.png)
Federal and Provincial Authorities
At the federal level, there is an umbrella institution named the Canadian Securities Administrators[1] (hereinafter “CSA”), which works towards coordinating and harmonizing the regulation of Canadian capital markets across the different provinces and territories[2].
The provincial regulator which a Quebec company would have to follow is the Autorité des marchés financiers[3] (hereinafter “AMF”).
Should someone decide to move the location of their headquarters in another province, the applicable regulations will remain nearly the same because the CSA has made sure that there is uniformity across the country.
Notice 31-342 – Guidance for Portfolio Managers Regarding Online Advice
Portfolio managers are subject to many laws and regulations. Unfortunately, almost none of them mention technology or technological advances, which makes it very difficult to grasp how they would apply to businesses using A.I. technology.
However, in 2015, the CSA released the CSA Staff Notice31-342 – Guidance for Portfolio Managers Regarding Online Advice[4] (hereinafter “Notice 31-342”).
This notice describes the requirements for individuals that operate or would like to operate as an online adviser.
While it is not a law, since it was released by the CSA, it is still an official document which gives excellent guidelines.
A key topic discussed in the Notice is related to client information collection, which is referred to as “know-your-client” (hereinafter “KYC”). Of course, the CSA requires for online managers to integrate on their platforms solid data privacy and security systems. It is also very important for online advisers to be able to collect accurate information about their client to be able to correctly make sense of their investor profile[5].
Therefore, any questionnaire or risk management tool that the users fill out must be of high quality.
Additionally, Notice 31-342 states that for most online advisers, the investor’s portfolio is assigned to the client through a software. Most of the time, the portfolio is a model portfolio that matches the client’s KYC information. An advising representative will then make sure that the portfolio fits with the client’s reality and that it is suitable for them.
Usually, the portfolios are composed of EFTs, low-cost mutual funds or other redeemable investment funds, or cash and cash equivalents[6].
In terms of registration, Notice 31-342 states that no exemptions have been granted to portfolio managers who operate through softwares, in compliance with NI 31-103[7]. In other words, online advisers must follow the same rules and regulations that any portfolio manager would.
National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations
National Instrument 31-103, which was briefly mentioned earlier in this text, lays out under what category, a person or a company who operates in the field of securities must register with the AMF. It is the main source of obligations for companies who deal with securities.
For instance, the regulation sets out guidelines for suspensions and expulsions, internal controls and systems, client relationships and the handling of client accounts.
Part 15 of NI 31-103 is interesting because it allows the regulator to grant to a person or a company an exemption from the whole or part of the regulation. These exemptions are usually granted subject to conditions or restrictions[8] imposed by the AMF.
Other Regulations
National Instrument 33-109 Registration Information[9], will also be helpful during the registration process.
Additionally, such a firm will have to comply to the Personal Information Protection and Electronic Documents Act, the Act respecting the protection of personal information in the private sector[10] and the Act to establish a legal framework for information technology[11]. These federal and provincial laws cannot be avoided when one will establish their business.
Lastly, it is mandatory for any company incorporated under the Canada Business Corporations Act, to also register itself in Quebec in the Enterprise Registrar, so long as said company operates its business or has its head office located in the province[12].
At Boavista Legal Services, we specialize in navigating the intricate legal landscape surrounding the use of AI in business. With our in-depth knowledge, we meticulously assess the legal implications, develop robust strategies, and provide transparent communication to mitigate risks and maximize opportunities. Whether you need assistance with data privacy or regulatory compliance, our experienced attorneys are here to guide you through the intricacies of AI-driven business operations.
[1] Canadian Securities Administrators, online: <https://www.securities-administrators.ca/>. [2] Id., About Us, online: <https://www.securities-administrators.ca/about/>. [3] Autorité des marchés financiers, online: <https://lautorite.qc.ca/en/general-public>. [4] Canadian Securities Administrators, Staff Notice 31-342 – Guidance for Portfolio Managers Regarding Online Advice, online: <https://lautorite.qc.ca/fileadmin/lautorite/reglementation/valeurs-mobilieres/0-avis-acvm-staff/2015/2015sept24-31-342-avis-acvm-en.pdf > (hereinafter “Notice 31-342”). [5] Id. [6] Notice 31-342, p. 3. [7] Id. [8] Art. 15 N.I. 31-103. [9] Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5. [10] Act Respecting the Protection of Personal Information in the Private Sector, RLRQ, c. P-39.1. [11] Act to Establish a Legal Framework for Information Technology, RLRQ, c. C-1.1. [12] Act Respecting the Legal Publicity of Enterprises, RLRQ, c. P-44.1, art. 21 (5), (6).
Comments