Conducting securities trading or advising activities in Canada – International Sub-Adviser Exemption
Canadian securities regulators require that entities or individuals that conduct certain specified activities must first be registered with the securities regulatory authorities in the Canadian provinces or territories in which such activities are conducted. Firms and individuals must register if they are in the business of trading or advising in securities, acting as an underwriter, or acting as an investment fund manager. There are, however, numerous exemptions available to the registration requirement. For foreign adviser or dealers, the most commonly used exemptions are (1) international adviser; (2) international sub-adviser; and (3) international dealer. This article is part of a multi-part series, and discusses the international sub-adviser exemption.
The international sub-adviser exemption permits a foreign sub-adviser with their head office or principal place of business in a foreign jurisdiction to provide advice to registered advisers or registered dealers (“Canadian registrants”), without having to register as an adviser in Canada. In these scenarios, the Canadian registrant is the foreign sub-adviser’s client, and the Canadian registrant receives the advice, either for its own benefit or for the benefit of its clients. Some of the conditions of this exemption are that: (a) the Canadian registrant has entered into an agreement with its clients that it is responsible for losses that arise out of certain failures by the foreign sub-adviser; (b) the foreign sub-adviser has entered into a written agreement with the Canadian registrant setting out the obligations and duties of the foreign sub-adviser; (c) the foreign sub-adviser must be registered to perform such functions in the foreign jurisdiction or be operating under an exemption from registration; and (d) the foreign sub-adviser engages in the business of an adviser in the foreign jurisdiction. The international sub-adviser exemption may be an option for certain foreign sub-advisers. Please consult with Canadian legal counsel to learn the details about this exemption and whether you qualify.
This article is an overview only and does not constitute legal advice. It is not intended to be a complete statement of the law or the proposed regulations. You should not act upon the information in this article without a thorough examination of the law or proposed regulations as applied to the facts of your situation.