|
|
Table of Contents | Rule 1 | Rule 2 | Rule 3 | Rule 4
| 5.1 |
REQUIREMENT FOR RECORDS |
|
Every Member shall keep such books, records and other documents as are necessary for the proper recording of its business transactions and financial affairs and the transactions that it executes on behalf of others and shall keep such other books, records and documents as may be otherwise required by the Corporation. Such books and records shall contain as a minimum the following: |
|
(a) |
blotters, or other records, containing an itemized daily record of: |
|
|
(i) |
all purchases and sales of securities; |
|
|
(ii) |
all receipts and deliveries of securities, including certificate numbers; |
|
|
(iii) |
all receipts and disbursements of cash; |
|
|
(iv) |
all other debits and credits, the account for which each transaction was effected; |
|
|
(v) |
the name of the securities; |
|
|
(vi) |
the class or designation of the securities; |
|
|
(vii) |
the number or value of the securities; |
|
|
(viii) |
the unit and aggregate purchase or sale price; and |
|
|
(ix) |
the trade date and the name or other designation of the person from whom the securities were purchased or received or to whom they were sold or delivered; |
|
(b) |
an adequate record of each order, and of any other instruction, given or received for the purchase or sale of securities, whether executed or unexecuted. Such record shall show: |
|
|
(i) |
the terms and conditions of the order or instructions and of any modification or cancellation thereof; |
|
|
(ii) |
the account for which entered or received; and |
|
|
(iii) |
the time of entry or receipt, the price at which executed and, to the extent feasible, the time of execution or cancellation; |
|
|
(iv) |
evidence that the client was informed of all fees and charges in accordance with Rule 2.4.4 |
| Related Notice |
MR-0078 – MFDA Rules 2.4.4 (Transaction fees or Charges) and 5.1(b)(iv) (Requirement for Records) (issued February 22, 2011) |
| Related Bulletin |
#0355-C – Common Sales Compliance Deficiencies and Appropriate Corrective Action (issued January 28, 2009)
#0466-P - New MFDA Rule 2.4.4 (Transaction Fees or Charges) and Amendments to MFDA Rule 5.1 (Requirement for Records) (issued February 22, 2011) |
|
(c) |
where the order or instruction is placed by an individual other than the person in whose name the account is operated, or an individual duly authorized to place orders or instructions on behalf of a client that is a company, the name, sales number or designation or the individual placing the order or instruction shall be recorded; |
|
(d) |
copies of confirmations of all purchases and sales of securities and copies of all other debits and credits for securities, cash and other items for the account of clients; |
|
(e) |
a record of the proof of cash balances of all ledger accounts in the form of trial balances and a record of calculation of minimum capital, adjusted liabilities and risk adjusted capital required; |
|
(f) |
all cheque books, bank statements, cancelled cheques and cash reconciliations; |
|
(g) |
all bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of the Member; |
|
(h) |
all limited trading authorizations in respect of any account, and copies of resolutions empowering an agent to act on behalf of a corporation; |
|
(i) |
all written agreements (or copies thereof) entered into by such Member relating to their business as such, including leveraging documentation, disclosure materials and agreements relating to any account; and |
|
(j) |
all documentation relating to an advance of funds or extension of credit to or on behalf of a client, directly or indirectly, in connection with the receipt of funds on the redemption of mutual fund securities, including the prior written confirmation referred to in Rule 3.2.3. |
| Related Notices |
MR-0025 – Suitability Obligations for Unsolicited Orders (issued February 24, 2004)
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 Units Without Client Knowledge or Consent (issued June 8, 2005)
|
| Related Bulletins |
#0017-P – CSA Staff Joint Notice Concerning National Instrument 23-101 (issued May 1, 2003)
#0056-C – Common Deficiencies Noted During On-site Examinations of Members (issued February 9, 2004)
#0139-P – CSA Staff Notice 32-302 – Joint Regulatory Notice – Electronic Audit Trail Initiative (TREATS) (issued April 25, 2005)
#0147-P – Revised FINTRAC Guideline 6E: Record Keeping and Client Identification for Securities Dealers (issued June 24, 2005)
#0183-C – Second Round of Compliance Examinations (issued January 27, 2006)
#0188-P – Status of the Transaction Reporting and Electronic Audit Trail System (TREATS) (issued March 24, 2006) |
| 5.2 |
STORAGE MEDIUM |
|
All records and documents required to be maintained by a Member in writing or otherwise may be kept by means of mechanical, electrical, electronic or other devices provided: |
|
(a) |
such method of record keeping is not prohibited under any applicable legislation; |
|
(b) |
there are appropriate internal controls in place, to guard against the risk of falsification of the information recorded; |
|
(c) |
such method provides a means to furnish promptly to the Corporation upon request legible, true and complete copies of those records of the Member which are required to be preserved; and |
|
(d) |
the Member has suitable back-up and disaster recovery programs. |
| 5.3 |
CLIENT REPORTING |
| Related Notice |
MR-0024 – Portfolio Summaries (issued February 24, 2004) |
| 5.3.1 |
Delivery of Account Statement |
|
(a) |
Each Member shall, in a timely manner send an account statement to each client in accordance with the following minimum standards: |
|
|
(i) |
once every 12 months for a client name account; |
|
|
(ii) |
once a month for nominee name accounts of clients where there is an entry during the month and a cash balance or security position; and |
|
|
(iii) |
quarterly for nominee name accounts where no entry has occurred in the account and there is a cash balance or security position at the end of the quarter. |
|
(b) |
A Member may not rely on any other person (including an Approved Person) to send account statements as required by this Rule. |
|
(c) |
Notwithstanding the provisions of 5.3.1(b), a Member may rely on the trustee administering a self-directed registered plan to send the account statement required by paragraph (a)(i) where the following conditions are met: |
|
|
(i) |
The Member does not act as agent for the trustee for the registered plans; |
|
|
(ii) |
The trustee meets the definition of "Acceptable Institution" as defined in Form 1; |
|
|
(iii) |
There is a services agreement in place between the Member and the trustee which complies with the requirements of MFDA Rule 1.1.3 and provides that the trustee is responsible for sending account statements to clients of the Member that comply with the requirements of MFDA Rule 5; |
|
|
(iv) |
There is clear disclosure about which trades are placed by the Member; |
|
|
(v) |
Clear disclosure must be provided on the account statement regarding which securities positions referred to on the statement are eligible for coverage by the MFDA Investor Protection Corporation and which are not (once the Corporation is offering coverage); |
|
|
(vi) |
The Member's full legal name must appear on the account statement together with the name of the trustee; and |
|
|
(vii) |
The Member must receive copies of the statements, or have other systems in place, to ensure that the information contained on the statements matches its own information regarding the transactions it executes. |
|
(d) |
Notwithstanding the provisions of Rule 5.3.1(b), where a Member is affiliated with a fund manager and in connection with a specific client account is selling only the mutual fund securities of an issuer managed by such affiliated fund manager for that client account, the Member may rely on the affiliated fund manager to send the account statement required by paragraph (a)(i) for that specific account. |
| History |
Bulletin #0050-M – Amendments to MFDA Rules and 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-0015 – Electronic Delivery (issued January 23, 2003) |
| 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)
#0458-P – Amendments to MFDA By-law No. 1, Rules and Form 1 - Financial Questionnaire and Report (issued December 3, 2010) |
| 5.3.2 |
Automatic Payment Plans. Notwithstanding the provisions of Rule 5.3.1 (a)(ii), where a Member holds client assets in nominee name and the only entry in the client's account in a month relates to the client's participation in: |
|
(a) |
any automatic payment plan that provides for systematic trading in the securities of a mutual fund on a monthly or more frequent basis, or |
|
(b) |
other automatic entries such as dividends and reinvested distributions, |
|
the Member shall send an account statement to the client quarterly. |
| 5.3.3 |
Content of Account Statement. Each account statement must contain the following information: |
|
(a) |
for nominee name accounts or accounts where the Member acts as an agent for the trustee for the purposes of administering a self-directed registered retirement savings or similar plan: |
|
|
(i) |
the opening balance; |
|
|
(ii) |
all debits and credits; |
|
|
(iii) |
the closing balance; |
|
|
(iv) |
the quantity and description of each security purchased, sold or transferred and the dates of each transaction, and; |
|
|
(v) |
the quantity, description and market value of each security position held for the account; |
|
(b) |
for client name accounts: |
|
|
(i) |
all debits and credits; |
|
|
(ii) |
the quantity and description of each security purchased, sold or transferred and the dates of each transaction; and |
|
|
(iii) |
for automatic payment plan transactions, the date the plan was initiated, a description of the security and the initial payment amount made under the plan. |
|
(c) |
for all accounts: |
|
|
(i) |
the type of account; |
|
|
(ii) |
the account number; |
|
|
(iii) |
the period covered by the statement; |
|
|
(iv) |
the name of the Approved Person(s) servicing the account, if applicable; and |
|
|
(v) |
the name, address and telephone number of 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)
#0458-P – Amendments to MFDA By-law No. 1, Rules and Form 1 - Financial Questionnaire and Report (issued December 3, 2010) |
| 5.3.4 |
Member Business Only. Only transactions executed by the Member may appear on the statement of account required pursuant to Rule 5.3.3. |
| New Rule 5.3.5 (Account Performance Reporting) |
| Rule 5.3.5 is subject to a transition period. Members must comply with the requirements of Rule 5.3.5 as of June 3, 2012. |
| 5.3.5 |
Account Performance Reporting. The Member must provide information to clients on an annual basis with respect to the performance of the client’s account at the Member. |
|
(a) |
Subject to paragraphs (b) and (c), the account performance reporting must include the following information for the annual period: |
|
|
(i) |
the total market value of the account as at the start of the period covered by the report; |
|
|
(ii) |
total assets deposited to the account during the period covered by the report; |
|
|
(iii) |
total assets withdrawn from the account during the period covered by the report; |
|
|
(iv) |
the total market value of the account as at the end of the period covered by the report; |
|
|
(v) |
gain or loss in the account as at the end of the period covered by the report. |
|
(b) |
Notwithstanding the provisions of paragraph (a), where market values cannot be readily and reliably determined by the Member in respect of security positions held in the account, such values shall not be included in the report and the Member must disclose to the client in the report the security positions for which values have not been included and why the information has not been included in the report. |
|
(c) |
A Member need not send the information contained in paragraph (a) where the Member sends a client communication that contains an annualized percentage rate of return for the client’s account in accordance with the requirements of Rule 2.8.3. |
| Related Notice |
MR-0076 – Performance Reporting (issued December 3, 2010) |
| Related Bulletin |
#0458-P – Amendments to MFDA By-law No. 1, Rules and Form 1 - Financial Questionnaire and Report (issued December 3, 2010) |
| 5.4 |
TRADE CONFIRMATIONS |
| 5.4.1 |
Delivery of Confirmations. Every Member who has acted as principal or agent in connection with any trade in a security shall promptly send by prepaid mail or deliver to the client a written confirmation of the transaction containing the information required under Rule 5.4.3. The Member need not send to its client a written confirmation of a trade in a security of a mutual fund where the manager of the mutual fund sends the client a written confirmation containing the information required to be sent under Rule 5.4.3. |
| Related Notice |
MR-0015 – Electronic Delivery (issued January 23, 2003) |
| 5.4.2 |
Automatic Payment Plans. Where a transaction relates to a client's participation in an automatic payment plan that provides for systematic trading in the securities of a mutual fund on a monthly or more frequent basis, and the Member registers the mutual funds pursuant to the plan, the Member is required to send a trade confirmation for the initial purchase only. |
| 5.4.3 |
Content. Every confirmation of trade sent to a client must set forth the following information: |
|
(a) |
the quantity and description of the security; |
|
(b) |
the price per share or unit at which the trade was effected; |
|
(c) |
the consideration; |
|
(d) |
the name of the Member; |
|
(e) |
whether or not the Member is acting as principal or agent; |
|
(f) |
if acting as agent, the name of the person or company from or to or through whom the security was bought or sold; |
|
(g) |
the type of the account through which the trade was effected; |
|
(h) |
the commission, if any, charged in respect of the trade; |
|
(i) |
the amount deducted by way of sales, service and other charges; |
|
(j) |
the amount, if any, of deferred sales charges; |
|
(k) |
the name of the Approved Person, if any, in the transaction; |
|
(l) |
the date of the trade; and |
|
(m) |
the settlement date. |
| 5.5 |
ACCESS TO BOOKS AND RECORDS |
|
All books, records, documentation and other information required to be kept and maintained by a Member or Approved Person shall be available for review by the Corporation and the Corporation shall be entitled to make copies thereof and retain them for the purposes of carrying out its objects and responsibilities under the applicable securities legislation, the By-laws or the Rules. |
| 5.6 |
RECORD RETENTION |
|
Each Member shall retain copies of the records and documentation referred to in this Rule 5 for seven years from the date the record is created or such other time as may be prescribed by the Corporation. |
| Related Bulletin |
#0458-P – Amendments to MFDA By-law No. 1, Rules and Form 1 - Financial Questionnaire and Report (issued December 3, 2010) |
|
|
