A hotly debated issue during the roll-out of the Client Focused Reforms (CFR) was the new ban on the use of corporate titles by individuals at registered firms who are not formally corporate officers of their firms. Corporate titles include “Vice-President”, “Director” and “Managing Director” (and variations of those titles). The Canadian Securities Administrators (CSA) received submissions from industry that such a ban would place Canadian firms at a disadvantage when competing for institutional clients with non-Canadian firms that do not have an equivalent ban. The CSA also heard that the concern with such titles deceiving or misleading clients is unlikely to arise in the institutional client space.
Though the ban remains in the CFR, the CSA recently gave exemptive relief to a number of firms and their institutional client personnel to continue using corporate titles.
How Your Institutional Team Can Recommence Using Corporate Titles
Firms that were not part of the initial group mentioned above that obtained exemptive relief can continue using corporate titles in one of two ways:
Formally Appoint Your Institutional Team Members as Officers of the Firm
The ban in the CFR applies only if the individuals have not been appointed officers of their firm according to corporate law requirements. This can be done simply by passing a resolution of the firm’s board of directors to that effect and updating corporate records with the relevant government office. This approach is not limited to institutional individuals or clients, and can be used for retail business as well.
When doing so, there are several additional factors to consider:
- The individual may need to update their personal information on NRD within 10 days.
- The firm should confirm whether it needs to make any changes or updates to its directors & officers insurance.
- Firms have the option to modify their corporate by-laws in order to define the scope of authority of such individuals. For example, the firm may wish to expressly state the extent (if any) to which such individuals can sign documents and authorize banking transactions for the firm.
Apply For and Obtain the Same Exemptive Relief That Has Been Given to Others
The exemption orders given by the CSA to the first applicants set the precedent for others to obtain similar relief. The key representations and conditions in those exemption orders are the following:
- The firm offers services to institutional clients (either “permitted clients” under National Instrument 31-103 or “institutional clients” under IIROC Rule 1201) who are not individuals. These will be the “clients” within the scope of the exemptive relief.
- The identified individuals deal exclusively with institutional clients. In other words, these individuals cannot simultaneously solicit or service both institutional clients and non-institutional clients (including any clients that are individuals).
- The application to the CSA confirms:
- both the number of individuals initially expected to use corporate titles and the range of titles expected to be used,
- that the awarding of corporate titles to individuals is pursuant to criteria established by the firm (such as seniority and/or experience), and that sales activity or revenue generation is not a primary factor, and
- that the firm has significant operational and human resources challenges by not using corporate titles.
Next Steps
Please do not hesitate to reach out to your contact at Fasken if you would like assistance with the use of corporate titles by your institutional team.
