Under the New Brunswick Securities Act a “dealer” means a person who trades (buys or sells on behalf of someone else) in securities or derivatives in the capacity of principal or agent. (“Registered dealer” means a dealer that is registered under theSecurities Act or the regulations.)
A principal is the main party in a transaction. The principal acts as either the buyer or the seller for his or her own account.
An agent is someone who represents or acts on behalf of a principal. This could be an individual or firm who carries out securities transactions for a client, or a securities salesperson who represents an issuer when trying to buy or sell to the public. There are different categories of registration for a person or company that is required under the New Brunswick Securities Act to be registered as a dealer and what they may do.
- Investment dealer
An investment dealer may act as a dealer or an underwriter in respect of any security and must be a “Dealer Member”, as defined under the rules of IIROC . An investment dealer may also be known as an investment adviser, investment representative or stockbroker. But remember, it is the category of registration that is more important than their title.
An underwriter is a company or other entity that administers the distribution of securities for a corporation or other issuing body. They determine the offering price of the securities, buy them from the issuer and are responsible for selling them to investors. They generally receive fees for providing this service and earn profits from selling the securities. If they can’t sell all the securities at the price they have set, they may have to sell them at a loss or keep the securities themselves.
- Restricted dealer
A restricted dealer may act as a dealer or an underwriter in accordance with the terms, conditions, restrictions or requirements applied to its registration.
- Mutual fund dealer
A mutual fund dealer may act as a dealer in respect of any security of a mutual fund or an investment fund that is a labour-sponsored investment fund corporation or labour-sponsored venture capital corporation under legislation of a jurisdiction of Canada. They must be a “member”, as defined under the rules of the MFDA.
- Scholarship plan dealer
A scholarship plan dealer may act as a dealer in respect of a security of a scholarship plan, an educational plan or an educational trust.
- Exempt market dealer
An exempt market dealer is only permitted act as a dealer in the “exempt market”. These activities relate to trades of prospectus exempt securities to specified clients. Usually in order to distribute securities an issuer must file a prospectus with the regulator (FCNB).
A prospectus is a legal document that contains all the important information and facts about the security being issued and the company issuing that an investor would need to make an informed decision. However, there are some instances when a prospectus is not required. The key permitted activities for an exempt market dealer are trades of prospectus-exempt securities to specified clients, including “accredited investors”, and trades in securities to clients who purchase a minimum of $150,000 of a security in one transaction.
An exempt market dealer may:
- act as a dealer by trading a security that is distributed under an exemption from the prospectus requirement, whether or not a prospectus was filed in respect of the distribution,
- act as a dealer by trading a security that, if the trade were a distribution, would be exempt from the prospectus requirement,
- receive an order from a client to sell a security that was acquired by the client in a circumstance described in points 1 or 2, and may act or solicit in furtherance of receiving such an order, and
- act as an underwriter in respect of a distribution of securities that is made under an exemption from the prospectus requirement;
Visit Exempt Markets for more information about the risks involved or Securities Exemptions to learn more about the exemptions that exist. Details about registration exemptions can be found in National Instrument 45-106 Prospectus and Registration Exemptions.