Industry


A Guide to Financial Filing Requirements



National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) sets out various financial filing requirements for registrants. This page summarizes the key elements for registered firms, other than those registered in the categories of investment dealer and mutual fund dealer:

  • Working Capital – Form 31-103F1 Calculation of Excess Working Capital (Form 31-103F1)
  • Insurance – Notice of any change in, claim made under, or cancellation of policy
  • Financial Reporting
    • Annual financial statements
    • Interim financial information
    • Net Asset Value (NAV) Adjustments
    • Repayment/termination notice for subordination agreement

For financial filing requirements applicable to investment dealers and mutual fund dealers, please see the section below on “Investment dealers and mutual fund dealers”.

Registered firms that are late in filing any of the financial filings may be subject to regulatory action, see the section below on “Late filings”.


Working Capital – Form 31-103F1 Calculation of Excess Working Capital (Form 31-103F1)

Along with the annual financial statements and interim financial information, all registered firms are required to deliver a completed Form 31-103F1 showing the calculation of the firm’s excess working capital as at the end of the financial year or interim period, as applicable, and as at the end of the immediately preceding financial year or immediately preceding interim period, as applicable. This requirement is set out under subsections 12.12(1), 12.13 or 12.14(1) and 12.14(2) of NI 31-103 for firms registered as a dealer, adviser or investment fund manager, respectively.

A copy of Form 31-103F1 can be found here.

Section 12.1 of NI 31-103 sets out the capital requirements. The minimum capital requirement for each category of registration is set out in subsection 12.1(3) of NI 31-103. and are as follows: 

  • $25,000, for a registered adviser that is not also a registered dealer or a registered investment fund manager
  • $50,000, for a registered dealer that is not also a registered investment fund manager
  • $100,000 for a registered investment fund manager.

Firms are required to know their excess working capital at all times. This may require a firm to calculate its working capital every day. The frequency of working capital calculations depends on many factors, including the size of the firm, the nature of its business and the stability of the components of its working capital.  

If, at any time, the excess working capital of a registered firm, as calculated in accordance with Form 31-103F1, is less than zero, the registered firm must notify the regulator as soon as possible (subsection 12.1(1) of NI 31-103). The excess working capital of a registered firm, as calculated in accordance with Form 31-103F1, must not be less than zero for 2 consecutive days (subsection 12.1(2) of NI 31-103). 

The following section outlines each line item of Form 31-103F1 and provides examples of what to take into account: 


Insurance – Notice of any change in, claim made under, or cancellation of policy

All registered firms must maintain bonding or insurance that contains certain specific clauses and coverage. See sections 12.3 to 12.5 of NI 31-103 for details on how to calculate the amount of bonding and insurance required for a dealer, adviser or investment fund manager. A registered firm must, as soon as possible, notify the regulator in writing of any change in, claim made under, or cancellation of any insurance policy (section 12.7 of NI 31-103). 


Financial Reporting


Annual financial statements

All registered firms are required to deliver annual financial statements to the regulator no later than the 90th day after the end of its fiscal year. The deadlines are outlined under subsections 12.12(1), 12.13 or 12.14(1) of NI 31-103 for firms registered as a dealer, adviser or investment fund manager, respectively. 

The annual financial statements must be audited. 

The annual financial statements must include the items outlined in section 12.10 of NI 31-103 as follows: 

  • A statement of comprehensive income, a statement of changes in equity and a statement of cash flows, each prepared for the most recently completed financial year and the financial year immediately preceding the most recently completed financial year, if any
  • A statement of financial position, signed by at least one director of the registered firm, as at the end of the most recently completed financial year and the financial year immediately preceding the most recently completed year, if any
  • Notes to the financial statements.

The annual financial statements must also be prepared in accordance with the acceptable accounting principles and auditing standards outlined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107).  

Domestic registrants (i.e. firm incorporated or organized in Canada) Paragraph 3.2(3)(a) of NI 52-107: Domestic registrants are required to prepare annual financial statements in accordance with Canadian Generally Accepted Accounting Principles (GAAP) applicable to publicly accountable enterprises, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in International Accounting Standard 27 Separate Financial Statements (IAS 27).  

Canadian GAAP applicable to publicly accountable enterprises refers to International Financial Reporting Standards (IFRS). Separate financial statements are sometimes referred to as non-consolidated financial statements. 

Additionally, the annual financial statements must: 

  • Include the following statement:
    These financial statements are prepared in accordance with the financial reporting framework specified in paragraph 3.2(3)(a) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for financial statements delivered by registrants.
  • Describe the financial reporting framework used to prepare the financial statements.

Foreign registrants (i.e. firm incorporated or organized outside Canada) Section 3.15 of NI 52-107: The term “foreign registrant” is defined in section 1.1 of NI 52-107 and means a registrant that is incorporated or organized under the laws of a foreign jurisdiction with limited exception. Despite paragraph 3.2(3)(a) of NI 52-107, foreign registrants may prepare annual financial statements in accordance with one of: 

  • IFRS, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27
  • U.S. GAAP, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27
  • Accounting principles that meet the disclosure requirements of a foreign regulatory authority to which the registrant is subject, if it is a foreign registration incorporated or organized under the laws of that designated foreign jurisdiction.

Separate financial statements are sometimes referred to as non-consolidated financial statements. 

Additionally, the annual financial statements must: 

  • Include the following statement:
    These financial statements are prepared in accordance with the financial reporting framework specified in section 3.15 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for financial statements delivered by registrants.
  • Describe the financial reporting framework used to prepare the financial statements.

Interim financial information

Firms registered as an investment fund manager or as a dealer in the category of scholarship plan dealer are required to deliver interim financial information to the regulator no later than the 30th day after the end of its interim period. The deadlines are outlined under subsections 12.12(2) and 12.14(2) of NI 31-103 for firms registered as an investment fund manager or as a dealer in the category of scholarship plan dealer, respectively. 

The interim financial information does not need to be audited. 

Interim financial information must include the items outlined in section 12.11 of NI 31-103 as follows: 

  • A statement of comprehensive income for the 3-month period ending on the last day of the interim period and for the same period of the immediately preceding financial year, if any
  • A statement of financial position, signed by at least one director of the registered firm, as at the end of the interim period and as at the end of the same interim period of the immediately preceding financial year, if any.

Notes to interim financial information are not required. 

The interim financial information must also be prepared in accordance with the acceptable accounting principles and auditing standards outlined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107).  

Domestic registrants (i.e. firm incorporated or organized in Canada) Paragraph 3.2(3)(a) of NI 52-107: Domestic registrants are required to prepare interim financial information in accordance with Canadian Generally Accepted Accounting Principles (GAAP) applicable to publicly accountable enterprises, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in International Accounting Standard 27 Separate Financial Statements (IAS 27).  

Canadian GAAP applicable to publicly accountable enterprises refers to International Financial Reporting Standards (IFRS). Separate financial statements are sometimes referred to as non-consolidated financial statements. 

Additionally, the interim financial information must: 

  • Include the following statement:
    These financial statements are prepared in accordance with the financial reporting framework specified in paragraph 3.2(3)(a) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for financial statements delivered by registrants.
  • Describe the financial reporting framework used to prepare the financial statements.

Foreign registrants (i.e. firm incorporated or organized outside Canada) Section 3.15 of NI 52-107: The term “foreign registrant” is defined in section 1.1 of NI 52-107 and means a registrant that is incorporated or organized under the laws of a foreign jurisdiction with limited exception. Despite paragraph 3.2(3)(a) of NI 52-107, foreign registrants may prepare interim financial information in accordance with one of: 

  • IFRS, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27
  • U.S. GAAP, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27
  • Accounting principles that meet the disclosure requirements of a foreign regulatory authority to which the registrant is subject, if it is a foreign registration incorporated or organized under the laws of that designated foreign jurisdiction.

Separate financial statements are sometimes referred to as non-consolidated financial statements. 

Additionally, the interim financial information must:

  • Include the following statement:
    These financial statements are prepared in accordance with the financial reporting framework specified in section 3.15 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for financial statements delivered by registrants.
  • Describe the financial reporting framework used to prepare the financial statements.

Net Asset Value (NAV) Adjustments

Along with the annual financial statements and interim financial information, firms registered as investment fund managers must also deliver to the regulator a description of any net asset value adjustment made in respect of an investment fund managed by the investment fund manager during the financial year or the interim period, as applicable. This requirement is set out under subsections 12.14(1) and 12.14(2) of NI 31-103.

Subsection 12.14(3) specifies that a description of a net asset value adjustment must include the following:

(a) the name of the fund;

(b) assets under administration of the fund;

(c) the cause of the adjustment;

(d) the dollar amount of the adjustment;

(e) the effect of the adjustment on net asset value per unit or share and any corrections made to purchase and sale transactions affecting either the investment fund or security holders of the investment fund.

A NAV adjustment is necessary when there has been a material error and the NAV per unit does not accurately reflect the actual NAV per unit at the time of computation. Please refer to section 12.14 of 31-103CP for some examples of the causes of NAV errors.

As set out in section 12.14 of 31-103CP,investment fund managers are expected to have policies that clearly define what constitutes a material error that requires an adjustment, including threshold levels, and how to correct material errors.


Repayment/termination notice for subordination agreement

All registered firms that have executed a subordination agreement, the effect of which is to exclude an amount from its long-term related party debt as calculated on Form 31-103F1, must notify the regulator 10 days before it repays the loan or any part of the loan, or terminates the agreement (section 12.2 of NI 31-103). Further documentation may be requested by the regulator after receiving this notice. 


Investment dealers and mutual fund dealers

Investment dealers that are a member of the Investment Industry Regulatory Organization of Canada (IIROC) should refer to the IIROC website to determine the financial reporting requirements that apply to them.  

Mutual fund dealers that are a member of the Mutual Fund Dealers Association of Canada (MFDA) should refer to the MFDA website to determine the financial reporting requirements that apply to them. 

IIROC and MFDA member firms that are also registered in other categories that do not require membership in a self-regulatory organization (SRO) must still comply with the financial filing requirements in Part 12 Financial condition of NI 31-103 in accordance with the requirements of the other categories, even if they are relying on the exemptions in sections 9.3 and 9.4 of NI 31-103.  

Insurance

If your firm is a member of an SRO and is also registered in other categories, it is required to maintain adequate insurance, as applicable, in accordance with the requirements of the other categories. 

Working capital 

Provided certain conditions are met, IIROC or MFDA members that are registered in other categories may be permitted to calculate their working capital in accordance with the SRO forms and file the SRO forms instead of Form 31-103F1. 

IIROC member firms: 

For IIROC member firms, provided criteria from section 12.14(4) of NI 31-103 are met, firms may file a completed IIROC Form 1 Joint Regulatory Financial Questionnaire and Report (IIROC Form 1) that shows the calculation of the firm’s risk adjusted capital as at the end of the current period and as at the end of the immediately preceding period, if any. IIROC Form 1 is filed in lieu of Form 31-103F1.  

MFDA member firms: 

For MFDA member firms, provided criteria from subsections 12.12(2.1) and 12.14(5) of NI 31-103 are met, firms may file a completed MFDA Form 1 MFDA Financial Questionnaire and Report (MFDA Form 1) that shows the calculation of the firm’s risk adjusted capital as at the end of the current period and as at the end of the immediately preceding period, if any. MFDA Form 1 is filed in lieu of Form 31-103F1.  

Annual financial statements and interim financial information 

If your firm is a member of an SRO and is also registered in other categories, it is required to file annual financial statements and interim financial information, as applicable, in accordance with the requirements of the other categories. 


Late filings

Registered firms that are late in filing any of the above-outlined requirements may be subject to regulatory action, including: 

  • Receipt of a warning letter
  • Terms and conditions imposed on the firm’s registration
  • Levy of late fees
  • Suspension of registration