In Canada, any firm or individual in the business of advising on or trading in securities or derivatives or managing investment funds must be registered with the securities regulator in each jurisdiction where they do business unless a registration exemption applies.
"Security” and “trade” are defined broadly in the Alberta Securities Act. For example, the word “security” is defined to include certain derivatives and investment contracts and anything deemed to be a security by the Alberta Securities Commission (ASC). The word “derivative” has also been defined very broadly by the ASC.
As a regulator, the ASC cannot provide legal advice. The information contained below is intended as a general guide. The instruments should be reviewed with your specific facts in mind. If you are uncertain whether the requirement to register applies, it is best to seek legal advice.
A firm or individual may require registration in more than one category. Different types of registerable activity require different categories of registration (see Registration categories below).
If you have any questions about the registration process, please contact registration@asc.ca, and a member of our team will be able to assist you.
Firms and individuals must register with the ASC if they trade or advise in securities, derivatives or manage investment funds in Alberta, unless they have an exemption. For full details of the registration requirements, refer to National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) and the Companion Policy to NI 31-103 (31-103CP).
Firms
A firm must register with the ASC if it meets any of the following conditions in Alberta, unless it is relying on an exemption:
- It is in the business of trading in or advising on securities or derivatives.
- It promotes itself as being in the business of trading or advising on securities or derivatives.
- It acts as an underwriter or an investment fund manager.
Individuals
Individuals must register if they:
- Trade, advise or underwrite on behalf of a registered firm.
- Act as the ultimate designated person or chief compliance officer of a registered firm.
An individual’s registration must be sponsored by a registered firm.
Business trigger
The registration requirement only applies to those in the business of doing the activities mentioned above – this is referred to as the “business trigger” for registration. The business triggers can be found in section 1.3 of 31-103CP. To evaluate if the activity is carried out for a business purpose requiring registration, the ASC considers whether the entity or individual is:
- Engaging in activities similar to a registrant. Setting up a business to advise in, to buy or to sell securities or derivatives may be considered trading or advising for a business purpose.
- Intermediating trades or acting as a market maker. Brokering trades, acting as a liaison between buyers and sellers, and making a market in securities or derivatives is considered trading for a business purpose. A market maker refers to a company or individual who buys and sells securities or derivatives to ensure market liquidity.
- Directly or indirectly carrying on the activity with repetition, regularity or continuity. Activities done repetitively or regularly, particularly with the expectation or hope of a profit, are most likely done with a business purpose. One-time trading or advising activities do not typically require registration (such as the sale of a business).
- Being, or expecting to be, remunerated or compensated. The payment or acceptance of compensation, or an expectation of compensation, particularly if the compensation is based on the value of a transaction, indicates trading or advising for a business purpose.
- Directly or indirectly soliciting. Contacting anyone, whether publicly, through advertising, or personally, to solicit securities transactions or to offer advice may reflect a business purpose. We also consider whether the activity is targeted at a particular client, investment product or other specific purpose. For example, investment advice that is disseminated through social media platforms (such as TikTok, Instagram, and YouTube) that is general in scope, not intended for a specific client or portfolio, and is accompanied by a disclosure of financial interests may not trip the “business trigger” of registration.
The above list is not exhaustive. When determining whether registration is required, the ASC (and the other Canadian securities regulators) consider the firm or individual’s activities as a whole and determine the applicability of each of the factors noted above on a case-by-case basis. It is not necessary for all of the factors mentioned above to be present to trigger the registration requirement. Depending on the activity being performed, registration may be triggered by engaging in just one of these factors.
Examples of the business trigger test
Many issuers (i.e., entities who issue any assets that fall into the broadly defined term “security”) actively solicit buyers for their securities through officers, directors or other employees. If these individuals’ activities are incidental to their primary roles with an issuer, they would likely not be in the business of trading. If, however, their primary purpose with the issuer is to raise capital or if their compensation structure is tied to their success in raising capital, they may be considered to be in the business of trading. (Note that, regardless of the requirement to register, securities issuers that are distributing securities are subject to the prospectus requirements unless an exemption is available.)
Start-up businesses: During the start-up stage, securities issuers may not yet be actively carrying on their intended business. We consider a start-up securities issuer to have an “active non-securities business” if the entity is raising capital to start a business unrelated to trading for a business purpose. We would look for a bona fide business plan, containing milestones and the time anticipated to reach those milestones.
Venture capital firms: These firms typically raise money using a prospectus exemption in order to acquire a significant stake in a target business that is not publicly traded. This significant ownership is then used to become actively involved in the management of the company, sometimes for an extended period of time.
The venture capital firm seeks to profit from making the target business more profitable and valuable than before the acquisition. Once this objective has been accomplished, the shares of the target business can either be sold to the general public or another investor, and profits paid to the original investors. Venture capital firms primarily earn compensation from management fees from their active management of the target business, not from raising capital or trading securities. If this is the case, the venture capital firm would not need to register as an investment fund manager or portfolio manager. Venture capital firms, however, may need to register as dealers if they meet the dealer business triggers in section 1.3 of 31-103CP.
Some factors that point to active management include:
- Representation on the board of directors.
- Direct involvement in the appointment of managers.
- Influence over material management decisions.
- The venture capital firm holds securities representing more than 10 per cent of the outstanding equity or voting securities of the target company.
- Any right of the venture capital firm to appoint board members or board observer seats.
- Veto rights over decisions made by the management of the target company.
- The venture capital firm has the right to restrict the transfer of securities by other security holders of the target company.
Merger and acquisition specialists: These specialists advise the parties to a corporate transaction and are not normally required to register as dealers or advisers in connection with that activity, even though the transaction may result in trades in securities, and they will be compensated for the advice, so long as the advising activity is incidental to the transaction. If, however, the merger and acquisition specialists also engage in capital raising from prospective investors, they may be in the business of trading and require registration.
Professionals, such as lawyers, accountants, engineers, geologists and teachers, who may provide advice concerning securities in the normal course of their professional activities. We do not consider them as advising on securities for a business purpose. For the most part, any advice on securities or derivatives will be incidental to their professional activities.
Sample business trigger cases
Below are several cases covering situations where prospective registrants may have questions about the applicability of the business trigger. These cases are for illustrative purposes only; as a regulator, the ASC cannot provide legal advice. If you are uncertain whether the requirement to register applies, it is best to seek legal advice.
A new firm wants to start a business distributing investments in real estate. The firm does not want to trade in listed securities. They plan to only sell these investments to friends, family and business associates or to high-net-worth clients who are accredited investors. After reading National Instrument 45-106, the firm’s management agrees that the investments they plan to sell are prospectus-exempt securities. The firm’s management is unsure if they need to register with the ASC.
Yes, the firm needs to register. By acting as a dealer of prospectus-exempt securities, this firm is considered to be in the business of trading securities and will require exempt market dealer registration.
Exemptions
Exemptions from the requirement to register are available to firms and individuals in certain circumstances. For more information, refer to part 8 of NI 31-103.
Sometimes, the ASC (occasionally together with other Canadian securities regulators) issues Blanket Orders or other instruments that offer exemptions for specific circumstances to encourage growth or development in particular market sectors or generally reduce the burden of raising capital. Please seek legal advice if you believe your situation may warrant targeted exemptive relief. Please note that, as a regulator, the ASC cannot provide legal or other professional advice.
Firms and individuals may apply to the ASC for discretionary relief if they are unable to comply with a specific requirement in securities law.
Registration categories for firms
Under part 7 of NI 31-103, a firm must choose one or more categories of registration on its initial application for registration. Firms are responsible for determining which categories of registration apply to their business activities, meeting the prerequisites for registration in the applicable categories, completing the registration process for the applicable categories, and remaining compliant with the obligations applicable to registrants in those categories.
The following registration categories are open to firms:
Portfolio manager
Investment fund manager
Exempt market dealer
Scholarship plan dealer
Investment dealer
Mutual fund dealer
Restricted dealer
Some firms have unique business models where the appropriate registration categories may not be immediately apparent. If you are not sure whether your firm needs to register, or what categories may be applicable, consult a securities lawyer.
Registration categories for individuals
Under part 2 of NI 31-103, an individual must choose one or more categories when applying for initial registration. An individual’s registration must be sponsored by a registered firm.
Dealing representative
Advising representative (AR)
They can also manage investment funds according to the fund’s mandate as detailed in offering documents. Advising representatives work for firms registered in the portfolio manager category.
Associate advising representative
CRM advising representative
Ultimate designated person
Chief compliance officer
Exemptions
Certain international dealers and advisers may be exempt from the registration requirement.
Source: Understanding Registration
Firms and individuals must meet certain requirements to be registered and to maintain their registration:
- Proficiency – individuals must meet the education and experience requirements set out in part 3 of NI 31-103, including time limits on experience and courses to meet such requirements.
- Integrity – firms and individuals who demonstrate non-compliance with ethics, policies and procedures and/or regulatory and legal requirements may not be fit for registration.
- Solvency – firms must maintain solvency by meeting the capital and insurance requirements on a daily basis. Additionally, individuals must maintain personal solvency to be considered fit for registration; individuals with bankruptcies, consumer proposals or other financial debt obligations are scrutinized in this regard.
In order for individuals to apply for registration, they must be sponsored by a firm that is registered or seeking registration with the ASC.
If you have questions
If you are unsure whether you or individuals at your firm need to register, which category to register under or whether an exemption applies, seek professional advice. As a regulator, the ASC cannot provide legal or other professional advice.
Exemptions
Exemptions from registration requirements, such as proficiency, may be granted in certain circumstances based on the specific facts of each case.
This guide provides information regarding how a market participant may apply to register as a firm or individual with the ASC. The guide also references certain links that may assist during the application process.
Applying in more than one province or territory
Firms and individuals can apply for registration in more than one province or territory when they make their initial registration application. The most efficient way to do this, to the extent permissible, is to use the passport system process outlined in Multilateral Instrument 11-102 Passport System and the Companion Policy to the instrument. The location of the firm's head office generally determines the province or territory in which the application is submitted to the regulator for review. Under the passport system process, the principal regulator of the firm leads the review of the application and once approved, registration approval is extended to the jurisdictions where registration is sought. For more information on registration forms, refer to section 1.3 of Companion Policy to NI 33-109.
Membership in self-regulatory organizations
To seek registration and membership as an investment dealer, refer to CIRO’s registration regime.
Mutual fund dealers in Alberta must file their registration application with the ASC but are required to obtain membership with CIRO.
Firm registration
A firm applying for registration must enrol with the National Registration Database (NRD) to obtain its NRD number as a first step in the application process. The firm will submit subsequent filings to the ASC electronically through the NRD. The firm must then submit key information about its business so that the ASC has all the required information to process the registration. Click here for the full registration checklist.
Once an application is received, ASC staff will contact the firm by telephone or email upon receipt of the application package and when the firm has been set up in a pending state on the NRD. The firm will be requested to submit fees through the firm’s Electronic Fund Transfer account with CDS/NRD. For more information on fees, refer to the Frequently Used Forms and Fees page.
Individual registration
Initial registration for individuals is done through the NRD. The sponsoring firm must be enrolled with the NRD before the individual registration process can occur. Refer to the NRD Initial Application User Guide for the full step-by-step process. The initial application for registration of an individual must be completed by the firm’s authorized firm representative. Individuals can only register through a sponsoring firm.
For more information regarding the registration process for an individual transferring firms, refer to Changes to Registration.