Under Alberta securities law, the general prohibition against acting as a dealer is governed by a “Business Trigger Test” which is used to establish whether or not a firm is “acting” as a dealer rather than simply distributing securities for a non-business purpose. Only a firm that is acting in the business of dealing securities is required to register as a dealer.
The “Business Trigger Test” is primarily set out in the Companion Policy to National Instrument 31-103 (31-103CP) and corresponding decisions of securities regulatory authorities. The business trigger is determinable on a number of indicia, none of which are conclusive in isolation to establish whether or not an entity is required to register as a dealer. These indicia include: (1) acting similarly to a registered dealer, (2) intermediating trades or acting as a market maker, (3) dealing with repetition, regularity or continuity, (4) being remunerated for the activity, and (5) directly or indirectly soliciting (advertising) the dealing activity. Securities Commission decisions have shown that meeting only one or two of the indicia may not trigger a requirement for registration.
Securities regulatory authorities have shown a willingness to evaluate groups of related issuers as a common enterprise. For this reason, companies should perform both a historical and a prospective analysis on all issuers under common control when determining whether or not the company meets the “Business Trigger Test”. Effective analysis would consider past securities distribution activities as well as future business objectives and remuneration structures in the issuance of securities, including shares, units, bonds, promissory notes and mortgages.
Separate attention may need to be paid to additional registration requirements such as the requirement to register as an “investment fund manager” or “portfolio manager”. The registration requirement for fund managers and portfolio managers is typically triggered by managing a pool of investments or giving advice on the purchase and sale of securities, respectively. Discretionary control over an investment portfolio may also trigger the requirement to register as a portfolio manager.
The Securities Dealer "Business Trigger" For Registration
The above information is excerpted from a more comprehensive memorandum on the dealer registration requirement. Click below to: