On February 25, 2011, the Canadian Securities Administrators published CSA Staff Notice 31-323 Guidance Relating to the Registration Obligations of Mortgage Investment Entities [available here], which provides long awaited guidance on how the registration requirements under National Instrument 31-103 Registration Requirements and Exemptions apply to mortgage investment corporations (MICs), mortgage syndications and other mortgage investment entities. Although the Staff Notice provides some additional clarity on the application of these rules, a number of questions remain unanswered. In addition, the Staff Notice highlights that the members of the CSA have not come to a uniform position about these vehicles, with different positions being taken by the securities regulators in Alberta and British Columbia.
The application of securities law registration requirements to mortgage investment entities has been surrounded by a great deal of uncertainty since NI 31-103 was introduced in September 2009. Prior to that time, most mortgage investment entities had been subject to minimal regulation under securities laws. However, that changed significantly when securities regulators raised the prospect that certain mortgage investment entities may be required to obtain registration under NI 31-103 in up to three different categories of registration – investment fund manager, adviser and exempt market dealer.
Mortgage investment entities, and firms that provide services to such entities, that have been operating under existing investment fund manager and adviser registration exemptions granted by each CSA member in relation to MICs and other mortgage investment entities (for example, in Ontario, see OSC Decision [available here] and in BC, see BC Instrument 32-521 [available here] (the 2010 exemptions) will be required to apply for registration in one or both of these categories as early as March 31, 2011 and incur the additional costs associated with these registrations, unless they determine based on the guidance provided in the Staff Notice or otherwise that such registrations are not required.
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