Securities Industry Professionals
Every financial advising firm or individual who is registered (called a registrant) must register in a specific category. It’s this category that dictates what a registrant is allowed to do. Depending on what type of services you want to provide, a firm or individual may be register as a dealer, adviser or investment fund manager.
Under the New Brunswick Securities Act, a “dealer” means a person (including an individual, company or legal representative) 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 the Securities 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 securities legislation in New Brunswick to be registered as a dealer and what they may do.
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 the Canadian Investment Regulatory Organization (CIRO). An investment dealer is commonly referred to 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.
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 Canadian Investment Regulatory Organization (CIRO). Investment options when dealing with dealer representatives are mainly restricted to mutual fund products.
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 permitted to act as a dealer only in the “exempt market”. These activities relate to trades of prospectus-exempt securities to specified clients. Usually, 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
- act as an underwriter in respect of a distribution of securities that is made under an exemption from the prospectus requirement
Under the New Brunswick Securities Act, an “adviser” means a person engaging in or holding himself, herself, or itself out as engaging in the business of advising others as to the investment in or the purchase or sale of securities or derivatives. To be registered as an adviser under the New Brunswick Securities Act, a person or company must register under one of multiple different categories. These categories tell you what they can do.
A portfolio manager may act as an adviser (providing recommendations) in respect of any security. Portfolio managers may also be referred to as investment advisers, but remember, their category of registration will tell you more than their job title.
Restricted portfolio manager
A restricted portfolio manager may act as an adviser in respect of any security according to the terms, conditions, restrictions, or requirements applied to its registration.
Investment Fund Manager
An investment fund manager is the person or people responsible for implementing an investment fund’s strategy and managing the operations or affairs of the fund. An investment fund (such as a mutual fund, hedge fund, pension, or trust fund) can be managed by one person, co-managed by two, or managed by a team. Fund managers are paid a fee for the work they do managing the fund on behalf of investors.