CSA Notice 31-360: Transitional Relief for Deferred Sales Charge Options Under Client Focused Reforms

1 CSA Notice 31-360 Blanket Orders/Class Orders in respect of Transitional Relief Related to the Deferred Sales Charge Option in respect of Client Focused Reforms Enhanced Conflicts of Interest and Client First Suitability Provisions of Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations June 23, 2021 Introduction On October 3, 2019, the Canadian Securities Administrators (the CSA or we) published amendments to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (Regulation 31-103), the Client Focused Reforms (CFRs).On February 20, 2020, all CSA jurisdictions other than Ontario published amendments to Regulation 81-105 respecting Mutual Fund Sales Practices (Regulation 81-105) to prohibit (the DSC ban) the payment by fund organizations of upfront sales commissions to dealers, which will result in the discontinuation of all forms of a compensation model referred to as the deferred sales charge option, including low￾load options (collectively, the DSC option). In order to give dealers time to transition away from the DSC option, the DSC ban will not be effective until June 1, 2022 (the DSC transition period). On June 3, 2021, the Ontario Securities Commission (the OSC) published final amendments to Regulation 81-105 (the Ontario DSC ban amendments) to prohibit the DSC option in Ontario. In order to give dealers time to transition away from the DSC option, the DSC ban in Ontario will not be effective until June 1, 2022, which aligns with the DSC transition period already in place for all other CSA jurisdictions. The Ontario Minister of Finance approved the Ontario DSC ban amendments on June 17, 2021. Background The CFRs are an important investor protection initiative based on the concept that in the client-registrant relationship, the interests of the client come first. The CFRs’ enhanced conflicts of interest provisions come into effect on June 30, 2021. As a result, there will be an overlap period of approximately 11 months between the effective date of the CFRs’ enhanced conflicts of interest provisions and the effective date of the DSC ban. There will also be a five month overlap period between the effective date of the DSC ban and the CFRs’ enhanced suitability provisions, including the requirement to put the client’s interest first, which come into effect on December 31, 2021.

2 Summary of Relief Orders In order to address any issues raised by the overlapping periods between the implementation of the enhanced conflicts of interest and “client first” suitability requirements of the CFRs and the implementation of the DSC ban, the CSA jurisdictions have decided to grant relief from these enhanced standards in respect of sales of DSC products during the DSC transition period. The remainder of the CFRs enhanced suitability standard (the specified suitability factors in s. 13.3(1)(a) of Regulation 31-103), and all other CFRs requirements will apply to sales of DSC products as of the December 31, 2021 implementation date. Firms that continue to offer DSC products to their clients during the DSC transition period will have to consider the disclosure needed in respect of DSC products to meet their relationship disclosure information obligations under the CFRs. Relief Orders The orders will come into effect on June 30, 2021 and expire on June 1, 2022. For the specific provisions of the relief summarized above, see the applicable orders available on websites of CSA members including: www.lautorite.qc.ca www.albertasecurities.com www.bcsc.bc.ca www.fcnb.ca nssc.novascotia.ca www.osc.gov.on.ca www.fcaa.gov.sk.ca www.mbsecurities.ca Questions Please refer your questions to any of the following: Gabriel Chénard Senior Policy Analyst Direction de l’encadrement des intermédiaires Autorité des marchés financiers 514 395-0337 and 1 877 525-0337, extension 4482 Gabriel.chenard@lautorite.qc.ca Kathryn Anthistle Senior Legal Counsel Capital Markets Regulation British Columbia Securities Commission 604 899-6536 kanthistle@bcsc.bc.ca

3 Isaac Filaté Senior Legal Counsel Capital Markets Regulation British Columbia Securities Commission 604 899-6573 and 1 800 373-6393 ifilate@bcsc.bc.ca Bonnie Kuhn Senior Legal Counsel Market Regulation Alberta Securities Commission 403 355-3890 bonnie.kuhn@asc.ca Liz Kutarna Director, Capital Markets Securities Division Financial and Consumer Affairs Authority of Saskatchewan 306 787-5871 liz.kutarna@gov.sk.ca Chris Besko Director, General Counsel The Manitoba Securities Commission 204 945-2561 and 1 800 655-5244 (Toll Free (Manitoba only)) chris.besko@gov.mb.ca Chris Jepson Senior Legal Counsel Ontario Securities Commission 416 593-2379 cjepson@osc.gov.on.ca Erin Seed Senior Legal Counsel Ontario Securities Commission 416 596-4264 eseed@osc.gov.on.ca Kat Szybiak Senior Legal Counsel Ontario Securities Commission 416 593-3686 kszybiak@osc.gov.on.ca

4 Chris Pottie Deputy Director, Registration & Compliance Nova Scotia Securities Commission 902 424-5393 chris.pottie@novascotia.ca Steven Dowling Acting Director Government of Prince Edward Island, Superintendent of Securities 902 368-4551 sddowling@gov.pe.ca Jason Alcorn Senior Legal Counsel and Special Advisor to the Executive Director Financial and Consumer Services Commission of New Brunswick 506 643-7857 jason.alcorn@fcnb.ca Scott Jones Assistant Deputy Minister Digital Government and Service NL 709 729-2571 scottjones@gov.nl.ca Jeff Mason Office of the Superintendent of Securities Department of Justice, Government of Nunavut 867 975-6591 jmason@gov.nu.ca Shmaila Nosheen Paralegal Securities Office of the Superintendent of Securities, Northwest Territories 867 767-9260 Shmaila_nosheen@gov.nt.ca Rhonda Horte Securities Officer Office of the Yukon Superintendent of Securities 867 667-5466 rhonda.horte@gov.yk.ca