Asset and portfolio management (in the context of activities governed under securities legislation) is a well-established and highly regulated business sector in Canada. This is a very sophisticated sector, as are the professionals that operate within it. It is difficult to become registered and is becoming more difficult over time as the regulators intensify the level of regulation.
Registration under securities legislation across Canada is required in order to engage in the business of advising others as to investing in securities. The activity must be a “business” activity, it must involve advising “another” person, and it must be in respect of “securities”. The business trigger for registration is not always clear. Consultation with a securities regulatory lawyer is recommended.
Registration is not a “license” per se in Canada. There are different categories of adviser registration, the most common of which is portfolio manager. There are also exemptions from the adviser registration requirement, including the international adviser exemption. Costs of applying vary with the facts of each case, including complexity of business model, the number of individuals involved in the applicant business, the proficiencies and experi-ence of the individual applicants involved, number of Canadian jurisdictions in which the registration will be effective, etc. As an indication of order of magnitude, one should expect to pay at least $30,000 for professional fees plus filing fees, disbursements and taxes. Additional steps include audit and mandatory bonding.
A portfolio manager is required to maintain excess working capital of not less than $25,000 calculated pursuant to a stipulated capital calculation form, plus the deductible on applicable bond coverage. A portfolio manager should maintain additional capital in excess of the minimum, with the amount depending on the nature of the business model.
Registrants are subject to annual renewal charges that vary from one Canadian province or territory to another. There are also annual audit costs, costs associated with regulatory compliance reviews, participation in dispute resolutions systems, etc.
The 200 member firms of the Portfolio Management Association of Canada collectively manage more than $1.4 trillion in assets. Some of the larger players are Blackrock Asset Mangement, TD Asset Management, GLC Asset Management and Beutel, Goodman & Company Ltd.
Nora F. Osbaldeston
William L Northcote