Outside Business Activities seem to be one of those things that continually come up in regulatory exams for institutions and the SROs always seemed to find failures to report. Without fail, Peter, a registered person, forgot to report his volunteer coaching position on his son\’s Little League Baseball team. And without fail, the SRO would discover it, leading to a “finding”. Depending on the number of Peters at the Institution, this could lead to a requirement to update the Registration Policy, more registrant training, and a promise that the firm will remind registrants of their responsibilities again. However, it doesn’t matter how often you remind Peter of his responsibilities to report his volunteer, outside business activity, he always forgets. Take it from someone who managed a Registrations Team responsible for IIROC, MFDA, and CSA registration across Firms, it is a good thing that the CSA decided to tackle Outside Business Activities (OBA) in their recent changes to the “Amendments Modernizing Registration Information Requirements, Clarifying Outside Activity Reporting & Updating Filing Deadlines”.
The CSA introduced some pretty spectacular changes that will, hopefully, reduce that reporting burden on Peter and his Firm. I will only focus on the three that I would consider the most significant, but the Amendments in 33-109 are worth a read.
The first mind-blowing change of significance was a simple title change from “Outside Business Activities” to “Outside Activities”. While it may seem minor, this is logical and an excellent use of plain language. Peter now knows that his Coaching position, while unpaid, may still be a reportable Outside Activity and may still fall under a reportable Category (Activities with Another Registered Firm; Activities with an Entity that Receives Compensation from a Registered Firm; Other Securities-Related Activities; Provision of Financial or Finance-Related Services; Position of Influence). In this case, hooray, Peter, now remembering that all Outside Activities are reportable, can peruse the list of reportable categories and determine, fairly quickly, that acting as a volunteer Coach is no longer reportable in NRD.
…simple title change from “Outside Business Activities” to “Outside Activities”. While it may seem minor, this is logical and an excellent use of plain language.
The CSA changed reporting requirements for Notice of Cessation and seemingly expanded the requirements of Firms. At the time of cessation of employment, the Firm, who always had to report if a registered person committed or is alleged to commit a crime, contravened any statute, regulation, Order of a Court, regulatory body, rule or bylaw of an SRO, will also be responsible to determine if the individual may have failed to meet any standard of conduct of a sponsoring firm or professional body, which means a contravention of any Code of Conduct. This is relevant since, in the past, when Investigators in organizations received a complaint or had a concern about a registrant’s activities, usually, that individual resigned with an organizational silent “sigh of relief”. No awkward conversation with the registrant and HR, no need to complete the investigation if no money was stolen, moving right on to the next employee allegation. Now, the firm will be responsible to report allegations against the registered person. This prevents “rolling bad apples” who roll from one firm to another engaging in misconduct and bringing the capital markets system into disrepute. This is a noteworthy change that will require Firm diligence and now Peter’s questionable conduct at one Firm will follow him to the next Firm.
This prevents “rolling bad apples” who roll from one firm to another engaging in misconduct and bringing the capital markets system into disrepute.
Lastly, the requirement to report Titles. Peter, VP of Awesomeness and Registered Person, will have to report his title. CSA 13.18 of NI 31-103 prohibits a registered person from, “holding out their services in a manner that could deceive or mislead a person”. An individual within an organization who interacts with clients (involved in presentations to clients or prospective clients) must use a title that describes what they do. The CSA is clear that a registered person cannot use a “corporate officer title” like Vice President unless they’ve been appointed a Vice President by the Firm to a corporate office. This may mean that Peter’s current title and those of his colleagues across the Firm will need to be re-considered. Peter’s VP of Awesomeness title can no longer be used when interacting with Clients.
Peter, VP of Awesomeness and Registered Person, will have to report his title.
Firms and banks have until June 2023 to comply. By June 23, 2022 (quickly coming up!) NRD will read, \”there is no response to this question\” in new areas and those requiring review. This means that Peter and all registrants, must update their information whenever they report a change in NRD or by June 6, 2023. And, if Peter doesn’t know he has to update his Volunteer Coaching role, register his proper Title and learn to behave properly at all institutions, this then becomes an integrity issue for him and his Firm and Peter will then be “paying the Piper”.
Reference: https://www.securities-administrators.ca/uploadedFiles/General/pdfs/CFRFAQsMarch2021E.pdf