Filing Procedures and Minimum Requirements as Futures Commission Merchant under The Commodity Futures Act
" Futures Commission Merchant" means a person or Firm that is registered under the Commodity Futures Act as a Dealer in the Futures Commission Merchant registration category [MSC Rule 2000-11, 1.1].
A Futures Commission Merchant may
(a) engage in soliciting or accepting orders from both members of a commodity futures exchange and non-members for the purchase or sale of contracts on, or subject to the rules of, the exchange;
(b) in, or in connection with, the solicitation or acceptance of orders, accept money, securities or property, or extend credit, to margin, guarantee or secure any trades or contracts that result or may result from the solicitation or acceptance of the orders;
(c) engage in the activities set out in subsection (1); and
(d) engage in the activities of an Adviser [MSC Rule 2000-11, 2.1(3)].
REGISTRATION PROCESS FOR THE FIRM:
Firms are required to be enrolled with CDS for the purpose of registering by way of NRD. To obtain information on enrollment, please refer to the NRD website: www.nrd-info.ca; or contact CDS, NRD Administrator help line: 1-800-219-5381. Also, refer to Chapter 3 of the NRD Filer Manual for the NRD forms, fees and other related information that is required to be completed for the purpose of registering with the NRD system.
Once The Manitoba Securities Commission (MSC) has received hard (paper) copies of the required documentation to register the Firm, MSC staff will amend NRD records and notify you. The Firm can then submit the appropriate submissions for the individuals by way of the NRD System.
File Form 5 stating registration desired as Dealer (Futures Commission Merchant) fully completed and executed [MSC Rule 2000-11, 3.1]. Submit appropriate fee of $1,000 for registration of the Firm. Cheque is to be made to The Minister of Finance.
3. Provide evidence of membership with the Winnipeg Commodity Exchange as a Futures Commission Merchant [MSC Rule 2000-11, 3.17].
4. If the Firm does not have an office located in Manitoba, please file a completed Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by Non-Resident Dealer [the Act 67(2)].
Every Futures Commission Merchant shall maintain risk adjusted capital greater than zero [MSC Rule 2000-11, 3.18(1)]; or
Every Futures Commission Merchant who is also a registrant under The Securities Act (Manitoba) shall maintain the most stringent standards of capital required of the registrant under the rules and regulations of that Act [MSC Rule 2000-11, 3.18(2)].
a) File audited financial statements for the current year and the previous four years;
i. If the Firm has not existed for a complete financial year, file an audited opening balance sheet;
ii. These financial statements must be signed by at least two directors of the Firm; and be accompanied by a signed auditor’s report; and
b) If the registrant is newly incorporated, please specify date of a fiscal year end.
If the Firm is a member of the Investment Dealers Association the Firm shall file an audited Joint Regulatory Financial Questionnaire and Report, Form 1 of the Investment Dealers Association of Canada, with the Commission in duplicate [MSC Rule 2000-11, 3.20(2)(a)].
Please provide evidence that the Firm’s insurance requirements are in compliance with the insurance requirements set out in Section 3.21(1) of the Rule. Acceptable evidence is a copy of the Financial Institution Bond [MSC Rule 2000-11, 3.21(1)].
a) Submit a brief history of the Firm and any associated companies, describing the nature of the current business activities and those contemplated in the future. In particular, a description of the nature of the activities the applicant intends to undertake in Manitoba.
b) Also, provide evidence that the Firm is registered under the Corporations Act (Manitoba).
c) The Firm must be registered in its home jurisdiction under the same or a similar category of registration. Proof of registration will be obtained from the NRD System.
Please be advised that every Futures Commission Merchant shall establish and maintain policies directed at ensuring fairness in the allocation of trading opportunities among the Futures Commission Merchant’s customers and shall provide a written copy of the policies to each customer and file one with the commission. We request that we be provided same [MSC Rule 2000-11, 3.26].
10. For your information, unless prior approval in writing is obtained from the director, no Futures Commission Merchant shall accept securities as margin, other than bonds, debentures or other evidences of indebtedness
a) of or guaranteed by the Government of Canada or any province of Canada, or by the Government of the United States of America or any state of that country;
b) of or guaranteed by a bank as defined in the Bank Act (Canada), a trust corporation or loan corporation registered under Part XVI of The Corporations Act or an insurance Firm licensed under The Insurance Act; or
c) of or guaranteed by a bank that is a member of the Federal Reserve System of the United States of America; and
d) maturing not more than one year from the date of purchase [MSC Rule 2000-11, 3.33].
Each Futures Commission must meet the minimum personnel requirements at its principal place of business and at each branch office [MSC Rule 2000-11, 3.16(1)].
Subject to such conditions as the director considers appropriate, the director may exempt a Futures Commission Merchant from the requirements of section 3.16(1) if the director is satisfied that fewer personnel can provide adequate service to the customers of the Futures Commission Merchant. If the Firm is requesting such exemption, please indicate how adequate service will be provided to the customers of the Futures Commission Merchant [MSC Rule 2000-11, 3.16(1)].
For each Branch Office, please submit an NRD Open a Location Submission.
FOR OFFICERS, DIRECTORS, PARTNERS, SALESPERSONS AND BRANCH MANAGERS:
a) Application for registration for each Officer, Director, Partner (trading or non-trading), Salesperson or Branch Manager must be processed through NRD. Please refer to MSC Notice 2002-46 – Notice of Rule Under the Securities Act and The Commodity Futures Act Multilateral Instrument 33-109 and Companion Policy 33-109 Registration Information [Notice 2002-46 and MI 33-109].
b) Individuals who are non-resident a Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by Salesperson, Partner, Officer or Director of Non-Resident Dealer is required to be completed [the Act 67(2)] and retained at the Firm’s head office [(Notice 2002-46, MI 33-1096.1(2)].
c) A current photograph of each Manitoba resident individual registered in a trading or advising category must be available at the applicant’s place of business.
d) Individuals who are non-resident must be registered in their home jurisdiction in a similar category or capacity. Proof of registration will be obtained from the NRD System.
e) Any employee(s) authorized to accept customer’s unsolicited instructions, pursuant to Section 3.16(I)(b)(ii) of MSC Rule 2000-11, are to be designated as non-trading. Registration is to be submitted by way of NRD.
f) Fees for individuals and locations will be collected by way of the NRD system. Below is a summary of fees:
i. Salespeople - $300
ii. Branch Manager - $300
iii. Trading Officer, Partner, or Director - $300
iv. Non-Trading Officer, Partner or Director - $300
v. Branch Office - $250
The fees for individuals of the dealer shall be reduced by 50% when the individual of the dealer is concurrently registered as such under The Securities Act.
a) Persons designated as salesperson must have successfully completed the following:
i. The Derivates Fundamentals Course, Futures Licensing Course and Options Licensing Course; or
ii. The National Commodity Futures Examination and the Futures Licensing Course and Options Licensing Course [MSC Rule 2000-11, 3.13(1)].
b) Persons designated as a branch manager must have successfully completed the following:
i. Where the Futures Commission Merchant’s business includes trading in commodity futures contracts, he or she has successfully completed the Canadian Commodities Supervisors Examination; and
ii. Where the Futures Commission Merchant’s business includes trading in commodity futures options, he or she has successfully completed the Options Supervisors Course [MSC Rule 2000-11, 3.13(2)].
c) Persons designated as a partner or officer must have successfully completed the Derivatives Fundamentals Course, Futures Licensing Course, Options Licensing Course and the Partners, Directors and Senior Officers Qualifying Examination [MSC Rule 2000-11, 3.13(3)].
d) Persons designated as associate futures contracts portfolio managers must provide the following:
i. Proof that the individual is registered with The Investment Dealers Association of Canada as an "associate futures contract portfolio manager”;
ii. Proof that the individual has been registered as a salesperson, partner or officer of a Futures Commission Merchant;
iii. A letter from an Officer or Partner of the Firm indicating that the individual has had at least two years experience actively trading in contracts as a registered salesperson, partner or officer of a Futures Commission Merchant;
iv. A letter from an Officer or Partner of the Firm indicating that the individual has had at least two years of the experience referred to in (iii) have been continuously served in the 25 months immediately preceding the filing of the application for registration as an associate futures contract portfolio manager; and
v. The individual provides the Commission with a letter of undertaking from the Futures Commission Merchant (signed by each partner or officer who is a member of its portfolio management committee) that the individual will, while exercising discretionary authority as an associate futures contracts portfolio manager with respect to any discretionary account, be under the direct supervision of a futures contract portfolio manager [MSC Rule 2000-11, 3.14(4)].
e) Persons designated as futures contracts portfolio manager must provide the following:
i. Proof that the individual is registered with The Investment Dealers Association of Canada as a "futures contract portfolio manager";
ii. Proof that the individual is registered as a salesperson, partner or officer of the Futures Commission Merchant and has been trading in contracts for at least three years;
iii. A letter from an Officer or Partner of the Firm indicating that the individual has had at least three years experience as an associate futures contracts portfolio manager;
iv. A letter from an Officer or Partner of the Firm indicating that the individual has had at least three years of the experience referred to in (iii) above have been served in the 37 months immediately preceding the filing of the application for registration as a futures contracts portfolio manager; and
v. The individual has at the time of application, and has had for a continuous period of at least one year before that time, assets comprised of commodity futures contracts having an aggregate value of not less than $5,000,000 under his or her direct administration on a discretionary basis, provided that the aggregate value of the assets shall be computed based upon the value of underlying commodities [MSC Rule 2000-11, 3.13(6)].
Where the qualifications outlined in Item 2 are not met, exemption from those requirements may be granted where the applicant has educational qualifications and experience that are equivalent, and are satisfactory to the Director [MSC Rule 2000-11, 3.15]. Such exemptions are to be filed by way of NRD (Apply for an Exemption Submission).
For each resident applicant only, please provide a completed Securities Fraud Information Centre Records Request Form. Faxed copies are acceptable, fax no. 204-945-0330.
Copies of the Commodity Futures Act and Regulations may be obtained, at a cost, from:
Statutory Publications
200 Vaughan Street
Winnipeg MB R3C 1T5
Telephone: (204) 945-3101
Fax: (204) 945-7172
If you have any questions regarding this matter, please contact Isilda Tavares, Registration Officer, direct telephone: (204) 945-2560, Fax: (204) 945-0330, or via e-mail: Itavares@gov.mb.ca
Dated: August, 2004