Cost disclosure, performance reporting and client statements
The Client Relationship Model - Phase 2 (CRM2) amendments to NI 31-103 that came into effect on July 15, 2013 are being phased-in over a three-year period. These amendments introduce new requirements for reporting to clients about the costs and performance of their investments, and the content of their accounts. The requirements apply to dealers and advisers in all categories of registration, with some application to IFMs as well. For more information about these amendments, see CSA Notice of Amendments to NI 31-103 and to 31-103CP (Cost Disclosure, Performance Reporting and Client Statements).
Minor clarifications to NI 31-103, such as enhancements to relationship disclosure information, were implemented as of July 15, 2013. Beginning July 15, 2014, dealers and advisers were required to:
- provide pre-trade disclosure of charges; and
- report on compensation from debt securities transactions.
Beginning July 15, 2015, expanded account statement requirements will be implemented. These include requirements to provide position cost information and to determine market values using a prescribed methodology for most securities owned by clients, including those held in client name.
Beginning July 15, 2016, registered firms will need to:
- provide an annual report on charges and other compensation that shows, in dollars, what the dealer or adviser was paid for the products and services it provided; and
- provide an annual investment performance report that covers
- deposits into, and withdrawals from, the client’s account;
- the change in value of the account; and
- the percentage returns for the previous year; and the previous three, five and ten years.
IIROC and MFDA member rules will be materially harmonized with the CSA’s CRM2 requirements and will be implemented on the same schedule. SRO members who comply with equivalent member rules will be exempted from the CRM2 requirements in NI 31-103.
The CRM2 requirements represent a significant step forward in client communications and we are committed to helping industry to implement them. Staff has conducted “outreach” sessions and webinars, speaks often about CRM2 at industry seminars, and makes themselves available to assist with questions and guidance about the requirements and practical issues as they arise. With our CSA colleagues, we published Staff Notice: 31-337 Cost Disclosure, Performance Reporting and Client Statements - Frequently Asked Questions and Additional Guidance as of February 27, 2014, and sent a document on CRM2 planning tips directly to CCOs of all registered dealers and advisers as of March 7, 2014. We have also initiated a CRM2 discussion forum of industry associations and regulators, including IIROC and the MFDA.