Decision No. 2021-PDG-0032: General Decision Regarding a Transitional Exemption Concerning the Elimination of Deferred Sales Charges and Amendments to National Instrument 31-103

DECISION NO. 2021-PDG-0032
General Decision Regarding a Transitional Exemption Concerning the Elimination of Deferred Sales Charges and Provisions of National Instrument 31-103 on Registration Obligations and Exemptions and Ongoing Obligations of Registered Persons Introduced by Client-Focused Reforms to Enhance Obligations Regarding Conflicts of Interest and Client Convenience

Having regard to the publication by the Canadian Securities Administrators (the "CSA"), on October 3, 2019, of amendments to National Instrument 31-103 Registration Obligations and Exemptions and Ongoing Obligations of Registered Persons, RLRQ, c. V-1.1, r. 10 (the "NI 31-103") relating to client-focused reforms;

Having regard to the Act Respecting the Amendment of National Instrument 31-103 Registration Obligations and Exemptions and Ongoing Obligations of Registered Persons (the "Amending NI 31-103") approved by Order in Council No. 2019-09 of the Minister of Finance dated December 11, 2019, (2019) 151 G.O. 2 5174, which implements these amendments;

Having regard to the Amending NI 31-103 which provides for a phased implementation of the amendments to NI 31-103, namely December 31, 2020, for amendments relating to conflicts of interest and provisions relating to relationship information, and December 31, 2021, for other amendments;

Having regard to Decision No. 2020-PDG-0031 issued on April 15, 2020 [(2020) vol. 17, No. 15, B.A.M.F, section 3.8] (the "Decision No. 2020-PDG-0031") by which the Autorité des marchés financiers (the "Authority") exempted, until June 30, 2021, registered persons under the Securities Act, RLRQ, c. V-1.1 (the "SA"), from the application of certain enhanced obligations of NI 31-103 introduced by the client-focused reforms, subject to certain conditions;

Having regard to the publication by the CSA (except the Ontario Securities Commission), on February 20, 2020, of amendments to National Instrument 81-105 Investment Fund Continuous Disclosure, RLRQ, c. V-1.1, r. 41 which prohibit the payment by mutual fund organizations of commissions to brokers at the time of subscription (the "deferred sales charge ban"), which will result in the abandonment of all forms of deferred sales charge options, including reduced deferred sales charge options (collectively, the "deferred sales charge option");

Having regard to the deferred sales charge ban which will not come into force until June 1, 2022 in order to give brokers time to adjust their practices as well as their operational systems and processes (the "transition period");

Having regard to the overlapping periods between the implementation of the enhanced obligations by the client-focused reforms relating to conflicts of interest and those aimed at "giving priority to the client's interest" in the assessment of suitability for the client, on the one hand, and the implementation of the deferred sales charge ban, on the other hand, which will raise operational difficulties for registered persons who will resort to the deferred sales charge option during the transition period;

Having regard to section 263 of the SA, which allows the Authority, under the conditions it determines, to exempt a person or a group of persons from all or part of the obligations provided for in titles two to six of this law or by regulation when it considers that this exemption does not prejudice the protection of savers;

Having regard to the analysis of the Intermediary Oversight Directorate as well as the recommendation of the Superintendent of Client Assistance and Distribution Oversight to grant this decision on the grounds that it does not prejudice the protection of savers;

Therefore:

The Authority exempts registered persons under the SA from the obligations provided for in the following provisions regarding transactions in securities of an investment fund that result in the payment of a commission at the time of subscription and which may result in the payment of deferred sales charges:

1. sections 13.4 and 13.4.1 of NI 31-103 (the "enhanced conflict of interest obligations") to which registered persons are required to comply as of June 30, 2021 because Decision No. 2020-PDG-0031 will cease to have effect on that date;

2. subparagraph b of paragraph 1 of section 13.3 of NI 31-103 (the "obligation to prioritize the client's interest in the assessment of suitability") to which registered persons are required to comply as of December 31, 2021 under sections 10 and 26 of the Amending NI 31-103.

This decision is granted on the condition that registered persons comply with:

a. the provisions of Part 13 of NI 31-103, as amended by sections 12 to 15, 17 and 18 of the Amending NI 31-103, and to which they are required to comply as of June 30, 2021 because Decision No. 2020-PDG-0031 will cease to have effect on that date, excluding the enhanced conflict of interest obligations, to which they will be required to comply only on the date on which this decision ceases to have effect;

b. the other provisions of NI 31-103, as amended by sections 1 to 3, paragraphs 1 and 3 of section 4, sections 5 to 11, 19 and 24 of the Amending NI 31-103 which will come into force on December 31, 2021, and to which they will therefore be required to comply as of that date, excluding the obligation to prioritize the client's interest in the assessment of suitability, to which they will be required to comply only on the date on which this decision ceases to have effect;

c. section 13.4 of NI 31-103 as it read on December 30, 2020.

This decision takes effect on the following dates:

• June 30, 2021 regarding the exemption provided for in paragraph 1 of this decision;
• December 31, 2021 regarding the exemption provided for in paragraph 2 of this decision.

This decision will cease to have effect on May 31, 2022.

Done on June 18, 2021.

Louis Morisset
President and Chief Executive Officer