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Pursuant to the requirements of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, the prescribed proficiency requirements for an advising representative (AR) includes both an education requirement and a requirement for relevant investment management experience (RIME) that is acquired over specified periods of time. All applicants are required to have expertise in analyzing and selecting individual securities as a part of the RIME requirement in order to become eligible to register in the AR category.
If an individual can demonstrate that they have satisfied all of the proficiency requirements of an AR (but for the securities selection-related RIME), the individual can be registered as an AR who will specialize in CRM activity as a CRM AR. Terms and conditions are imposed on the registration of a CRM AR in order to restrict their registerable activities to activities that do not involve the selection of securities. CRM ARs are permitted to recommend model portfolios and pooled funds, determine asset allocations, and formulate and draft investment policy statements without the approval of an AR. CRM ARs can approve CRM-related advice given by an associate advising representative. This can help portfolio manager (PM) firms that use CRM ARs to operate more efficiently.
A PM that uses client relationship managers will have to decide if its particular operating model has a place for a CRM AR that is subject to the restrictive terms and conditions. There will be no lowered expectations in respect of a PM’s internal controls simply because some of its ARs are registered as CRM ARs. No PM will be permitted to operate without at least one unrestricted AR who is not a CRM AR.
In order to ensure that there are no misunderstandings on the part of clients, CRM ARs may not use any title that could imply to a reasonable person that their advising activities are materially the same as those of unrestricted ARs.
If a CRM AR’s title does not include “client relationship manager” (although that is the easiest thing for all concerned), “client relationship manager” must be attached to their title as a description of their function in client communications and marketing materials. Examples of client communications and marketing materials where this would apply include, among other things, documents and webpages that reference the individual, e-mail signatures and business cards.
CRM specialist ARs are required to tell clients about the limits of the advice they can give and that unrestricted ARs will advise clients on securities selection.
We have prepared a Frequently Asked Questions (FAQ) regarding CRM ARs, which includes guidance on the process to become registered as a CRM AR. The FAQ can be viewed here.