promise of specific results;
	(c)	uses unrepresentative statistics to suggest unwarranted or exaggerated conclusions, or fails to identify the material assumptions made in arriving at these conclusions;
	(d)	contains any opinion or forecast of future events which is not clearly labelled as such;
	(e)	fails to fairly present the potential risks to the client;
	(f)	is detrimental to the interests of the public, the Corporation or its Members; or
	(g)	does not comply with any applicable legislation or the guidelines, policies or directives of any regulatory authority having jurisdiction over the Member.

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

Related Notice

MR-0033 – Websites of Approved Persons of MFDA Members (issued November 22, 2004)

2.7.3

Review Requirements. No advertisement or sales communication shall be issued unless first approved by a partner, director, officer, compliance officer or branch manager who has been designated by the Member as being responsible for advertisements and sales communications.

Related Notice

MR-0033 – Websites of Approved Persons of MFDA Members (issued November 22, 2004)

Related Bulletins

#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

2.8

CLIENT COMMUNICATIONS

Related Notices

MR-0024 – Portfolio Summaries (issued February 24, 2004)

MR-0070 – Misleading Communications Regarding Leverage (issued May 12, 2008)

2.8.1	Definition. For the purposes of the By-laws and Rules "client communication" means any written communication by a Member or an Approved Person to a client of the Member, including trade confirmations and account statements, other than an advertisement or sales communication.
2.8.2	General Restrictions. No client communication shall:
	(a)	be untrue or misleading or use an image such as a photograph, sketch, logo or graph which conveys a misleading impression;
	(b)	make unwarranted or exaggerated claims or conclusions or fail to identify the material assumptions made in arriving at these conclusions;
	(c)	be detrimental to the interests of clients, the public, the Corporation or its Members;
	(d)	contravene any applicable legislation or any guideline, policy, rule or directive of any regulatory authority having jurisdiction over the Member; or
	(e)	be inconsistent or confusing with any information provided by the Member or Approved Person in any notice, statement, confirmation, report, disclosure or other information either required or permitted to be given to the client by a Member or Approved Person under the By-laws, Rules, Policies or Forms.
2.8.3	Rates of Return
	(a)	In addition to complying with the requirements in Rule 2.8.2, any client communication containing or referring to a rate of return regarding a specific account or group of accounts must be based on an annualized rate of return and explain the methodology used to calculate such rate of return in sufficient detail and clarity to reasonably permit the client to understand the basis for the rate of return.
	(b)	Notwithstanding the provisions of paragraph (a), where an account has been open for less than 12 months, the rate of return shown must be the total rate of return since account opening.

History

Bulletin #0050-M Amendments to MFDA Rules and MFDA Policy No. 3 (Handling Client Complaints) (issued February 3, 2004)

2.9	INTERNAL CONTROLS
	Every Member shall establish and maintain adequate internal controls as prescribed by the Corporation from time to time.

Related Policy

MFDA Policy No. 4 – Internal Control Policy Statements (issued December 13, 2005)

Related Notices

MR-0022 – Out of Province Registration (issued October 29, 2003)

MR-0023 – Late Trading and Market Timing (issued December 19, 2003)

MR-0056 – Business Continuity Planning (issued October 23, 2006)

Related Bulletin

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

2.10	POLICIES AND PROCEDURES MANUAL
	Every Member shall establish and maintain written policies and procedures (that have been approved by senior management of the Member) for dealing with clients and ensuring compliance with the Rules, By-laws and Policies of the Corporation and applicable securities legislation.

Related Notices

MR-0008 – Policies and Procedures Manual (issued March 16, 2001)

MR-0023 – Late Trading and Market Timing (issued December 19, 2003)

Related Bulletin

#0395-C – Policies and Procedures Manual Reference Guide

2.11	COMPLAINTS
	Every Member shall maintain a log of client complaints and shall establish written policies and procedures for dealing with client complaints which ensure that such complaints are dealt with promptly and fairly.

Related Policy

MFDA Policy No. 3 Handling Client Complaints (issued July 3, 2007)

Related Notices

MR-0073 – Complaint Handling - MFDA Policy No. 3 (issued April 6, 2010)

Related Bulletins

#0123-M – Reporting of Enforcement Related Issues (issued January 24, 2005)

#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)

#0430-P - Guide to Creating a Summary of Member Compliant Handling Procedures (issued April 6, 2010)

2.12

TRANSFERS OF ACCOUNT

History

Bulletin #0050-M – Amendments ot MFDA Rules and MFDA Policy No. 3 (Handling Client Complaints) (issued February 3, 2004)

Related Notices

MR-0001 – Transition Periods (Replaced by MR-0026) (issued March 16, 2001)

MR-0017 – Transfer of Client Accounts (issued March 28, 2003)

MR-0068 – Servicing of Client Accounts in Transition (issued March 20, 2008)

2.12.1	Definitions. For the purposes of the By-laws and Rules:
	(a)	"account transfer" means the transfer in whole or in part of an account of a client of a Member at the request or with the authority of the client;
	(b)	"delivering Member" means in respect of an account transfer the Member from which the account of the client is to be transferred; and
	(c)	"receiving Member" means in respect of an account transfer the Member to which the account of the client is to be transferred.
2.12.2	Transfers. No account transfer shall be effected by a Member without the written authorization of the client holding the account. If an account transfer is authorized by a client, a delivering Member and a receiving Member shall act diligently and promptly in order to facilitate the transfer of the account in an orderly and timely manner.