CSA Introduces International Investment Fund Manager Exemption
Canadian Securities Administrators (CSA) Notice 31-320, published October 15, 2010, proposes amendments to National Instrument 31-103 Registration Requirements & Exemptions (NI 31-103) and its companion policy that introduce an international investment fund manager registration exemption. The Notice also proposes an exemption from registration for domestic fund managers (for non-principal regulators) and foreign fund managers meeting certain conditions, as well as other minor changes to NI 31-103. Comments are requested by January 13, 2011. Market participants are reminded that investment fund manager registration requirements are scheduled to apply to foreign fund managers and domestic fund managers (in addition to the jurisdiction in which their head office is located) by the end of September 2011.
The international investment fund registration exemption, similar to the international dealer and adviser registration exemptions, is limited to activities with permitted clients as defined in NI 31-103. As a result, the registration exemption is available only to a foreign fund manager of an investment fund if all securities of the investment fund are distributed only to "permitted clients." In addition, the fund manager must not have a physical place of business in Canada, the investment fund must be formed under the laws of a foreign jurisdiction, the securities of the investment fund must be distributed under prospectus exemptions, and the investment fund cannot be a reporting issuer in Canada. Similar to the international adviser registration exemption, Canadian asset thresholds must not be surpassed: the fair value of all of the assets attributable to Canadians of any investment fund for which the fund manager acts cannot be more than 10 per cent of all assets of that fund, and the total assets of all funds managed by the investment fund manager attributable to Canadians must be less than $50 million. The international investment fund manager exemption will be subject to similar client disclaimer and submission-to-jurisdiction and appointment-of-agent-for-service filing requirements as the exemptions that are available for international dealers and advisers. A fund manager wishing to rely on the exemption must notify the securities regulators annually by December 1.
A "grandfathering" exemption for all jurisdictions (other than its head office jurisdiction, in the case of a domestic fund manager) is proposed for domestic and foreign fund managers where the manager and the investment fund have not actively solicited local residents after September 28, 2011. This new exemption is subject to a number of conditions including that the investment fund is not a reporting issuer, the investment fund and fund manager are not formed under the laws of the local jurisdiction, and the activities of the fund manager are not conducted from a physical place of business in the local jurisdiction.