If a registered dealer is engaged, then care should be taken to ensure that the dealer is involved from the beginning in soliciting and marketing activities in Canada – this may include the dealer participating in meetings and telephone calls with potential investors and should include the dealer’s review and distribution of the fund’s marketing materials to investors. Adviser Registration Requirement: Only in (or to) Canada Any person engaging in or holding itself out as engaging in the business of advising another with respect to an investment in or the purchase or sale of securities or in the business of managing a securities portfolio must be registered as an adviser. Advice that is both given and received outside Canada is not subject to the adviser registration requirement. Generally, any advice that is given by a fund manager is given to the fund itself, and not to the fund’s investors directly. Accordingly, the adviser registration requirement typically does not apply to the manager of a fund if both the manager and the fund are located outside Canada. The analysis is different for managed accounts. In the case of a managed account in Canada, the adviser registration requirement does apply because the advice is being given to a recipient in Canada. An international adviser exemption is available from the adviser registration requirements for advisers located outside Canada. The exemption is similar to the international dealer exemption, in that it requires the adviser to advise only permitted clients. Some other conditions to the exemption include the following: – the adviser must not be advising its client on securities of Canadian issuers unless providing that advice is incidental to its providing advice on a foreign security ;1 – the adviser must be registered in, or operate under an exemption from the securities legislation of, its home jurisdiction in a category that permits the adviser to carry on the activities that it is proposing to carry on in the local Canadian jurisdiction; and – the adviser must not, during its most recently completed financial year, have derived more than 10% of its aggregate consolidated gross revenue (including revenue of its affiliates and affiliated partnerships) from Canadian advising and portfolio management activities. 2
Any person engaging in or holding itself out as engaging in the business of advising another with respect to an investment in or the purchase or sale of securities or in the business of managing a securities portfolio must be registered as an adviser.
1 A “foreign security” is a security issued by (i) an issuer incorporated, formed or created under the laws of a foreign jurisdiction or (ii) a government of a foreign jurisdiction. 2 T he term “portfolio management activities” is not specifically defined under Canadian securities laws, but generally involves “engaging in the business of advising others as to the investing in or the buying or selling of securities.”
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Go North, Young Fund!
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