Released on October 14 by the Ontario Securities Commission (OSC), OSC Staff Notice 33-754 (the Summary Report) covers registration and compliance deficiencies with regard to (amongst others), restriction on self-custody, prohibited investments, suitability and client instructions, prospectus exemptions misuse, pre-registration reviews of Crypto Trading Platforms (CTPs), conflicts of interest and marketing review.
The Summary Report also includes the OSC’s recommendations on what action firms must take to ensure compliance, to quote a few :
Restriction on self-custody: registered firms that consider self-custody, should consult with their legal counsel to assess whether they qualify for the exemption provided under subsection 14.5.2(7) of NI 31-103.
Prohibited investments: while portfolio managers should ensure to have policies and procedures in place to comply with the requirements of paragraph 13.5(2)(b) of NI 31-103, investment fund managers must verify that fund’s advisers have appropriate inter-fund trading policies and procedures.
Suitability and client instructions: portfolio managers and exempt market dealers should, among other things, (i) develop policies and procedures consistent with subsection 13.3(2.1) of NI 31-103 to be followed when client instructions are received, (ii) refrain from contracting-out of their obligations to clients and (iii) use clear and tailored language when informing the client of its suitability assessment.
Pre-registration reviews of CTPs: CTPs should, among others things, verify that their insurance bonding policy includes coverage for all the required clauses specified in Appendix A to NI 31-103 and maintain policies and procedures on how crypto assets will be safeguarded and monitored.
The Summary Report is released on an annual basis and will be of interest for registrants including, investment fund managers, portfolio managers and exempt market dealers.
As recommended by the OSC, the Summary Report should serve as a self-assessment tool to strengthen compliance with regulatory requirements and adjust policies, procedures, processes and systems where applicable.