Ontario Securities Commission Bulletin

Issue 31/39 - September 26, 2008

Ont. Sec. Bull. Issue 31/39

Table of Contents

Chapter 1 - Notices / News Releases

Notices

• Current Proceedings Before The Ontario Securities Commission

• The Investment Funds Practitioner

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Policy No. 4 -- Internal Control Policy Statements and MFDA Financial Questionnaire and Report -- Form 1

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 3 -- Financial and Operations Requirements

• OSC Staff Notice 51-706 - Corporate Finance Branch Report 2008 - Notice of Correction

• Notice of Ministerial Approval - Amendment to OSC Rule 31-502 Proficiency Requirements for Registrants

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Policy No. 1 -- New Registrant Training and Supervision

• Notice of Commission Approval -- Amendments to Section 11 of MFDA By-law No. 1 -- Member Approval Process

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 2.3 -- Power of Attorney / Limited Trading Authorization

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 4 -- Insurance

• Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 1.1.7 -- Business Names, Styles, Etc.

Notices of Hearing

• Global Partners Capital et al. - ss. 127, 127.1

News Releases

• Settlement Agreements related to AiT Advanced Information Technologies Corporation and Bernard Jude Ashe Revoked

• Canadian Securities Regulators Support Temporary Order Issued by OSC Prohibiting Short Selling

• OSC Amends Temporary Order Prohibiting Short Selling

Notices from the Office of the Secretary

• New Life Capital Corp. et al.

• XI Biofuels Inc. et al.

• Global Partners Capital et al.

Chapter 2 - Decisions, Orders and Rulings

Decisions

• Upper Lake Oil and Gas Ltd. and Monterey Exploration Ltd.

• Art In Motion Income Fund and Clarke Inc.

• Hewlett-Packard Company

• Cassiar Gold Corp. (formerly, Cusac Gold Mines Ltd.) - s. 1(10)(b)

Orders

• New Life Capital Corp. et al. - s. 127

• XI Biofuels Inc. et al. - s. 127

• In the Matter of Certain Financial Sector Issuers Set Forth on Schedule A - ss. 127(1), (2) and (5)

• In the Matter of Certain Financial Sector Issuers Set Forth on Schedule A - ss. 127(1), (2), (5) and 144(1)

Chapter 4 - Cease Trading Orders

• Temporary, Permanent & Rescinding Issuer Cease Trading Orders

• Temporary, Permanent & Rescinding Management Cease Trading Orders

• Outstanding Management & Insider Cease Trading Orders

Chapter 5 - Rules and Policies

• Amendment to OSC Rule 31-502 Proficiency Requirements for Registrants

Chapter 8 - Notice of Exempt Financings

• Reports of Trades Submitted on Forms 45-106F1 and 45-501F1

Chapter 11 - IPOs, New Issues and Secondary Financings

Chapter 12 - Registrations

• Registrants

Chapter 13 - SRO Notices and Disciplinary Proceedings

• Housekeeping Amendments to MFDA Policy No. 4 -- Internal Control Policy Statements and MFDA Financial Questionnaire and Report -- Form 1

• Housekeeping Amendments to MFDA Rule 3 -- Financial and Operations Requirements

• IIROC Amendments to Implement the CSA Registration Reform Project

• MFDA Sets Date for Kerry Scharfenberg Hearing in Edmonton, Alberta

• Housekeeping Amendments to MFDA Policy No. 1 -- New Registrant Training and Supervision

• Approved Amendments to Section 11 of MFDA By-law No. 1 -- Member Approval Process

• Housekeeping Amendments to MFDA Rule 2.3 -- Power of Attorney / Limited Trading Authorization

• Housekeeping Amendments to MFDA Rule 4 -- Insurance

• Housekeeping Amendments to MFDA Rule 1.1.7 -- Business Names, Styles, Etc.

Chapter 25 - Other Information

Consents

• EM Resources Inc. - s. 4(b) of the Regulation

Requests for Permission

• SCHOTT Solar AG - s. 38(3)

Approvals

• Wealhouse Capital GP Inc. - s. 213(3)(b) of the LTCA

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Chapter 1 -- Notices / News Releases

Current Proceedings Before The Ontario Securities Commission

SEPTEMBER 26, 2008

CURRENT PROCEEDINGS

BEFORE

ONTARIO SECURITIES COMMISSION

Unless otherwise indicated in the date column, all hearings will take place at the following location:

The Harry S. Bray Hearing Room

Ontario Securities Commission

Cadillac Fairview Tower

Suite 1700, Box 55

20 Queen Street West

Toronto, Ontario

M5H 3S8

Late Mail depository on the 19^th Floor until 6:00 p.m.

THE COMMISSIONERS

SCHEDULED OSC HEARINGS

ADJOURNED SINE DIE

Global Privacy Management Trust and Robert Cranston

Andrew Keith Lech

S. B. McLaughlin

Livent Inc., Garth H. Drabinsky, Myron I. Gottlieb, Gordon Eckstein, Robert Topol

Portus Alternative Asset Management Inc., Portus Asset Management Inc., Boaz Manor, Michael Mendelson, Michael Labanowich and John Ogg

Maitland Capital Ltd., Allen Grossman, Hanouch Ulfan, Leonard Waddingham, Ron Garner, Gord Valde, Marianne Hyacinthe, Diana Cassidy, Ron Catone, Steven Lanys, Roger McKenzie, Tom Mezinski, William Rouse and Jason Snow

Euston Capital Corporation and George Schwartz

Al-Tar Energy Corp., Alberta Energy Corp., Eric O'Brien, Bill Daniels, Bill Jakes, John Andrews, Julian Sylvester, Michael N. Whale, James S. Lushington, Ian W. Small, Tim Burton and Jim Hennesy

Global Partners Capital, WS Net Solution, Inc., Hau Wai Cheung, Christine Pan, Gurdip Singh Gahunia

Land Banc of Canada Inc., LBC Midland I Corporation, Fresno Securities Inc., Richard Jason Dolan, Marco Lorenti and Stephen Zeff Freedman

The Investment Funds Practitioner

September, 2008

THE INVESTMENT FUNDS PRACTITIONER

From the Investment Funds Branch, Ontario Securities Commission

What is the Investment Funds Practitioner

The Practitioner is an overview of recent issues that have arisen in connection with applications for discretionary relief, prospectuses, and continuous disclosure documents that investment funds file with the OSC. We, the staff of the Investment Funds Branch, have written the Practitioner primarily for investment fund managers and their staff or advisors who regularly prepare public disclosure documents and applications for exemptive relief on behalf of investment funds.

The purpose of the Practitioner is to make you more broadly aware of some of the issues we have raised in connection with our reviews of documents filed with us and how we have resolved them. We hope that fund managers and their advisors will find this information useful and that the Practitioner can serve as a useful resource when preparing applications and disclosure documents.

Please note, however, that the information contained in the Practitioner is based upon particular factual circumstances and that outcomes may change as facts change or as regulatory approaches evolve. We will continue to assess each particular case on its own merits. Please also note that staff of the Investment Funds Branch prepared the Practitioner and the views it expresses do not necessarily reflect those of the Commission or the Canadian Securities Administrators.

Request for Feedback

This is the third edition of the Practitioner. The two previous editions are available on our website www.osc.gov.on.ca. We welcome your feedback and any suggestions for topics that you would like us to cover in future editions. Please forward your comments by email to investmentfunds@osc.gov.on.ca, or feel free to contact us.

Who we are

Currently, our group is:

Applications for Relief

Process

We remind filers that NP 12-201 -- Mutual Reliance Review System for Exemptive Relief Applications has been replaced by National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions. Filers and their advisors should review NP 11-203 prior to filing any applications.

We would also like to remind filers that:

• It is their responsibility to provide us with a draft decision that complies with the form required by NP 11-203 at the time they file the application. Failure to do so can cause delays in processing the application.

• Commission duty panels generally meet on Tuesdays and Fridays to consider applications for exemptive relief. Generally, we must submit final materials for consideration by a duty panel the day before the duty panel convenes. We recommend that filers factor in the Commission's duty panel schedule when planning any transactions that require relief from the Commission.

• Applications for novel relief generally take more time to process. They often require, amongst other steps, significant discussions with our colleagues in the CSA. It assists our review of novel applications if the application also explains the business purpose of a particular novel structure, feature, or product.

• It is a good idea to indicate in bold on the first page of the application the date by which the filer requires the relief if it is seeking expedited treatment and the reasons why the filer is requesting expedited treatment. Filers may wish to review s. 6.2(5) of NP 11-203 regarding requests for expedited treatment.

NI 81-107 and the Conflicts Provisions

As reported in the last edition, the Commission and the Director have granted a number of decisions reissuing relief that they previously granted, but that terminated with the coming into force of NI 81-107 -- Independent Review Committee for Investment Funds.

We continue to also see a number of novel applications for relief from the various conflicts provisions under the Act, the Regulation, and NI 81-102 -- Mutual Funds based on IRC approval. We remind filers that the CSA deliberately chose to maintain the various conflicts provisions in the legislation and codify only limited exemptions from them in NI 81-107 rather than replace them wholesale with a fund governance agency. We encourage filers to carefully consider the basis for any novel relief from the conflicts provisions before filing an application.

The following are some requests for relief from the conflicts provisions that have been considered since the last edition.

Relief to Permit Purchases of Related Party Debt on the Secondary Market

Several filers applied for and received relief from s. 111 and s. 118(2)(a) of the Act and s. 4.1(2) of NI 81-102 to permit their mutual funds to purchase debt securities of related entities on the secondary market.{1} These filers were unable to rely upon the relief from s.118(2)(a) codified in section 6.2(2) of NI 81-107 as that exemption requires the trade to occur on an exchange. Most debt securities do not trade on an exchange. The relief was granted based on IRC approval and conditions designed to impose pricing discipline and transparency in a manner similar to trades that occur on an exchange.

Some of the filers were also dealer managed funds. Consequently, they also applied for and received relief from s. 4.1(2) of NI 81-102 for both purchases of related party debt in the secondary market and purchases of equity on an exchange.

Inter-fund Trades at Last Sale Price

One filer applied for and received relief to conduct inter-fund trades using the last sale price, as defined under UMIR, as opposed to current market price, as defined under NI 81-107.{2} We suggest that any future requests for this relief be drafted as an exemption from the relevant prohibitions in the Act as opposed to an exemption from the conditions of the exemption codified in NI 81-107.

Relief to Permit Inter-fund Trades with Pooled Funds and Managed Accounts

Some filers applied for and received relief to facilitate inter-fund trading with and between pooled funds and managed accounts.{3} The inter-fund trading exemption codified under s. 6.1(4) only applies to inter-fund trades between investment funds that are subject to NI 81-107. Pooled funds that are not reporting issuers and managed accounts are not subject to NI 81-107. The relief was granted subject to similar conditions as those in s. 6.1(2) of NI 81-107.

Consistent with the exemptions codified under NI 81-107 and NI 81-102, the filers requested relief from section 118(2)(b) of the Act, section 115(6) of the Regulation, and section 4.2 of NI 81-102.

The conditions of relief include that the pooled funds must appoint an IRC and that the managed accounts must obtain the consent of the account holder.

The filers requested relief from section 4.2 of NI 81-102 for inter-fund trades in debt securities because the filers could not rely upon the exemption codified in s. 4.3(2) of NI 81-102. As with the exemption from s. 118(2)(b) and s. 115(6) codified under s. 6.1(4) of NI 81-107, the exemption under s. 4.3(2) of NI 81-102 requires the funds on both side of the trade to be subject to NI 81-107. The exemption codified under s. 4.3(1) of NI 81-102, however, remains available for inter-fund trades with pooled funds and managed accounts.

We recognize that an inter-fund trade in a non-debt security that is not exchange traded could comply with the conditions in s. 6.1(2) of NI 81-107, but not technically be able to comply with the conditions in s. 4.3(1) of NI 81-102. We will attempt to rectify this discrepancy through consequential amendments at the next available opportunity.

Relief to Permit Non-Redeemable Investment Fund to Purchase Mortgages from a Related Party

This filer applied for and received relief from s. 118(2)(b) of the Act and s. 115(6) of the Regulation.{4} The filer requested the relief to facilitate a mortgage fund's purchase of mortgages from a related party that was pooling mortgages for the purpose of transferring them to the filer. Historically, the Commission has only granted such relief to conventional mutual funds that will be complying with National Policy 29 -- Mutual Funds Investing in Mortgages. The relief was granted based on IRC approval and the filer satisfying staff regarding the manner in which it would value the mortgages.

Inter-fund Trades and Reorganizations

One filer applied for relief from section 118(2)(b) of the Act and section 115(6) of the Regulation in connection with a merger that was subject to NI 81-102 and IRC review. The filer applied out of concern that the trades in portfolio securities necessary to complete the merger may be inter-fund trades and the filer was not able to comply with all of the conditions of the exemption codified under s. 6.1(2) of NI 81-107. The filer also applied for the Director's approval under section 5.5 of NI 81-102.

Trades in portfolio securities effected in connection with mergers can be inter-fund trades, but we remind filers of the exemption from the mutual fund conflict of interest investment restrictions codified under section 5.9 of NI 81-102. This exemption remains available in connection with inter-fund trades effected as part of a merger or reorganization transaction that either complies with section 5.6 of NI 81-102 or that has been approved by the Director. The filer subsequently withdrew the request for relief from section 118(2)(b) and section 115(6) after realizing it could avail itself of this exemption.

Prospectuses

Process

Increasingly, filers have been adding more issuers (from 2 to 100 or more), different types of units and shares, and jurisdictions to their combined preliminary and pro forma prospectuses. This may cause delays in the processing of preliminary receipts.

To make the filing process as smooth, efficient and accurate as possible, we suggest that filers detail in their covering letters the following:

• the issuers and their securities that need to be issued a preliminary receipt;

• the new jurisdiction(s) the filing is being added to; and

• the current names of all funds to be on the document with future or former names noted as well.

Long-term Warrant Offerings -- Non Redeemable Investment Funds

A couple of filers recently filed short-form prospectuses for long-term warrant offerings. These offerings were structured as rights offerings. The warrants were not sweetener warrants offered as part of a unit offering. The warrants were issued on a stand-alone basis to existing unitholders at no charge. In each case, the warrants were exercisable for a price into underlying units for up to two years. A distinguishing feature of these offerings is the term of the warrants relative to a conventional rights offering that normally has a much more limited exercise period and closes in a relatively short period of time.

We remind filers of the requirement contained in s. 4.2(a) of NI 45-101 -- Rights Offerings. This provision requires that the prospectus qualify the underlying securities that the warrants can be exercised into in addition to the warrants themselves. One of the policy reasons for this requirement is to ensure that investors receive the appropriate statutory rights in connection with the securities underlying the warrants.

Practically, this requirement will generally result in the filer having to keep their prospectus live for the duration of the exercise period of the long-term warrants and provide a second delivery of the prospectus at the time the long-term warrant is exercised. Filers contemplating long-term warrant offerings may wish to review the disclosure provided in the short-form prospectus filed by First Capital Realty Inc. dated March 8, 2002 under Sedar Project No. 424349. Filers may also wish to review the discussion of long-term warrants contained in paragraph 5 of OSC Staff Notice 51-706 -- Corporate Finance Report for the year 2004.

National Instrument 81-105 -- Payment of Trailing Commissions

We have periodically seen filers disclose that dealers will be paid a trailing commission based on a percentage of the performance fee received by the portfolio manager. We have consistently raised comments expressing concern whether a trailing commission calculated in this manner complies with section 3.2(1)(d)(ii) of National Instrument 81-105 -- Sales Practices. Filers have generally responded by removing the feature from their prospectus filings.

Form 41-101F2 -- Forms Compliance Reviews

National Instrument 41-101 -- General Prospectus Requirements came into force March 17, 2008. This rule includes a new form for investment funds that must file a long-form prospectus. We have been raising comments on long-form prospectuses where it appears that the disclosure does not comply with the new form requirements. We encourage filers to review the new form requirements before filing their preliminary long-form prospectuses.

Part 14 of NI 41-101 -- Custodian Requirements

We have raised comments in several instances regarding Part 14 of NI 41-101. Part 14 requires investment funds that use Form 41-101F2 to have a qualified custodian. Prior to the coming into force of NI 41-101, investment fund issuers that were not subject to NI 81-102 were not required to have a custodian. We remind all long form investment fund issuers that Part 14 of NI 41-101 imposes a new custodian requirement.

Continuous Disclosure

Publication of Recent Amendments

As a follow-up to previous editions that reported on the exemption the Director granted under NI 81-106 in connection with section 3855 of the CICA Handbook, the amendments to National Instrument 81-106 - Investment Fund Continuous Disclosure were published in the OSC Bulletin on June 20, 2008. These amendments came into force on September 8, 2008.

Publication of CSA Staff Notice 52-320

The CSA issued CSA Staff Notice 52-320 - Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards on May 9, 2008, which was published in the May 9, 2008 OSC Bulletin. This was in response to the Canadian Accounting Standards Board confirmation that January 1, 2011 will be the date on which International Financial Reporting Standards (IFRS) will replace current Canadian standards and interpretations as Canadian Generally Accepted Accounting Principles (Canadian GAAP).

The Notice discusses the disclosure of relevant information about the changeover to IFRS, including, but not limited to, the key elements and timing of the changeover plan in the annual and interim filings three, two, and one year(s) before the changeover. Filers may wish to review the Notice when preparing their MRFP or notes to their financial statements for as early as the interim period to June 30, 2008.

Public Inquiries

NI 81-107 -- Inter-fund Trades -- Market Integrity Requirements for Non-Exchange Traded Securities

Sub-paragraph 6.1(1)(b)(iii) of NI 81-107 defines market integrity requirements in that context as: "...the purchase or sale is through a dealer, if the purchase or sale is required to be reported by a registered dealer under applicable securities legislation". We have received several inquiries regarding the applicability of the market integrity requirement to inter-fund trades in debt or other securities that do not trade on an exchange. The inquiries have generally focused on what applicable securities legislation is sub-paragraph 6.1(1)(b)(iii) referring to and how should that provision be read together with the exemptions codified in sub-sections 6.1(3) and 6.1 (5).

Sub-paragraph 6.1(1)(b)(iii) is intended to refer to the dealer reporting obligations for non-exchange traded securities found in s. 154 of the Regulation in Ontario and Part 8 of National Instrument 21-101 -- Marketplace Operation.

The overall intent of the requirement in this context is for these inter-fund trades to be reported in the same manner that a dealer would be required to report them if a dealer were conducting the trade. If a dealer would not be required under applicable securities legislation to report the trade, there is no reporting requirement in connection with the inter-fund trade.

{1} See Altamira Investment Services Inc. et al dated May 15, 2008 for the NI 81-102 relief and May 22, 2008 for the s. 111 and 118 relief.

{2} See RBC Asset Management Inc. dated January 18, 2008.

{3} See UBS Global Asset Management (Canada) Co. dated April 1, 2008 and CIBC Asset Management Inc. dated July 8, 2008 for relief granted under the Act and CIBC Asset Management Inc. dated July 22, 2008 for relief granted under NI 81-102.

{4} See C.A.B. Realty Finance L.P. dated February 19, 2008.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Policy No. 4 -- Internal Control Policy Statements and MFDA Financial Questionnaire and Report -- Form 1

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO

MFDA POLICY NO. 4

INTERNAL CONTROL POLICY STATEMENTS AND

MFDA FINANCIAL QUESTIONNAIRE

AND REPORT -- FORM 1

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Policy No. 4 Internal Control Policy Statements and MFDA Financial Questionnaire and Report -- Form 1. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments make updates to reflect the legal name of the MFDA Investor Protection Corporation, clarify existing requirements, and update incorrect cross-references.

The amendments are housekeeping in nature. A description and a copy of the amendments are contained in Chapter 13 of this OSC Bulletin.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 3 -- Financial and Operations Requirements

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO

MFDA RULE 3 --

FINANCIAL AND OPERATIONS REQUIREMENTS

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Rule 3 -- Financial and Operations Requirements. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments clarify, update and address minor inconsistencies between terms used in the rule and terms used in other contexts, such as the Canadian Institute of Charted Accountants Handbook. The amendments also remove a provision no longer required to reflect the fact that the MFDA Investor Protection Corporation offers coverage only to Members of the MFDA.

The amendments are housekeeping in nature. A description and a copy of the amendments are contained in Chapter 13 of this OSC Bulletin.

OSC Staff Notice 51-706 - Corporate Finance Branch Report 2008 - Notice of Correction

OSC STAFF NOTICE 51-706 - CORPORATE FINANCE BRANCH REPORT 2008

NOTICE OF CORRECTION

On page 21 of the Corporate Finance Branch Report 2008, which was published with separate pagination following page 8692 in (2008), 31 OSCB 8692 on September 12, 2008, the text of the fourth bulleted item on the page read:

• A revised National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings was published in final form on August 15, 2008. The instrument is expected to be implemented on December 31, 2008.

The date was in error; the item should read:

• A revised National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings was published in final form on August 15, 2008. The instrument is expected to be implemented on December 15, 2008.

Notice of Ministerial Approval - Amendment to OSC Rule 31-502 Proficiency Requirements for Registrants

NOTICE OF MINISTERIAL APPROVAL

OF AMENDMENT TO

ONTARIO SECURITIES COMMISSION RULE 31-502

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

On September 19, 2008, the Minister of Finance approved an amendment to Rule 31-502 Proficiency Requirements for Registrants that revises the post-registration proficiency requirements for salespersons of brokers, investment dealers or securities dealers.

The amendment was previously published in the Bulletin on August 1, 2008 at (2008) 31 OSCB 7631 and was published for comment on March 9, 2007 at (2007) 30 OSCB 2103.

The amendment will come into force on October 24, 2008 and a notice will be published in the Ontario Gazette prior to that date.

The amendment is published in Chapter 5 of this issue of the Bulletin and is available at www.osc.gov.on.ca.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Policy No. 1 -- New Registrant Training and Supervision

MUTUAL FUND DEALERS ASSOCIATION OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO MFDA POLICY NO. 1 --

NEW REGISTRANT TRAINING AND SUPERVISION

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Policy No. 1 -- New Registrant Training and Supervision. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments clarify that a branch manager must pre-approve all new accounts for newly registered salespersons before any trade is processed in the account.

The amendments are housekeeping in nature. A description and a copy of the amendments are contained in Chapter 13 of this OSC Bulletin.

Notice of Commission Approval -- Amendments to Section 11 of MFDA By-law No. 1 -- Member Approval Process

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

AMENDMENTS TO SECTION 11 OF

MFDA BY-LAW NO. 1 REGARDING

THE MEMBER APPROVAL PROCESS

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to Section 11 of MFDA By-law No. 1 regarding the Member approval process. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments. The amendments streamline and clarify the MFDA Member approval process, with the objective of ensuring that the membership application process remains fair and allows for due process, clarifies who the appropriate decision makers are, and is administratively and procedurally practical and efficient.

The MFDA's proposal was published for comment on September 21, 2007 at (2007) 30 OSCB 8174. Some non-material changes have been made to the MFDA's proposal since the time it was originally published. A blacklined version of the approved amendments are being published in Chapter 13 of this Bulletin.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 2.3 -- Power of Attorney / Limited Trading Authorization

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO

MFDA RULE 2.3 -- POWER OF ATTORNEY /

LIMITED TRADING AUTHORIZATION

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Rule 2.3 -- Power of Attorney/Limited Trading Authorization. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments will require an Approved Person who accepts or acts upon a general power of attorney or similar authorization from a client, where the client is the Approved Person's spouse, parent, or child, to notify the Member of their acceptance of the power of attorney or similar authorization.

The amendments are housekeeping in nature. A description and a copy of the amendments are published in Chapter 13 of this OSC Bulletin.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 4 -- Insurance

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO

MFDA RULE 4 -- INSURANCE

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Rule 4 -- Insurance. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments include minor changes to Rule 4.2 and Rule 4.3 to clarify the application of those rules. In addition, the amendments to Rule 4.7 provide that the limits under a Member's insurance policy may also be affected by claims made by a holding company of the Member, provided that the holding company does not carry on any business or own any investments other than its interest in the Member.

The amendments are housekeeping in nature. A description and a copy of the amendments are published in Chapter 13 of this OSC Bulletin.

Notice of Commission Approval -- Housekeeping Amendments to MFDA Rule 1.1.7 -- Business Names, Styles, Etc.

MUTUAL FUND DEALERS ASSOCIATION

OF CANADA (MFDA)

HOUSEKEEPING AMENDMENTS TO

MFDA RULE 1.1.7 --

BUSINESS NAMES, STYLES, ETC.

NOTICE OF COMMISSION APPROVAL

The Ontario Securities Commission has approved amendments to MFDA Rule 1.1.7 -- Business Names, Styles, Etc. In addition, the Alberta Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission approved, and the British Columbia Securities Commission did not object to the amendments.

The amendments clarify that the requirement in Rule 1.1.7(d) to notify the MFDA prior to the use of any business style or trade names other than the Member's legal name applies to any business style or trade names to be used by Approved Persons in connection with the business of the Member as well as business carried on by Approved Persons outside of the Member.

The amendments are housekeeping in nature. A description and a copy of the amendments are published in Chapter 13 of this OSC Bulletin.

Global Partners Capital et al. - ss. 127, 127.1

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

GLOBAL PARTNERS CAPITAL,

ASIA PACIFIC ENERGY, INC.,

1666475 ONTARIO INC. operating as

"ASIAN PACIFIC ENERGY", ALEX PIDGEON,

KIT CHING PAN also known as Christine Pan,

HAU WAI CHEUNG, also known as Peter Cheung,

Tony Cheung, Mike Davidson, or Peter McDonald,

GURDIP SINGH GAHUNIA also known as

Michael Gahunia or Shawn Miller,

BASIL MARCELLINIUS TOUSSAINT also known as

Peter Beckford, and RAFIQUE JIWANI

also known as Ralph Jay

NOTICE OF HEARING

(Sections 127 and 127.1)

TAKE NOTICE THAT the Ontario Securities Commission (the "Commission") will hold a hearing pursuant to sections 127 and 127.1 of the Ontario Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") at the offices of the Commission at 20 Queen Street West, 17th Floor Hearing Room on Wednesday, October 1st, 2008 at 11 a.m., or as soon thereafter as the hearing can be held, to consider:

(i) whether, in the opinion of the Commission, it is in the public interest, pursuant to ss. 127 and 127.1 of the Act to order that:

(a) trading in any securities by Global Partners Capital ("Global Partners"), Asia Pacific Energy, Inc. ("Asia Pacific"), 1666475 Ontario Inc. operating as Asian Pacific Energy ("1666475"), Alex Pidgeon ("Pidgeon"), Kit Ching Pan also known as Christine Pan ("Pan"), Hau Wai Cheung also known as Peter Cheung, Tony Cheung, Mike Davidson, or Peter McDonald ("Cheung"), Gurdip Singh Gahunia also known as Michael Gahunia or Shawn Miller ("Gahunia"), Basil Marcellinius Toussaint also known as Peter Beckford ("Toussaint"), and Rafique Jiwani also known as Ralph Jay ("Jiwani") (collectively the "Respondents") cease permanently or for such period as is specified by the Commission;

(b) the acquisition of any securities by the Respondents is prohibited permanently or for such other period as is specified by the Commission;

(c) any exemptions contained in Ontario securities law do not apply to the Respondents permanently or for such period as is specified by the Commission;

(d) each Respondent disgorge to the Commission any amounts obtained as a result of non-compliance by that respondent with Ontario securities law;

(e) the Respondents be reprimanded;

(f) Pan, Cheung, Pidgeon, Gahunia, Toussaint, and Jiwani (collectively the "Individual Respondents") resign one or more positions that they hold as a director or officer of any issuer, registrant, or investment fund manager;

(g) The Individual Respondents be prohibited from becoming or acting as a director or officer of any issuer, a registrant, an investment fund manager;

(h) the Respondents be prohibited from becoming or acting as a registrant, as an investment fund manager or as a promoter;

(i) the Respondents each pay an administrative penalty of not more than $1 million for each failure by that respondent to comply with Ontario securities law; and,

(j) the Respondents be ordered to pay the costs of the Commission investigation and the hearing;

(ii) whether, in the opinion of the Commission, an order should be made pursuant to section 37 of the Act that the Respondents cease permanently to telephone from within Ontario to any residence within or outside Ontario for the purpose of trading in any security or any class of securities; and,

(iii) whether to make such further orders as the Commission considers appropriate.

BY REASON OF the allegations as set out in the Statement of Allegations of Staff of the Commission dated September 11, 2008 and such further additional allegations as counsel may advise and the Commission may permit;

AND BY REASON OF the evidence filed with the Commission and the testimony heard by the Commission;

AND TAKE FURTHER NOTICE that any party to the proceedings may be represented by counsel at the hearing;

AND TAKE FURTHER NOTICE that upon failure of any party to attend at the time and place aforesaid, the hearing may proceed in the absence of that party and such party is not entitled to any further notice of the proceedings.

DATED at Toronto this 11th day of September, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

GLOBAL PARTNERS CAPITAL,

ASIA PACIFIC ENERGY, INC.,

1666475 ONTARIO INC. operating as

"ASIAN PACIFIC ENERGY", ALEX PIDGEON,

KIT CHING PAN also known as Christine Pan,

HAU WAI CHEUNG, also known as Peter Cheung,

Tony Cheung, Mike Davidson, or Peter McDonald,

GURDIP SINGH GAHUNIA also known as

Michael Gahunia or Shawn Miller,

BASIL MARCELLINIUS TOUSSAINT also known as

Peter Beckford, and RAFIQUE JIWANI

also known as Ralph Jay

STATEMENT OF ALLEGATIONS

OF STAFF OF THE

ONTARIO SECURITIES COMMISSION

Staff of the Ontario Securities Commission ("Staff") make the following allegations:

I. THE RESPONDENTS

1. Global Partners Capital ("Global Partners") is an unincorporated organization or business that operated in Toronto, Ontario.

2. Asia Pacific Energy, Inc. ("Asia Pacific") is a corporation that was registered in Nevada, U.S.A. that was incorporated on or about December 19, 2005.

3. 1666475 Ontario Inc. operating as "Asian Pacific Energy" ("1666475") is an Ontario corporation that was incorporated on or about July 13, 2005.

4. Alex Pidgeon ("Pidgeon") was the President and a registered director of Asia Pacific during the Material Time (as defined herein). Staff believe that Pidgeon resides in the State of Nevada, U.S.A.

5. Kit Ching Pan, also known as Christine Pan, ("Pan") is the President and sole registered director of 1666475.

6. Hau Wai Cheung, also known as Peter Cheung, Tony Cheung, Mike Davidson, or Peter McDonald, ("Cheung") is an officer or director of 1666475. Cheung was the President and a registered director of Asia Pacific during the Material Time.

7. Gurdip Singh Gahunia, also known as Michael Gahunia or Shawn Miller, ("Gahunia") was a co-manager and salesperson of Global Partners.

8. Basil Marcellinius Toussaint, also known as Peter Beckford, ("Toussaint") was a co-manager and salesperson of Global Partners.

9. Rafique Jiwani, also known as Ralph Jay, ("Jiwani") was a manager of Global Partners.

II. BACKGROUND TO ALLEGATIONS

• Trading in Securities of Asia Pacific

10. Staff allege that between February, 2006 and October, 2007 (the "Material Time"), Asia Pacific, Global Partners, 1666475, Pidgeon, Pan, Cheung, Gahunia, Toussaint, and Jiwani (collectively the "Respondents") traded securities of Asia Pacific.

11. Throughout the Material Time, none of the Respondents were registered in any capacity with the Commission.

12. The trades in Asia Pacific securities were trades in securities not previously issued and were therefore distributions. No preliminary prospectus or prospectus was filed and no receipts were issued for them by the Director to qualify the trading of Asia Pacific securities.

13. Global Partners purported to be a venture capital investment firm trading in various securities, including Asia Pacific. Throughout the Material Time, individuals, situated in premises in Ontario, claimed to be employed by Global Partners and sold Asia Pacific securities to investors.

14. Cheung, Gahunia, and Toussaint and other employees, representatives or agents of Global Partners contacted investors or potential investors by phone, and used aliases when speaking with investors or potential investors on the telephone. Some of the aliases used were: Sean Miller or Shawn Miller, Peter Beckford, and Gordon Scott.

15. Potential investors were sent information packages about Asia Pacific by e-mail, facsimile or mail.

16. The Respondents traded securities of Asia Pacific to Ontario residents and residents of other jurisdictions, primarily the United States, in circumstances where there were no exemptions available to them under the Act.

17. Cheung, Gahunia, and Toussaint and other employees, representatives or agents of Global Partners made representations or undertakings to potential investors and investors, with the intention of effecting trades, that:

(a) Asia Pacific shares would be repurchased or the purchase price would be refunded if the investor wished;

(b) Asia Pacific securities were about to be listed on a stock exchange; and,

(c) made undertakings relating to the future value or price of the Asia Pacific securities.

18. Asia Pacific securities were sold to over 110 investors and these investors sent over $2,200,000 (USD) to Asia Pacific.

19. After agreeing to invest, investors received a subscription agreement from Asia Pacific. The subscription agreement set out the quantity, unit price and total amount of investment. Investors were instructed to make cheques payable to Asia Pacific and to send the subscription agreement and cheques to an address in Dallas, Texas, U.S.A. The address in Dallas was a virtual office run by Regus/HQ Business Centres. Some investors were also given instructions on how to send their funds to Asia Pacific via wire transfer and did so.

20. Investors received a share certificate signed by Cheung for common shares in Asia Pacific.

21. The investor funds were deposited into one of three Asia Pacific bank accounts in the United States (the "U.S. Accounts"). The U.S. Accounts were all controlled by Pidgeon.

22. Pidgeon paid himself over $90,000 (USD) from the U.S. Accounts.

23. Between and including March 2006 and October 2007, over $2,000,000 (USD) was transferred from the U.S. Accounts to a U.S. dollar bank account in Canada held by 1666475 (the "1666475 USD Account"). Pan was the sole signatory on this account.

24. Over $1,000,000 (USD) was transferred from the 1666475 USD Account to a Canadian dollar account in Canada held by 1666475 (the "Canadian Account"). Pan was the sole signatory on the Canadian Account.

25. In 2006 and 2007, over $600,000 (USD) was removed from the 1666475 USD Account and paid out to individuals, including some of the Respondents, primarily as salary and commission.

26. In 2006 and 2007, over $520,000 was removed from the Canadian Account and paid out to individuals, including some of the Respondents, primarily as salary and commission.

27. Approximately $300,000 of investor funds was used to pay credit card bills for Pan from the Canadian Account.

• Fraudulent Conduct

28. Cheung, Gahunia, Toussaint, Pan and other employees, representatives or agents of Global Partners, during the Material Time, adopted high pressure sales approaches that included making prohibited representations and undertakings, as well as providing information to potential investors that was false, inaccurate and misleading, including:

(a) that Asia Pacific was about to go public and would be listed on a stock exchange;

(b) false, inaccurate and misleading information with respect to the business activities of Asia Pacific;

(c) false, inaccurate, and misleading content on the Asia Pacific website;

(d) false, inaccurate, and misleading information with respect to assets held by Asia Pacific;

(e) false, inaccurate, and misleading information with respect to the location of the business premises; and,

(f) using false names and aliases when communicating with potential investors and investors.

29. The false, inaccurate and misleading representations and undertakings were made with the intention of effecting trades in the securities of Asia Pacific.

30. Pan, Cheung, Gahunia, Toussaint, Jiwani and other employees, representatives or agents of Global Partners engaged in a course of conduct relating to securities that they knew or reasonably ought to have known would result in a fraud on investors.

31. Staff allege that Asia Pacific was, for the majority of the Material Time, not carrying on legitimate business operations and that their only significant source of funds was funds obtained from investors as a result of fraudulent conduct.

32. Pidgeon and Cheung, as directors or officers of Asia Pacific, authorized, permitted or acquiesced in the violations of Ontario securities laws that were committed by Asia Pacific or by the employees, agents or representatives of Asia Pacific.

33. Pan, Cheung, Gahunia, Toussaint, and Jiwani, as directors or officers of Global Partners, authorized, permitted or acquiesced in the violations of Ontario securities laws that were committed by Global Partners or by the employees, agents or representatives of Global Partners.

34. Pan and Cheung, as directors or officers of 1666475, authorized, permitted or acquiesced in the violations of Ontario securities laws that were committed by 1666475 or by the employees, agents or representatives of 1666475.

• Misleading Persons Appointed To Make An Investigation Or Examination

35. On November 1, 2007, Toussaint made statements to Staff that he was not involved in the sale of securities of Asia Pacific. Staff allege that the statements were, in a material respect and at the time and in the light of the circumstances under which they were made, misleading or untrue. Staff allege that Toussaint misled Staff with respect to his involvement in the sales of securities of Asia Pacific.

36. On January 28, 2008, Gahunia, made a statement to Staff that he never used the name Sean Miller at the Global Partners office. Staff allege that this statement, in a material respect and at the time and in the light of the circumstances under which it was made, was misleading or untrue. Staff allege that Gahunia used the alias Sean Miller or Shawn Miller when selling Asia Pacific securities to investors.

III. STAFF'S ALLEGATIONS -- Conduct Contrary to Ontario Securities Law and Contrary to the Public Interest

37. The specific allegations advanced by Staff are:

(a) Between and including February, 2006 and October, 2007, the Respondents engaged or participated in acts, practices or courses of conduct relating to Asia Pacific securities that the Respondents knew or reasonably ought to have known perpetrated a fraud on persons or companies, contrary to section 126.1(b) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") and contrary to the public interest;

(b) Between and including February, 2006 and October, 2007, the Respondents traded in securities of Asia Pacific without being registered to trade in securities, contrary to section 25(1)(a) of the Act and contrary to the public interest;

(c) Between and including February, 2006 and October, 2007, the Respondents traded in securities of Asia Pacific when a preliminary prospectus and a prospectus had not been filed and receipts had not been issued for them by the Director, contrary to section 53(1) of the Act and contrary to the public interest;

(d) Between and including February, 2006 and October, 2007, Cheung, Gahunia, and Toussaint, with the intention of effecting a trade in securities of Asia Pacific, made representations that the Asia Pacific securities would be repurchased or that the purchase price would be refunded, contrary to section 38(1) of the Act and contrary to the public interest;

(e) Between and including February, 2006 and October, 2007, Cheung, Gahunia, and Toussaint gave undertakings, with the intention of effecting a trade in securities of Asia Pacific, as to the future value or price of the securities of Asia Pacific, contrary to section 38(2) of the Act and contrary to the public interest;

(f) Between and including February, 2006 and October, 2007, Cheung, Gahunia, and Toussaint made representations without the written permission of the Director, with the intention of effecting a trade in securities of Asia Pacific, that such security would be listed on a stock exchange or quoted on any quotation and trade reporting system, contrary to section 38(3) of the Act and contrary to the public interest;

(g) Between and including February, 2006 and October, 2007, Pan, Cheung, Gahunia, Toussaint and Jiwani, being directors or officers of Global Partners, did authorize, permit or acquiesce in the commission of the violations of sections 126.1, 25, 53 and 38 of the Act, set out above, by Global Partners or by the employees, agents or representatives of Global Partners, which constitute offences under subsection 122(1)(c) of the Act, contrary to section 122(3) of the Act and contrary to the public interest;

(h) Between and including February, 2006 and October, 2007, Pidgeon and Cheung, being directors or officers of Asia Pacific, did authorize, permit or acquiesce in the commission of the violations of sections 126.1, 25, and 53 of the Act, set out above, by Asia Pacific or by the employees, agents or representatives of Asia Pacific, which constitute offences under subsection 122(1)(c) of the Act, contrary to section 122(3) of the Act and contrary to the public interest;

(i) Between and including February, 2006 and October, 2007, Pan and Cheung being directors or officers of 1666475, did authorize, permit or acquiesce in the commission of the violations of sections 126.1, 25, and 53 of the Act, set out above, by 1666475 or by the employees, agents or representatives of 1666475, which constitute offences under subsection 122(1)(c) of the Act, contrary to section 122(3) of the Act and contrary to the public interest;

(j) On or about November 1, 2007, Toussaint made statements, to Staff appointed to make an investigation or examination under the Act, during an examination conducted by Staff, that he was not involved in the sales of securities of Asia Pacific, that, in a material respect and at the time and in the light of the circumstances under which they were made, were misleading or untrue, contrary to section 122(1)(a) of the Act and contrary to the public interest; and,

(k) On or about January 28, 2008, Gahunia, made a statement, to Staff appointed to make an investigation or examination under the Act, during an examination conducted by Staff, that he never used the name Sean Miller at the Global Partners office, that, in a material respect and at the time and in the light of the circumstances under which it was made, was misleading or untrue and did thereby commit an offence, contrary to section 122(1)(a) of the Act and contrary to the public interest.

38. Staff reserve the right to make such other allegations as Staff may advise and the Commission may permit.

DATED at Toronto, September 11, 2008.

Settlement Agreements related to AiT Advanced Information Technologies Corporation and Bernard Jude Ashe Revoked

FOR IMMEDIATE RELEASE

September 17, 2008

SETTLEMENT AGREEMENTS RELATED TO AiT ADVANCED INFORMATION

TECHNOLOGIES CORPORATION AND BERNARD JUDE ASHE REVOKED

TORONTO -- Following an application by Staff, the Ontario Securities Commission (OSC) today issued an Order under Section 144 of the Securities Act revoking a previous Commission Order approving settlement agreements that had been entered into between Staff and AiT Advanced Information Technologies Corporation (AiT) and Bernard Jude Ashe.

"Logic and fairness dictate that these settlement agreements ought to be revoked," said the Chair of the Commission Panel, Patrick LeSage, Q.C.

On February 26, 2007, the Commission issued an Order approving settlement agreements between Staff of the Commission and AiT, and Staff of the Commission and Mr. Ashe. Following a contested hearing on the merits, the Commission dismissed allegations against another respondent in the matter, Deborah Weinstein on January 14, 2008. The Commission concluded at that time that AiT did not fail to make timely disclosure of a material change and did not contravene the Act and therefore the allegations against Ms. Weinstein were dismissed.

In the application, Staff submitted that identical facts formed the basis for the contested hearing involving Ms. Weinstein and the settlement agreements involving AiT and Mr. Ashe. If AiT did not contravene the Act, then Mr. Ashe and Ms. Weinstein could not be a party to AiT's violation of the Act.

The Commission Order is available on the OSC website at www.osc.gov.on.ca.

Canadian Securities Regulators Support Temporary Order Issued by OSC Prohibiting Short Selling

FOR IMMEDIATE RELEASE

September 19, 2008

CANADIAN SECURITIES REGULATORS SUPPORT

TEMPORARY ORDER ISSUED BY OSC

PROHIBITING SHORT SELLING

Toronto -- The Canadian Securities Administrators (CSA) indicated support today related to the issuance of a Temporary Order by the Ontario Securities Commission (OSC) prohibiting short selling of securities of certain financial sector issuers that are listed on the Toronto Stock Exchange (TSX) and are also interlisted in the United States (with the exception of one issuer whose shares are interchangeable).

"The CSA is supportive of the action taken by the OSC today," said Jean St-Gelais, Chair of the CSA and President & Chief Executive Officer of the Autorité des marchés financiers (Québec). "Other jurisdictions in the CSA will be taking similar action today, or in the coming days."

The CSA will also monitor trading in securities of other Canadian financial issuers and take action if necessary.

The OSC took the action in its capacity as lead regulator of the TSX. The action taken by the OSC today supports the action taken by the U.S. Securities and Exchange Commission earlier today. The U.K. Financial Services Authority took similar action this week.

The issuers affected are: Aberdeen Asia-Pacific Income Investment Company Ltd., Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Fairfax Financial Holdings Limited, Kingsway Financial Services Inc., Manulife Financial Corporation, Quest Capital Corp., Royal Bank of Canada, Sun Life Financial Inc., Thomas Weisel Partners Group Inc., The Toronto-Dominion Bank, and Merrill Lynch & Co., Canada Ltd.

The CSA, the council of the securities regulators of Canada's provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.

For more information:

For media inquiries:

OSC Amends Temporary Order Prohibiting Short Selling

FOR IMMEDIATE RELEASE

September 22, 2008

OSC AMENDS TEMPORARY ORDER

PROHIBITING SHORT SELLING

TORONTO -- The Ontario Securities Commission (OSC) today issued an amended Temporary Order under Section 144 of the Securities Act prohibiting short selling of certain financial sector issuers. This follows a Temporary Order under Section 127 (5) of the Act prohibiting short selling of securities of certain financial sector issuers that are listed on the Toronto Stock Exchange (TSX) and are also interlisted in the United States (with the exception of one issuer whose shares are exchangeable).

The original Order was issued as a precautionary matter with respect to short selling of the securities of financial sector issuers subject to the U.S. Securities and Exchange Commission (SEC) short selling order dated September 18, 2008, and to ensure that our markets are not used for purposes of regulatory arbitrage.

The OSC is acting in its capacity as lead regulator of the TSX. The amended Order is intended to address technical and operational matters that have arisen, or may arise, from the original Order, and supports action taken by the SEC on September 21, 2008, whereby it made similar amendments.

The OSC is a member of the Canadian Securities Administrators (CSA), which is the council of the securities regulators of Canada's provinces and territories. Other CSA members are examining the original and amended Orders and may issue similar Orders in the coming days.

The issuers affected by the original and amended Orders are: Aberdeen Asia-Pacific Income Investment Company Ltd., Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Fairfax Financial Holdings Limited, Kingsway Financial Services Inc., Manulife Financial Corporation, Quest Capital Corp., Royal Bank of Canada, Sun Life Financial Inc., Thomas Weisel Partners Group Inc., The Toronto-Dominion Bank, and Merrill Lynch & Co., Canada Ltd.

The amended Order will be in effect until October 3, 2008, unless extended by Order of the Commission. The amended Order is available on the OSC website at www.osc.gov.on.ca.

New Life Capital Corp. et al.

FOR IMMEDIATE RELEASE

September 19, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

NEW LIFE CAPITAL CORP.,

NEW LIFE CAPITAL INVESTMENTS INC.,

NEW LIFE CAPITAL ADVANTAGE INC.,

NEW LIFE CAPITAL STRATEGIES INC.,

1660690 ONTARIO LTD., L. JEFFREY POGACHAR,

PAOLA LOMBARDI AND ALAN S. PRICE

TORONTO -- The Commission issued an Order extending the Temporary Order to October 15, 2008 in the above named matter.

The hearing is adjourned to October 14, 2008 at 2:30 p.m.

A copy of the Order dated September 19, 2008 is available at www.osc.gov.on.ca.

XI Biofuels Inc. et al.

FOR IMMEDIATE RELEASE

September 19, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

XI BIOFUELS INC., BIOMAXX SYSTEMS INC.,

RONALD DAVID CROWE AND VERNON P. SMITH

AND

IN THE MATTER OF

XIIVA HOLDINGS INC. CARRYING ON BUSINESS

AS XIIVA HOLDINGS INC., XI ENERGY COMPANY,

XI ENERGY AND XI BIOFUELS

TORONTO -- The Commission issued an Order today which provides that the Temporary Orders are extended to October 22, 2008 and the Xi Hearing and the Xiiva Hearing for the extension of the Temporary Orders are adjourned to October 21, 2008 at 10:00 a.m.

A copy of the Order dated September 19, 2008 is available at www.osc.gov.on.ca.

Global Partners Capital et al.

FOR IMMEDIATE RELEASE

September 23, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

GLOBAL PARTNERS CAPITAL,

ASIA PACIFIC ENERGY, INC.,

1666475 ONTARIO INC. operating as

"ASIAN PACIFIC ENERGY", ALEX PIDGEON,

KIT CHING PAN also known as Christine Pan,

HAU WAI CHEUNG, also known as Peter Cheung,

Tony Cheung, Mike Davidson, or Peter McDonald,

GURDIP SINGH GAHUNIA also known as

Michael Gahunia or Shawn Miller,

BASIL MARCELLINIUS TOUSSAINT also known as

Peter Beckford, and RAFIQUE JIWANI

also known as Ralph Jay

TORONTO -- The Office of the Secretary issued a Notice of Hearing in the above named matter setting the matter down to be heard on Wednesday, October 1st, 2008 at 11 a.m., or as soon thereafter as the hearing can be held.

A copy of the Notice of Hearing dated September 11, 2008 and Statement of Allegations of Staff of the Ontario Securities Commission dated September 11, 2008 are available at www.osc.gov.on.ca.

Chapter 2 -- Decisions, Orders and Rulings

Upper Lake Oil and Gas Ltd. and Monterey Exploration Ltd.

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - request for exemption from Item 14.2 of 51-102F5 Information Circular to provide certain financial statement disclosure in an information circular - Filer completing a business combination with a private issuer that underwent a fundamental change in the nature of its business or operations and a change in all of its executive officers and directors - relief granted, subject to conditions.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

51-102F5 Information Circular, Item 14.2.

Citation: Upper Lake Oil and Gas Ltd. and Monterey Exploration Ltd., 2008 ABASC 471

July 31, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

UPPER LAKE OIL AND GAS LTD.

(Upper Lake)

and

MONTEREY EXPLORATION LTD.

(Monterey, and together with Upper Lake, the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filers from the requirement under the Legislation to provide financial statement disclosure with respect to Monterey for the year ended December 31, 2005 (the 2005 Financial Statements) in the management information circular (the Information Circular) prepared by the Filers and delivered to the holders (Upper Lake Shareholders) of common shares (Upper Lake Shares) and options (Upper Lake Options) of Upper Lake (Upper Lake Optionholders) and together with the Upper Lake Shareholders (the Upper Lake Securityholders), in connection with the special meeting (Special Meeting) of Upper Lake Securityholders scheduled to be held on August 29, 2008 (collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for the application;

(b) the Filers have provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec and New Brunswick; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

Upper Lake

1. Upper Lake is a corporation incorporated under the laws of the Province of Alberta. The principal office of Upper Lake is located in Calgary, Alberta.

2. Upper Lake is engaged in the exploration, development and production of oil and natural gas in western Canada.

3. Upper Lake is a reporting issuer or the equivalent under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec and New Brunswick. To its knowledge, Upper Lake is not in default of securities legislation in any jurisdiction of Canada.

4. The Upper Lake Shares are listed on the Toronto Stock Exchange (the TSX) under the symbol "UP".

5. Upper Lake has filed an "AIF" and has "current annual financial statements" (as such terms are defined in National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101)) for the financial year ended December 31, 2007.

Monterey

1. Monterey is a corporation continued under the laws of the Province of Alberta. The principal office of Monterey is located in Calgary Alberta.

2. Monterey is engaged in the exploration, development and production of oil and natural gas in western Canada.

3. Monterey is privately held and is not a reporting issuer in any jurisdiction. To its knowledge, Monterey is not in default of applicable securities legislation in any jurisdiction of Canada.

4. The Monterey Shares are not listed or posted for trading on any exchange or quotation and trade reporting system.

5. Monterey is the successor of 608841 New Brunswick Ltd. (608 New Brunswick), which is in turn, the successor of Mirant Canada Energy Marketing Investments, Inc. (Mirant Investments). 608 New Brunswick and Mirant Investments are referred to herein, collectively, as the "Monterey Predecessors".

Monterey Predecessors

1. Mirant Investments was incorporated under the laws of the Province of Alberta on September 18, 2001 and was subsequently continued into New Brunswick on October 7, 2003.

2. Mirant Investments was an indirect, wholly-owned subsidiary of Mirant Corporation, a corporation incorporated under the laws of the State of Delaware on April 20, 1993.

3. Mirant Canada Energy Marketing, Ltd. (Mirant Marketing) was the result of an amalgamation effected under the laws of the Province of Alberta on January 1, 2002 and was subsequently continued into New Brunswick on October 7, 2003. Mirant Marketing was a wholly-owned subsidiary of Mirant Investments.

4. Each of Mirant Investments and Mirant Marketing (collectively, Mirant) were engaged in the business of downstream natural gas marketing.

Mirant Insolvency Proceedings

1. On July 13, 2003, Mirant Corporation filed for voluntary relief under Chapter 11 of the Bankruptcy Code of the United States of America (the Chapter 11 Relief) and on July 14, 2003 Mirant filed for creditor protection in Canada under the Companies' Creditors Arrangement Act (CCAA) (collectively, the Mirant Insolvency Proceedings).

2. During the Mirant Insolvency Proceedings, Mirant sold or wound down all or substantially all of its operations and reached a court approved settlement agreement with its creditors and was discharged from CCAA protection in October 2004. Following such discharge, Mirant was indirectly operated by its parent company, Mirant Corporation. It was the intention of Mirant Corporation to seek out a restructuring transaction or sale in respect of Mirant in order to benefit Mirant Corporation, which was still under Chapter 11 Relief.

3. On November 23, 2005, Mirant Americas, Inc. (a wholly-owned subsidiary of Mirant Corporation) and Mirant Investments entered into a restructuring agreement (the Restructuring Agreement) whereby Mirant Investments agreed to amalgamate (the Amalgamation) with Mirant Marketing to form 608 New Brunswick. The Amalgamation was completed on December 21, 2005.

4. At the time the Restructuring Agreement was signed, the board of directors of Mirant Investments consisted of two directors. While Mirant Investments had not appointed any officers since October of 2003, four officers were appointed by Mirant Investments on December 19, 2005 for the sole purpose of signing documentation in connection with the Restructuring Agreement. These four officers did not continue as officers following the Amalgamation and continuance into Alberta.

5. Pursuant to the Restructuring Agreement, 608 New Brunswick was, among other things, continued into Alberta on December 28, 2005 and concurrently changed its name to Monterey Exploration Ltd. On or about January 12, 2006, the current management team of Monterey was appointed and following Monterey's annual and special meeting of shareholders held on March 29, 2006, the shareholders of Monterey elected a new slate of directors such that no former directors of the Monterey Predecessors remained as directors of Monterey.

6. Prior to the Mirant Insolvency Proceedings, Mirant operated as a downstream gas marketing business, engaged in the sale of natural gas to large industrial users and local distribution companies and the provision of natural gas hedging instruments. Following Mirant's emergence from the Mirant Insolvency Proceedings in October 2004, Mirant carried on minimal operations through its parent company, Mirant Corporation, with a view to conducting a restructuring agreement or sale that would benefit Mirant Corporation, which was still under Chapter 11 Relief.

7. Following the Restructuring Agreement, Monterey carried on business (and currently carries on business) in the upstream oil and gas exploration and production business, engaged in the exploration, development and production of oil and natural gas through drilling and property acquisitions. Such operations are fundamentally different from the operations previously conducted by Mirant.

The Arrangement

1. Upper Lake entered into an arrangement agreement (the Arrangement Agreement) with Monterey on July 2, 2008 whereby: (i) all of the issued and outstanding Upper Lake Shares will be exchanged for Monterey Shares on the basis of 0.28 of a Monterey Share for each Upper Lake Share held; and (ii) all of the unexercised Upper Lake Options will be cancelled in exchange for that number of Monterey Shares equal to the difference by which the weighted average trading price of the Upper Lake Shares exceeds the exercise price of such Upper Lake Options, multiplied by 0.28 (collectively, the Arrangement).

2. The Arrangement will constitute a "restructuring transaction" for Upper Lake under the Legislation.

3. Upper Lake and Monterey are preparing the Information Circular to be mailed to the Upper Lake Securityholders in connection with the Special Meeting, which is currently scheduled to be held on August 29, 2008. At the Special Meeting, Upper Lake Securityholders will be given an opportunity to vote on the Arrangement.

4. Pursuant to Section 14.2 of Form NI 51-102F5 Information Circular (the Circular Form) of National Instrument 51-102 Continuous Disclosure Obligations, Upper Lake is required to include financial statement disclosure in respect of Monterey, including audited income statements, statements of retained earnings and cash flow statements for the financial years ended December 31, 2007, December 31, 2006 and December 31, 2005 and audited balance sheets as at the end of December 31, 2007 and December 31, 2006.

5. As the business currently conducted by Monterey is fundamentally different from the business previously conducted by Mirant, and all of the executive officers and directors of Monterey have changed, any financial statements compiled in respect of Monterey for the financial year ended December 31, 2005 would not assist Upper Lake Securityholders or other potential shareholders with their assessment of Monterey's current business.

6. The Filers propose to include in the Information Circular the following financial statement disclosure in respect of Monterey:

(a) an unaudited income statement, a statement of retained earnings, and a cash flow statement of Monterey for the three month period ended March 31, 2008, together with a comparative income statement, statement of retained earnings, and cash flow statement of Monterey for the three month period ended March 31, 2007;

(b) an unaudited balance sheet of Monterey for the three month period ended March 31, 2008, together with a comparative balance sheet of Monterey for the three month period ended March 31, 2007;

(c) audited income statements, statements of retained earnings, and cash flow statements of Monterey for the financial years ended December 31, 2007 and December 31, 2006; and

(d) audited balance sheets of Monterey for the financial years ended December 31, 2007 and December 31, 2006.

7. In addition, the Information Circular will contain disclosure in accordance with the Circular Form and in respect of Monterey, in accordance with National Instrument 41-101 General Prospectus Requirements. The Circular will also include, among other things, financial statement disclosure in respect of Upper Lake in compliance with National Instrument 44-101 Short Form Prospectus Distributions and the pro forma financial statements of Upper Lake and Monterey in compliance with Form NI 41-101F1 Information Required in a Prospectus.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that the Filers include in the Information Circular:

(a) an unaudited income statement, a statement of retained earnings, and a cash flow statement of Monterey for the three month period ended March 31, 2008, together with a comparative income statement, statement of retained earnings, and cash flow statement of Monterey for the three month period ended March 31, 2007;

(b) an unaudited balance sheet of Monterey for the three month period ended March 31, 2008, together with a comparative balance sheet of Monterey for the three month period ended March 31, 2007;

(c) audited income statements, statements of retained earnings, and cash flow statements of Monterey for the financial years ended December 31, 2007 and December 31, 2006; and

(d) audited balance sheets of Monterey for the financial years ended December 31, 2007 and December 31, 2006.

Art In Motion Income Fund and Clarke Inc.

Headnote

NP 11-203 -- MI 61-101 -- take-over bid and subsequent business combination -- MI 61-101 requires sending of information circular and holding of meeting in connection with second step business combination -- target's declaration of trust provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units valid as if such voting rights had been exercised at a meeting of unitholders -- relief granted from requirement that information circular be sent and meeting be held -- minority approval to be obtained albeit in writing rather than at a meeting of unitholders.

Applicable Legislative Provisions

Multilateral Instrument 11-102 -- Passport System.

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions.

Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions.

September 17, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE "JURISDICTION")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF THE

TAKE-OVER BID FOR

ART IN MOTION INCOME FUND

BY CLARKE INC.

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Clarke Inc. (the "Filer") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation"), in connection with a take-over bid (the "Bid") for Art In Motion Income Fund (the "Fund"), for a decision that the requirements of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") that:

(1) a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of the Fund (the "Unitholders"); and

(2) an information circular be sent to the Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable;

be waived (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Quebec.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a company incorporated under, and governed by, the federal laws of Canada and is a reporting issuer or equivalent in all provinces and territories of Canada. The Filer's principal office is located at 6009 Quinpool Road, 9th Floor, Halifax, Nova Scotia, B3K 5J7. To the best of its knowledge, the Filer is not in default of any requirements of the Legislation.

2. The Fund is a trust established under the laws of the Province of British Columbia pursuant to the Declaration of Trust (as defined below) and is a reporting issuer or equivalent in all provinces of Canada. The Fund's head office is located at 1200 -- 200 Burrard Street, Vancouver, British Columbia, V7X 1T2.

3. As at the date of the commencement of the Bid, the Filer holds 60.13% of the voting securities of the Fund.

4. The Filer entered into a Support Agreement with the Fund on July 29, 2008 which set forth the terms and conditions upon which the Bid was to be made by the Filer.

5. On August 18, 2008, a take-over bid circular (the "Bid Circular") and a trustees' circular, each dated August 14, 2008, and related documents (collectively, the "Offer Documents"), were mailed to the Unitholders. Pursuant to the Offer Documents, the Bid is set to expire on September 23, 2008 (the "Expiration Date").

6. The outstanding trust units of the Fund (the "Units") are held by CDS Clearing and Depository Services Inc. in book-entry only form.

7. The Bid includes the following terms and conditions:

(a) the Bid is for all of the issued and outstanding Units, other than any Units owned, directly or indirectly, by the Filer and its affiliates, at a price of $0.75 in cash per Unit; and

(b) one of the conditions of the Bid is that there shall have been validly deposited under the Bid and not withdrawn as at the expiry of the Bid, such number of Units which constitutes at least: (A) 66 2/3% of the issued and outstanding Units (calculated on a fully-diluted basis), including Units directly or indirectly owned by the Filer; and (B) a majority of the outstanding Units that are held by persons whose Units may be included as part of any minority approval (being the approval of Unitholders other than the Filer and any associate, affiliate or insider of or joint actor with the Filer or any of their respective directors or senior officers) of a Subsequent Acquisition Transaction (as defined below), if minority approval is required under applicable laws (the "Minimum Tender Condition").

8. Under the Fund's Declaration of Trust (the "Declaration of Trust"), if within 60 days after the date of the Bid, the Minimum Tender Condition has been satisfied and the Bid is accepted by Unitholders representing not less than 90% of the outstanding Units, other than Units held at the date of the Offer by or on behalf of the Filer or an affiliate or associate of the Filer, then the Filer is entitled to acquire the Units held by Unitholders who did not accept the Offer (the "Dissenting Unitholders") on the same terms as the Filer acquired the Units of Unitholders who accepted the Offer (a "Compulsory Acquisition").

9. Under the Declaration of Trust, in order to effect a Compulsory Acquisition, the Filer must send, by registered mail, a notice to each of the Dissenting Unitholders in the form prescribed by the Declaration of Trust (the "Offeror's Notice") and the Dissenting Unitholders have 21 days from the date of the sending of the Offeror's Notice to transfer their Units to the Filer. In connection with either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction (as defined below), the Filer currently intends to amend the Declaration of Trust by the Written Resolution (as defined below) to provide that Units held by Dissenting Unitholders will be deemed to have been transferred to the Filer immediately on the sending of the Offeror's Notice in respect of a Compulsory Acquisition or a Subsequent Acquisition Transaction and that those Dissenting Unitholders will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration that the Filer would have paid to the Dissenting Unitholders if the Dissenting Unitholders had tendered their Units to the Bid (the "Notice Amendment").

10. If a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Filer or the Filer elects not to proceed under those provisions, the Filer currently intends to acquire the Units not deposited to the Bid by:

(a) causing the Declaration of Trust to be amended (the "Declaration of Trust Amendment") in one or more of the following ways: (a) to permit the Fund, notwithstanding anything to the contrary contained in the Declaration of Trust, to redeem all outstanding Units in cash or in kind at a redemption price equal to the cash consideration paid for Units taken up under the Bid in connection with a Subsequent Acquisition Transaction (as defined below), (b) to reorganize the unit capital of the Fund, (c) to permit the Fund, notwithstanding anything to the contrary contained in the Declaration of Trust, to sell all or substantially all of its assets, or to permit or consent to the sale of all or substantially all of the assets of any of the Fund's subsidiaries, to the Filer and/or one or more of its affiliates immediately prior to the redemption of Units, the proceeds of which shall be used, in whole or in part, to fund such redemption, (d) to authorize and effect the winding-up or termination of the Fund, and the sale of all or substantially all assets by the Fund and/or one or more of the Fund's subsidiaries and redemption of Units in connection therewith, and (e) to lower the threshold to effect a Compulsory Acquisition to 66 2/3% of the outstanding Units (the acquisition following such amendment referred to herein as a "Subsequent Acquisition Transaction"); and

(b) proceeding with the Subsequent Acquisition Transaction in respect of the Units not deposited to the Bid as permitted by the Declaration of Trust, as so amended.

11. In order to effect either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking the Unitholders' approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on Section 11.10 of the Declaration of Trust, which specifies that a resolution in writing executed by Unitholders holding more than 66 2/3% of the outstanding Units at any time (the "Written Resolution") is as valid as if such resolution had been passed at a meeting of Unitholders duly called and convened; which Written Resolution will approve, among other things, the Declaration of Trust Amendment and the Notice Amendment and any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable.

12. If the Filer decides not to pursue either the Compulsory Acquisition or the Subsequent Acquisition Transaction in the manner described above, the Filer reserves the right, to the extent permitted by applicable law, to purchase additional Units in the open market, in privately negotiated transactions, in another take-over bid or otherwise. Alternatively, the Filer may sell or otherwise dispose of any or all Units acquired pursuant to the Bid or otherwise.

13. In order to effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, if the Minimum Tender Condition is satisfied, in accordance with the foregoing, rather than seeking Unitholder approval at a special meeting of the Unitholders called for such purpose, the Filer intends to rely on Section 11.10 of the Declaration of Trust, which would permit the special resolutions to be approved in writing by Unitholders holding not less than 66 2/3% of the issued and outstanding Units.

14. A Compulsory Acquisition or a Subsequent Acquisition Transaction would be a "business combination" under MI 61-101.

15. To effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, the Filer will comply with the provisions of MI 61-101 and, specifically, will obtain minority approval (as that term is defined in MI 61-101) in accordance with the terms of Part 8 MI 61-101 ("Minority Approval") by Written Resolution rather than at a meeting if Unitholders.

16. The Bid Circular contains all disclosure required by applicable Legislation, including without limitation, the take-over bid provisions and form requirements of the Legislation, including the provisions of MI 61-101 relating to the disclosure required to be included in a disclosure document for a formal bid in respect of a second-step business combination.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that Minority Approval shall have been obtained by Written Resolution.

Hewlett-Packard Company

Headnote

Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from registration and prospectus requirements for trades in common shares of the filer in connection with the exercise of certain options - options were granted to employees of another company - the parent of that company and the filer merged and the filer assumed the outstanding and unvested options - exemptions in National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) are not available as the options were not issued by the filer and not all option holders are current employees of the filer.

Relief from the registration requirement for first trades in the common shares issued upon the exercise of the options - the exemption in s. 2.28 of NI 45-106 is not available as the filer is a reporting issuer in Quebec as a result of a previous merger transaction - the filer has a de minimis presence in Canada - all trades must be made through an exchange, or a market, outside of Canada or to a person or company outside of Canada.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am. ss. 25, 53, 74(1).

Instruments Cited

National Instrument 45-102 Resale of Securities.

National Instrument 45-106 Prospectus and Registration Exemptions.

September 19, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

HEWLETT-PACKARD COMPANY

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that:

(a) the dealer registration requirement and the prospectus requirement do not apply to a trade by the Filer in common shares of the Filer (Common Shares) to EDS Option Holders (as defined below), or their legal representatives or permitted transferees, in accordance with the terms and conditions of the EDS Options (as defined below) (the Exercise Requested Relief); and

(b) the dealer registration requirement does not apply to the first trade in the Common Shares issued upon the exercise of the EDS Options (the First Trade Registration Relief) (the Exercise Requested Relief and the First Trade Registration Relief, collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied on in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec and Nova Scotia (with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated under the laws of Delaware and is not a reporting issuer in any jurisdiction in Canada except Quebec. The Filer is subject to the reporting requirements of the Securities Exchange Act of 1934.

2. The authorized share capital of the Filer consists of 9,600,000,000 Common Shares with a par value of US$0.01 each and 300,000,000 shares of preferred stock with a par value of US$0.01 each. As at May 31, 2008 there were 2,466,191,046 Common Shares and no shares of preferred stock of the Filer issued and outstanding.

3. The Common Shares are listed on the New York Stock Exchange.

4. As at May 31, 2008, residents of Canada did not own, directly or indirectly, more than 10 percent of the outstanding Common Shares and did not represent in number more than 10 percent of the total number of owners, directly or indirectly, of Common Shares.

5. Hewlett Packard (Canada) Ltd. (HP Canada), a wholly-owned subsidiary of the Filer is a corporation incorporated under the federal laws of Canada. HP Canada is not a reporting issuer in any jurisdiction in Canada and does not have any present intention of becoming a reporting issuer or its equivalent in any jurisdiction in Canada.

6. In Canada, the equity compensation plans that the Filer operates for the benefit of the employees of HP Canada are, among others, the HP 2004 Stock Incentive Plan, the HP 2000 Employee Stock Purchase Plan and the HP 2000 Stock Plan (all such existing plans collectively, the Existing HP Plans).

7. Electronic Data Systems Corporation (EDS) was a corporation incorporated under the laws of the state of Delaware and was not a reporting issuer in any jurisdiction in Canada.

8. Immediately prior to the effective time of the Merger (as defined below), the authorized share capital of EDS consisted of 2,000,000,000 shares of common stock with a par value of US$0.01 per share and 200,000,000 shares of preferred stock with a par value of US$0.01 per share. As at June 24, 2008, there were 504,580,901 shares of common stock and no preferred stock of EDS issued and outstanding.

9. EDS Canada Inc. (EDS Canada) was a corporation incorporated under the laws of Canada and was not a reporting issuer in any jurisdiction in Canada. EDS Canada was a subsidiary of EDS.

10. EDS Advanced Solutions Inc. (EDS Advanced Solutions) was a corporation incorporated under the laws of British Columbia and was not a reporting issuer in any jurisdiction in Canada. EDS Advanced Solutions was a subsidiary of EDS Canada.

11. The Filer and EDS, together with Hawk Merger Corporation (Hawk), a Delaware corporation and wholly-owned subsidiary of the Filer, entered into an agreement and plan of merger dated as of May 13, 2008 (the Merger Agreement), pursuant to which, subject to certain terms and conditions, Hawk would merge with and into EDS and each outstanding share of common stock of EDS would be converted into the right to receive US$25.00 in cash (the Tender Offer).

12. Upon the fulfilment of the terms and conditions in the Merger Agreement, including the completion of the Tender Offer, on August 26, 2008 Hawk and EDS merged to form a wholly-owned subsidiary of the Filer (the Merger).

13. At the effective time of the Merger, without issuing any new options or restricted stock units to EDS Canada or EDS Advanced Solutions employees under any EDS option plans, the Filer assumed the outstanding vested and unvested options and restricted stock units (collectively, the Assumed Options) previously awarded by EDS to EDS Canada and EDS Advanced Solutions employees resident in the Jurisdictions under the 1996 Incentive Plan of EDS, the Global Share Plan 2000 Nonqualified Stock Option Plan of EDS, the Amended and Restated 2003 Incentive Plan of EDS (the 2003 EDS Plan) and the Transition Inducement Plan of EDS (collectively, the EDS Plans) and, pursuant to such assumption, the Assumed Options became options and restricted stock units for Common Shares.

14. The number of Common Shares issuable upon the exercise of each Assumed Option and the exercise price per share under each Assumed Option were calculated according to a predetermined formula as set out in the Merger Agreement. The duration and other material terms of each Assumed Option are the same as they existed immediately prior to the effective time of the Merger.

15. As of the closing of the Merger on August 26, 2008, there are approximately 354 holders of Assumed Options in Canada holding Assumed Options exercisable for 485,953 Common Shares.

16. Following the Merger, the only EDS Plan under which options will continue to be issued is the EDS 2003 Plan. The options that will be issued under the EDS 2003 Plan following the Merger (together with the Assumed Options, the EDS Options) will be options for Common Shares.

17. The current agent for the EDS Plans is BNY Mellon (the Agent). Following the Merger, the Filer intends to continue to use the services of the Agent in connection with the EDS Plans. The Agent is, and if replaced will be, a corporation, or corporations, registered under applicable U.S. securities legislation to trade in securities and has, or have, been authorized to provide services under the EDS Plans.

18. Subject to the discretion of the applicable plan administrator to permit transfers to permitted transferees in accordance with the terms of the EDS Plans and applicable securities laws, the EDS Options will not be transferable otherwise than by will or the laws of descent and distribution.

19. All of the disclosure documentation made available to the Filer's employees resident in the United States who receive options under the Existing HP Plans will be made available to holders of EDS Options resident in the Jurisdictions (the EDS Option Holders).

20. Participation in the EDS Plans is voluntary and the EDS Option Holders will not be induced to continue to participate in the EDS Plans or acquire Common Shares under the EDS Plans by expectation of employment or continued employment.

21. Because there is no market for the Common Shares in Canada and none is expected to develop, any trades of the Common Shares by the EDS Option Holders, their legal representatives or permitted transferees or the Agent will be effected through the facilities of and in accordance with the rules of an exchange or market outside of Canada on which the Common Shares are traded.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. In respect of the Exercise Requested Relief, the first trade in the Common Shares issued upon the exercise of each EDS Option is deemed to be a distribution unless the following conditions are satisfied:

(a) at the time of the issuance of the Common Shares upon the exercise of the EDS Option (the Exercise Time), the Filer is not a reporting issuer in any jurisdiction of Canada except Quebec;

(b) at the Exercise Time, after giving effect to the issuance of the Common Shares and any other Common Shares that were issued at the same time as or as part of the same distribution, residents of Canada:

(i) did not own directly or indirectly more than 10 percent of the outstanding Common Shares, and

(ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of Common Shares; and

(c) the trade is made:

(i) through an exchange, or a market, outside of Canada, or

(ii) to a person or company outside of Canada.

2. In respect of the First Trade Registration Relief, the conditions set out in subparagraphs (a), (b) and (c) of paragraph 1 above are satisfied.

Cassiar Gold Corp. (formerly, Cusac Gold Mines Ltd.) - s. 1(10)(b)

Headnote

Order pursuant to subsection 1(10)(b) of the Securities Act (Ontario) - Application by a reporting issuer for an order that it is not a reporting issuer in Ontario - Requested relief granted.

Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(b).

September 17, 2008

Dear Sir:

The Applicant has applied to the Ontario Securities Commission for an order under clause 1(10)(b) of the Act that the Applicant is not a reporting issuer.

As the Applicant has represented to the Commission that:

(a) The outstanding securities of the Applicant, including debt securities are beneficially owned, directly or indirectly, by less than 15 security holders in Ontario and less than 51 security holders in Canada;

(b) No securities of the Applicant are traded on a marketplace as defined in National Instrument 21-101 Marketplace Operation;

(c) The Applicant is not in default of any of its obligations under the Act as a reporting issuer; and

(d) The Applicant will not be a reporting issuer or the equivalent in any jurisdiction in Canada immediately following the Director granting the relief requested.

The Director is satisfied that it would not be prejudicial to the public interest to grant the requested relief and orders that the Applicant is not a reporting issuer.

New Life Capital Corp. et al. - s. 127

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

NEW LIFE CAPITAL CORP.,

NEW LIFE CAPITAL INVESTMENTS INC.,

NEW LIFE CAPITAL ADVANTAGE INC.,

NEW LIFE CAPITAL STRATEGIES INC.,

1660690 ONTARIO LTD., L. JEFFREY POGACHAR,

PAOLA LOMBARDI AND ALAN S. PRICE

ORDER

(Section 127)

WHEREAS the Ontario Securities Commission (the "Commission") issued a temporary cease trade order on August 6, 2008 (the "Temporary Order") in respect of New Life Capital Corp., New Life Capital Investments Inc., New Life Capital Advantage Inc., New Life Capital Strategies Inc., 1660690 Ontario Ltd., L. Jeffrey Pogachar ("Pogachar"), Paola Lombardi ("Lombardi") and Alan S. Price ("Price") (collectively, the "Respondents");

AND WHEREAS the Temporary Order ordered that (1) pursuant to clause 2 of section 127(1) and section 127(5) of the Act, trading in securities of and by the Respondents shall cease; (2) pursuant to clause 3 of section 127(1) and section 127(5) of the Act, any exemptions contained in Ontario securities law not do not apply to any of the Respondents; and (3) the Order shall not prevent or prohibit any future payments in the way of premiums owing from time to time in respect of insurance policies which were purchased by the Respondents on or before the date of the Order;

AND WHEREAS the Commission further ordered that the Temporary Order is continued until the hearing scheduled for August 21, 2008;

AND WHEREAS the Commission issued a Direction on August 6, 2008 to TD Canada Trust, Branch 2492 in Grimsby, Ontario directing TD Canada Trust to retain all funds, securities or property on deposit in the names or under the control of New Life Capital Corp., New Life Capital Investments Inc., New Life Capital Advantage Inc., New Life Capital Strategies Inc. and/or 1660690 Ontario Ltd. (the "Direction");

AND WHEREAS the Commission varied the Direction on August 11, 2008 to permit the release of $87,743.54 from the funds that are the subject of the Direction for the purpose of certain immediate and urgent expenses (the "Varied Direction");

AND WHEREAS on August 12, 2008 the Ontario Superior Court of Justice ordered that the Varied Direction, as varied or revoked by the Commission, is continued until final resolution of this matter by the Commission or further order of the Court;

AND WHEREAS on August 15, 2008, the Commission ordered the following exemptions to the Temporary Order: (1) Pogachar, Lombardi and Price may each hold one account to trade securities; (2) each account must be held with a registered dealer to whom this Order and any preceding Orders in this matter must be given at the time of opening the account or before any trading occurs in the account; and (3) the only securities that may be traded in each account are: (a) those listed and posted for trading on the TSX, TSX Venture Exchange, Bourse de Montreal or New York Stock Exchange; (b) those issued by a mutual fund which is a reporting issuer; or (c) a fixed income security;

AND WHEREAS the Respondents are represented by counsel and have been served with the Temporary Order, the Notice of Hearing dated August 7, 2008, the Statement of Allegations dated August 7, 2008 and the Affidavit of Stephanie Collins sworn August 7, 2008 (the "Collins Affidavit");

AND WHEREAS Staff of the Commission ("Staff") have filed the Collins Affidavit in support of Staff's request to extend the Temporary Order;

AND WHEREAS Staff and the Respondents requested an adjournment to permit Staff to continue the investigation and to permit the Respondents to respond to the Statement of Allegations dated August 7, 2008;

AND WHEREAS on August 21, 2008, Staff and counsel for the Respondents appeared before the Commission;

AND WHEREAS on August 21, 2008, the Commission ordered that the Temporary Order is continued until September 22, 2008 and that this hearing is adjourned to September 19, 2008, at 2:30 p.m.;

AND WHEREAS the Respondents have requested a variance to the Direction to permit outstanding expenses to be paid and additional expenses to be paid going forward and Staff are prepared at this time to consent to the Respondents' request but only with respect to certain outstanding expenses and certain minimal expenses to be paid going forward (the "Consent Expenses");

AND WHEREAS the Respondents are only moving today to seek a variance with respect to the Consent Expenses;

AND WHEREAS Staff have delivered to counsel for the Respondents and have filed a Supplementary Affidavit of Stephanie Collins sworn September 19, 2008 detailing the expenses included in the variance requested by the Respondents and consented to by Staff;

AND WHEREAS Staff and the Respondents have requested a further adjournment to permit Staff to continue the investigation and to permit the Respondents to respond to the Statement of Allegations dated August 7, 2008;

IT IS ORDERED that the Direction is varied in the form attached as Schedule "A" to this Order to permit the release of $46,891.35.

IT IS FURTHER ORDERED that the Temporary Order is continued until October 15, 2008, and the hearing is adjourned to October 14, 2008 at 2:30 p.m., or such other date as is agreed by Staff and the Respondents and determined by the Office of the Secretary.

DATED at Toronto this 19^th day of September, 2008.

"Wendell S. Wigle"

"Suresh Thakrar"

SCHEDULE 'A'

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

NEW LIFE CAPITAL CORP.,

NEW LIFE CAPITAL INVESTMENTS INC.,

NEW LIFE CAPITAL ADVANTAGE INC.,

NEW LIFE CAPITAL STRATEGIES INC.,

AND 1660690 ONTARIO LTD.

SECOND VARIED DIRECTION

Section 126(1)(a), (7)

TAKE NOTICE THAT pursuant to paragraph 126(1)(a) of the Securities Act, R.S.O. 1990, c. S.5 (the "Act") you are directed to retain under your control for safekeeping all funds, securities or property which you may have on deposit in accounts in the name of or under the control of New Life Capital Corp., New Life Capital Investments Inc., New Life Capital Advantage Inc., New Life Capital Strategies Inc. and/or 1660690 Ontario Ltd. (collectively the "Respondents") including those bearing account numbers:

and hold them until the Ontario Securities Commission in writing revokes or varies this Direction or consents to release a particular fund, security or property from this Direction or until the Ontario Superior Court of Justice orders otherwise, except that you may release a total of $46,891.35 from the funds, securities or property at the request of the Respondents. This Second Varied Direction is further to the Varied Direction dated August 11, 2008, which authorized the release of $87,743.54.

AND TAKE FURTHER NOTICE THAT this Direction applies to any and all funds, securities or property in a recognized clearing agency and to any and all securities in the process of transfer by a transfer agent.

AND TAKE FURTHER NOTICE THAT this Direction may be served by fax or courier to the last known address of the parties named in this Direction in the records of TD Canada Trust.

DATED at Toronto this 19^th day of September, 2008, as varying this Direction first dated August 6^th and varied on August 11^th, 2008.

"Wendell S. Wigle"

"Suresh Thakrar"

XI Biofuels Inc. et al. - s. 127

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

XI BIOFUELS INC., BIOMAXX SYSTEMS INC.,

RONALD DAVID CROWE AND VERNON P. SMITH

AND

IN THE MATTER OF

XIIVA HOLDINGS INC. CARRYING ON BUSINESS

AS XIIVA HOLDINGS INC., XI ENERGY COMPANY,

XI ENERGY AND XI BIOFUELS

ORDER

Section 127

WHEREAS on November 22, 2007, the Ontario Securities Commission (the "Commission") issued a Temporary Order pursuant to subsections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") that all trading by XI Biofuels Inc. ("XI") and Biomaxx Systems Inc. ("Biomaxx") shall cease, that XI, Biomaxx, Ronald David Crowe ("Crowe") and Vernon P. Smith ("Smith") (the "XI Respondents") cease trading in all securities and that the exemptions contained in Ontario securities law do not apply to these Respondents (the "XI Temporary Order");

AND WHEREAS on December 14, 2007, the Commission issued a Temporary Order (the "Xiiva Temporary Order") pursuant to subsections 127(1) and (5) of the Act that all trading in securities of Xiiva Holdings Inc. ("Xiiva"), incorrectly described at paragraph 1 of the Xiiva Temporary Order as XI Holdings Inc., shall cease and that the exemptions contained in Ontario securities law do not apply to it;

AND WHEREAS the Commission issued Notices of Hearing to consider, among other things, the extension of the XI Temporary Order (the "XI Hearing") and the Xiiva Temporary Order (the "Xiiva Hearing");

AND WHEREAS the Temporary Orders were extended and the XI Hearing and the Xiiva Hearing (collectively, the "Hearings") were adjourned from time to time;

AND WHEREAS the Hearings were heard by the Commission on June 20, 2008 and orders were made by the Commission extending the Temporary Orders to September 22, 2008 and adjourning the Hearings for the extension of the Temporary Orders beyond September 22, 2008 to September 19, 2008;

AND WHEREAS the corporate Respondents were petitioned into bankruptcy on or about May 21, 2008 (the "bankruptcy");

AND WHEREAS Staff of the Commission and the trustee in bankruptcy for the corporate Respondents (the "Trustee") have agreed to a hearing date of October 17, 2008 with the Commercial List of the Superior Court of Justice of Ontario regarding the bankruptcy at which time Staff of the Commission anticipate bringing a motion for advice and directions in relation to the bankruptcy;

AND WHEREAS Staff of the Commission, the individual Respondents and the Trustee consent to adjourn the Hearings to a date following the October 17, 2008 hearing before the Commercial List and have agreed on a date of October 21, 2008 and to extend the Temporary Orders to October 22, 2008, without prejudice to any arguments which the individual Respondents or the Trustee may raise as a consequence thereof;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this Order;

IT IS ORDERED that the Temporary Orders are extended to October 22, 2008;

IT IS FURTHER ORDERED that the Hearings for the extension of the Temporary Orders beyond October 22, 2008 are adjourned to October 21, 2008 at10:00 a.m.

DATED at Toronto this 19th day of September, 2008.

"Patrick LeSage"

"Wendell S. Wigle"

"David L. Knight"

In the Matter of Certain Financial Sector Issuers Set Forth on Schedule A - ss. 127(1), (2) and (5)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

CERTAIN FINANCIAL SECTOR ISSUERS

set forth on Schedule A attached

TEMPORARY ORDER

(Sections 127(1), (2) and (5))

WHEREAS it appears to the Ontario Securities Commission (the Commission) that:

1. On September 18, 2008, the United States Securities and Exchange Commission (SEC) issued an order pursuant to section 12(k)(2) of the Securities Exchange Act of 1934 (the SEC Order) that "all persons are prohibited from short selling [as defined in the SEC Order] any publicly traded securities" of a defined list of financial firms, subject to certain exceptions;

2. Attached as Schedule A is a list of financial sector issuers that (a) are listed on the Toronto Stock Exchange (TSX) and are reporting issuers in Ontario; and (b) are interlisted in the United States or, in the case of one issuer, has outstanding securities that are interchangeable into securities of a financial firm listed in the SEC Order (the Financial Sector Issuers). Most of the Financial Sector Issuers are subject to the SEC Order; and

3. This order is being issued as a precautionary matter to prevent regulatory arbitrage with respect to short selling in Ontario of the securities of the Financial Sector Issuers and to promote fair and orderly markets in Ontario for the Financial Sector Issuers. Accordingly, it is in the public interest to temporarily prohibit any short sale (as defined in section 1.1 of the Investment Industry Regulatory Organization of Canada's Universal Market Integrity Rules (UMIR) which is attached as Schedule B) in the securities of the Financial Sector Issuers;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this order and that the time required to conclude a hearing could be prejudicial to the public interest;

IT IS ORDERED pursuant to subsections 127(1), (2) and (5) of the Act that trading that constitutes a short sale (as defined in Schedule B) in the securities of the Financial Sector Issuers is hereby prohibited, unless the short sale is:

(i) conducted in accordance with UMIR Rule 3.1 Restrictions on Short Selling, sections 2(a), (b), and (d);

(ii) conducted in order to comply with UMIR Rule 5.2 Best Price Obligation; or

(iii) conducted by a person or company as a result of the automatic exercise or assignment of an equity option held prior to the effectiveness of this order due to expiration of the option; and

IT IS FURTHER ORDERED that pursuant to section 127(6) of the Act this order shall take effect immediately and shall expire on October 3, 2008, unless extended by order of the Commission.

DATED at Toronto this 19th day of September, 2008.

"James E. A. Turner"

"Suresh Thakrar"

Schedule A

List of Financial Sector Issuers

{1} This company is not interlisted in the US. However, it is included on this list because its securities are interchangeable into securities of Merrill Lynch & Co. Inc. (listed in the US), which is subject to the SEC Order.

Schedule B

"short sale" means a sale of a security, other than a derivative instrument, which the seller does not own either directly or through an agent or trustee and, for this purpose, a seller shall be considered to own a security if the seller:

(a) has purchased or has entered into an unconditional contract to purchase the security, but has not yet received delivery of the security;

(b) has tendered such other security for conversion or exchange or has issued irrevocable instructions to convert or exchange such other security;

(c) has an option to purchase the security and has exercised the option;

(d) has a right or warrant to subscribe for the security and has exercised the right or warrant; or

(e) is making a sale of a security that trades on a when issued basis and the seller has entered into a contract to purchase such security which is binding on both parties and subject only to the condition of issuance of distribution of the security,

but a seller shall be considered not to own a security if:

(f) the seller has borrowed the security to be delivered on the settlement of the trade and the seller is not otherwise considered to own the security in accordance with this definition;

(g) the security held by the seller is subject to any restriction on sale imposed by applicable securities legislation or by an Exchange or QTRS as a condition of the listing or quoting of the security; or

(h) the settlement date or issuance date pursuant to:

(i) an unconditional contract to purchase,

(ii) a tender of a security for conversion or exchange,

(iii) an exercise of an option, or

(iv) an exercise of a right or warrant

would, in the ordinary course, be after the date for settlement of the sale.

Terms used in this schedule that are defined in UMIR have the meaning ascribed to them in UMIR.

In the Matter of Certain Financial Sector Issuers Set Forth on Schedule A - ss. 127(1), (2), (5) and 144(1)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

CERTAIN FINANCIAL SECTOR ISSUERS

set forth on Schedule A attached

ORDER

(Subsections 127(1), (2) and (5) and 144(1) of the Act)

WHEREAS on September 19, 2008 the Ontario Securities Commission (the Commission) issued a temporary order with respect to the Financial Sector Issuers set forth on Schedule A pursuant to subsections 127(1), (2) and (5) of the Act (the Original Order), in support of an order made by the United States Securities and Exchange Commission (SEC) on September 18, 2008 (the "SEC Order");

AND WHEREAS on September 21, 2008, the SEC issued an amendment to the SEC Order (the "SEC Amending Order") to address current and anticipated technical and operational concerns resulting from the requirements of the SEC Order;

AND WHEREAS the Executive Director has applied to the Commission to vary and restate the Original Order to support the changes made by the SEC Amending Order and to address certain other technical and operational concerns;

AND WHEREAS the Commission has determined that it is not prejudicial to the public interest to issue an order that varies and restates the Original Order;

IT IS ORDERED, pursuant to subsection 144(1) of the Act, that the Original Order be varied and restated as follows:

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

CERTAIN FINANCIAL SECTOR ISSUERS

set forth on Schedule A attached

TEMPORARY ORDER

(Subsections 127(1), (2) and (5))

WHEREAS it appears to the Ontario Securities Commission (the Commission) that:

1. On September 18, 2008, the United States Securities and Exchange Commission (SEC) issued an order pursuant to section 12(k)(2) of the Securities Exchange Act of 1934 (the SEC Order), as amended on September 21, 2008, that "all persons are prohibited from short selling [as defined in the SEC Order] any publicly traded common equity securities" of a defined list of financial firms, subject to certain exceptions;

2. Attached as Schedule A is a list of financial sector issuers that (a) are listed on the Toronto Stock Exchange (TSX) and are reporting issuers in Ontario; and (b) are interlisted in the United States or, in the case of one issuer, has outstanding securities that are exchangeable into securities of a financial firm listed in the SEC Order (the Financial Sector Issuers). Most of the Financial Sector Issuers are subject to the SEC Order; and

3. This order is being issued as a precautionary matter to prevent regulatory arbitrage with respect to short selling in Ontario of the securities of the Financial Sector Issuers and to promote fair and orderly markets in Ontario for the Financial Sector Issuers. Accordingly, it is in the public interest to temporarily prohibit any short sale (as defined in section 1.1 of the Investment Industry Regulatory Organization of Canada's Universal Market Integrity Rules (UMIR) which is attached as Schedule B) in the securities of the Financial Sector Issuers;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this order and that the time required to conclude a hearing could be prejudicial to the public interest;

IT IS ORDERED pursuant to subsections 127(1), (2) and (5) of the Act that trading that constitutes a short sale (as defined in Schedule B) in the common equity securities of the Financial Sector Issuers is hereby prohibited, unless the short sale is:

(i) conducted in accordance with UMIR Rule 3.1 Restrictions on Short Selling, sections 2(a), (b), (d) and (g); provided, however, a dealer fulfilling market maker obligations (market maker) may not effect a short sale in the common equity securities of the Financial Sector Issuers if the market maker ought reasonably to know that the client's or counterparty's transaction will result in the client or counterparty establishing or increasing an economic net short position (i.e. through actual positions, derivatives, or otherwise) in the issued share capital of a Financial Sector Issuer covered by this Order;

(ii) conducted by a registered dealer acting as principal to facilitate a transaction with a client that has a current market value of $200,000 or more in a single transaction, or in several transactions at approximately the same time, provided that the position is liquidated or hedged as soon as possible.

(iii) conducted in order to comply with UMIR Rule 5.2 Best Price Obligation;

(iv) conducted by a person or company as a result of the automatic exercise or assignment of an equity option, or in connection with settlement of a futures contract, held prior to the effectiveness of this order due to expiration of the option or futures contract;

(v) a sale of a security identified in paragraph (g) of Schedule B, where the security is beneficially owned by the seller and the sale is made under an exemption from the prospectus requirements in accordance with applicable securities legislation; or

(vi) conducted to adjust a pre-existing hedged derivative position in order to maintain the risk exposure that existed at the time the Original Order became effective; and

IT IS FURTHER ORDERED that pursuant to section 127(6) of the Act this order shall take effect immediately and shall expire on October 3, 2008, unless extended by order of the Commission.

DATED at Toronto this 22nd day of September, 2008.

"James E. A. Turner"

"Lawrence Ritchie"

Schedule A

List of Financial Sector Issuers

{1} This company is not interlisted in the US. However, it is included on this list because its securities are interchangeable into securities of Merrill Lynch & Co. Inc. (listed in the US), which is subject to the SEC Order.

Schedule B

"short sale" means a sale of a security, other than a derivative instrument, which the seller does not own either directly or through an agent or trustee and, for this purpose, a seller shall be considered to own a security if the seller:

(a) has purchased or has entered into an unconditional contract to purchase the security, but has not yet received delivery of the security;

(b) has tendered such other security for conversion or exchange or has issued irrevocable instructions to convert or exchange such other security;

(c) has an option to purchase the security and has exercised the option;

(d) has a right or warrant to subscribe for the security and has exercised the right or warrant; or

(e) is making a sale of a security that trades on a when issued basis and the seller has entered into a contract to purchase such security which is binding on both parties and subject only to the condition of issuance of distribution of the security,

but a seller shall be considered not to own a security if:

(f) the seller has borrowed the security to be delivered on the settlement of the trade and the seller is not otherwise considered to own the security in accordance with this definition;

(g) the security held by the seller is subject to any restriction on sale imposed by applicable securities legislation or by an Exchange or QTRS as a condition of the listing or quoting of the security; or

(h) the settlement date or issuance date pursuant to:

(i) an unconditional contract to purchase,

(ii) a tender of a security for conversion or exchange,

(iii) an exercise of an option, or

(iv) an exercise of a right or warrant

would, in the ordinary course, be after the date for settlement of the sale.

Terms used in this schedule that are defined in UMIR have the meaning ascribed to them in UMIR.

Chapter 4 -- Cease Trading Orders

Temporary, Permanent & Rescinding Issuer Cease Trading Orders

Temporary, Permanent & Rescinding Management Cease Trading Orders

** NOTHING TO REPORT THIS WEEK.

Outstanding Management & Insider Cease Trading Orders

Chapter 5 -- Rules and Policies

Amendment to OSC Rule 31-502 Proficiency Requirements for Registrants

AMENDMENT TO

ONTARIO SECURITIES COMMISSION RULE 31-502

PROFICIENCY REQUIREMENTS FOR REGISTRANTS

PART 1 AMENDMENT TO RULE 31-502

1.1 Amendment -- Section 2.1(2) of Ontario Securities Commission Rule 31-502 Proficiency Requirements for Registrants is amended by:

(a) replacing the wording of subsection (2)(a) with: "completed the Wealth Management Essentials course before the registration was granted; or", and

(b) replacing the wording of subsection (2)(b) with: "before the end of the thirty month period, completed the Wealth Management Essentials course."

PART 2 EFFECTIVE DATE

2.1 Effective Date -- This amendment comes into force on October 24, 2008.

Chapter 8 -- Notice of Exempt Financings

Reports of Trades Submitted on Forms 45-106F1 and 45-501F1

Chapter 11 -- IPOs, New Issues and Secondary Financings

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1322224

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1322724

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1322505

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1322897

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1321917

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1323181

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1323690

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1318706

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1305037

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1204786

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1295071

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1321609

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1217920

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Type and Date:

Offering Price and Description:

Underwriter(s) or Distributor(s):

Promoter(s):

Project #1309043

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Chapter 12 -- Registrations

Registrants

Chapter 13 -- SRO Notices and Disciplinary Proceedings

Housekeeping Amendments to MFDA Policy No. 4 -- Internal Control Policy Statements and MFDA Financial Questionnaire and Report -- Form 1

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

HOUSEKEEPING AMENDMENTS TO MFDA POLICY NO. 4

INTERNAL CONTROL POLICY STATEMENTS

AND

MFDA FINANCIAL QUESTIONNAIRE AND REPORT -- FORM 1

Current Requirements

MFDA Policy No. 4 Internal Control Policy Statements prescribes requirements and provides guidance on compliance with MFDA Rule 2.9, which requires that Members establish and maintain internal controls as prescribed by the MFDA from time to time.

MFDA Financial Questionnaire and Report ("FQR") -- Form 1 is the prescribed form for Members to file their financial statements with the MFDA in accordance with Rule 3.5.1.

Reasons for Amendments

MFDA Policy No. 4 Internal Control Policy Statements was drafted before the MFDA Investor Protection Corporation was established and incorrectly refers to the MFDA Investor Protection Plan.

The proposed amendments to the FQR are housekeeping in nature in that they are intended to clarify existing requirements and correct cross-references.

Description of Amendments

The proposed amendment to MFDA Policy No. 4 will update the legal name of the Investor Protection Plan by substituting MFDA Investor Protection "Plan" with MFDA Investor Protection "Corporation".

Housekeeping amendments to the FQR are summarized in the table below:

Effective Date

The amended Policy and Form will be effective on a date to be subsequently determined by the MFDA.

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

MFDA POLICY NO. 4 INTERNAL CONTROL POLICY STATEMENTS

On May 22, 2008, the Board of Directors of the Mutual Fund Dealers Association of Canada made the following housekeeping amendments to MFDA Policy No. 4 Internal Control Policy Statements:

MFDA POLICY NO. 4

INTERNAL CONTROL POLICY STATEMENTS

MFDA INTERNAL CONTROL POLICY STATEMENT 1 -- GENERAL MATTERS

This Policy Statement is one in a series that prescribes requirements for and provides guidance on compliance with MFDA Rule 2.9 that states "every Member shall establish and maintain adequate internal controls as prescribed by the Corporation from time to time."

"Internal control" is defined as follows:

"Internal control consists of the policies and procedures established and maintained by management to assist in achieving its objective of ensuring, as far as practical, the orderly and efficient conduct of the entity's business. The responsibility for ensuring adequate internal control is part of management's overall responsibility for the ongoing activities of the entity." (CICA Handbook, 5200.03)

The effectiveness of specific policies and procedures is affected by many factors, such as management philosophy and operating style, the function of the board of directors (or equivalent) and its committees, organizational structure, methods of assigning authority and responsibility, management control methods, system development methodology, personnel policies and practices, management reaction to external influences, and internal audit. These and other aspects of internal control affect all parts of the Member firm.

In addition to compliance with required policies and procedures set out in these Policy Statements, a Member must consider the following, to the extent that they suggest a higher standard than would otherwise be required:

(ii) Authoritative literature such as publications of the Mutual Fund Dealers Association of Canada, the MFDA Investor Protection Plan Corporation, the Internal Control Guidelines published by the Investment Dealers Association of Canada and publications of the Canadian Institute of Chartered Accountants;

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

MFDA FINANCIAL QUESTIONNAIRE AND REPORT -- FORM 1

On May 22, 2008, the Board of Directors of the Mutual Fund Dealers Association of Canada made the following housekeeping amendments to the MFDA Financial Questionnaire and Report -- Form 1:

FORM 1

MFDA FINANCIAL QUESTIONNAIRE AND REPORT

STATEMENT A

NOTES AND INSTRUCTIONS

[comparative figures to be completed at audit date only]

Line 4 - In the case of commissions or fees receivables from mutual funds, to the extent that there is written documentation that the Member does not have a liability to pay salespersons' commission until it is received from the mutual fund company, the salesperson's portion of the commission or fee receivable is an allowable asset.

Line 8 - Include only overpayment of prior years' income taxes or current year installments. Taxes recoverable due to current year losses may be included to the extent that they can be carried back and applied against taxes previously paid. This line should not include future tax debits arising from losses carried forward.

Line 9 - Include GST receivables, capital tax, Part IV tax, sales and property taxes.

Line 10 - Includes only receivables from Acceptable Entities but does not include subordinated loans receivable from other Members which should be shown on line17. Allowable assets are those assets which due to their nature, location or source are either readily convertible into cash or from such creditworthy entities as to be allowed for capital purposes.

Line 18 - Including but not limited to such items as:

Line 23 - Includes amounts owed by the Member for the purchase of client securities.

Line 27 - Include discretionary bonuses payable and bonuses payable to shareholders.

Line 29 - Include current portion of deferred lease inducements.

Line 38 - Include contributed surplus, if applicable.

STATEMENT B

NOTES AND INSTRUCTIONS

EACH MEMBER SHALL HAVE AND MAINTAIN AT ALL TIMES RISK ADJUSTED CAPITAL IN AN AMOUNT NOT LESS THAN ZERO.

Line 4 - Rule 3.1.1 requires the following minimum capital amounts:

Line 11 - 100% of the market value of securities must be provided in the case where client or firm securities are held at locations which do not qualify as acceptable securities locations (see General Notes and Definitions). Securities held by an entity with which the Member has not entered into a written custodial agreement as required by the By-laws and Rules of the MFDA shall be considered as being held at non-acceptable securities locations.

For nominee name accounts, where a mutual fund company or financial institution does not provide a monthly statement or electronic file confirming all of the Member firm's mutual fund positions, the Member shall provide margin equal to 100% of the market value of such mutual funds and other investment products held on behalf of clients.

Line 12 and 13 - Items are considered unresolved unless a journal entry to resolve the difference has been processed as of the Due Date of the questionnaire.

This does not include journal entries writing off the difference to profit or loss in the period subsequent to the date of the questionnaire.

Margin must be provided for adverse unresolved differences in nominee name accounts in an amount equal to the market value of the securities short plus the applicable margin rates related to the security. If the deficiency has not been resolved within thirty days of being discovered, the Member shall immediately purchase the securities that are short.

Line 14 - This item should include all margin requirements not mentioned above as outlined in the By-laws and Rules of the MFDA

STATEMENT C

NOTES AND INSTRUCTIONS

1. The objective of the various Early Warning Tests is to measure characteristics likely to identify a firm heading into financial trouble and to impose restrictions and sanctions to reduce further financial deterioration and prevent a subsequent capital deficiency. "Yes" answers indicate Early Warning has been triggered.

If the firm is currently capital deficient (i.e. risk adjusted capital is negative), only Part A of the early warning tests need be completed.

2. The profit or loss figures to be used are before bonuses, income taxes and extraordinary items [Statement D, line 20]. Note that the "current quarter" figure must also reflect any audit adjustments made subsequent to the filing of the Quarterly Monthly Financial Report.

3. If the current quarter is profitable, enter a "No" answer for Part C.

STATEMENT D -- NOTES AND INSTRUCTIONS

A comparative statement of income prepared in accordance with generally accepted accounting principles and containing at least the information shown in the pre-printed Statement D may be substituted. It should be affixed to the statement provided.

It is recognized that the components of the revenue and expense classification on this statement may vary between firms. However, it is important that each firm be consistent between periods. Fair presentation may require the separate disclosure of additional large and/or unusual items by way of a note to this statement.

Lines

2 Assets under Administration means the market value of all mutual funds reflected in the client accounts (nominee and client name) of a Member in all provinces of Canada, excluding Quebec.

3-7 All Commission Revenue should be reported net of payouts to carrying dealers. Commission paid to salespersons should be shown on line 15.

3 Includes all gross commissions and trailer fees earned on mutual fund transactions, net of any payouts to the mutual funds.

10 Includes any charges to clients that are not related to commissions.

11 Includes fund management fees and other consulting fees not charged to clients.

12 Includes all fees earned as a result of referring clients to another entity for products or services.

13 Includes foreign exchange profits/losses and all other revenue not reported above.

15 This category should include commissions, bonuses and other variable compensation of a contractual nature. Examples would encompass commission payouts to salespersons. Discretionary bonuses should be included on line 21. All contractual bonuses should be accrued monthly and included on line 15.

16 Includes all interest on subordinated debt.

17 Includes trading profits/losses from principal trading activities and adjustment of marketable securities to market value.

18 Unusual items are items that have some but not all of the characteristics of extraordinary items [line 23]. An example of an unusual item may include costs associated with a branch closure.

19 Includes all operating expenses except those mentioned elsewhere: Variable compensation [line 15], discretionary bonuses [line 21].

21 This category should include discretionary bonuses and all bonuses to shareholders in accordance with share ownership. However, please read the instructions for line 15 before completing.

22 Includes ONLY income taxes. Realty and capital taxes should be included in line 19. Taxes at 33-1/3% on partnership profits should be disclosed on this line. The current provision should be net of loss carryforwards, the details of which should be disclosed on Schedule 3.

23 Extraordinary items have the following characteristics:

(a) they are not expected to occur frequently over several years;

(b) they do not typify normal business activities; and

(c) they do not depend primarily on decisions or determinations by management.

They should be reported net of tax. An example of an extraordinary item would include the destruction of a company's uninsured art collection by fire.

26 Includes only direct charges or credits to retained earnings that are capital transactions (e.g. premium on share redemptions), income of a subsidiary accounted for by the equity method and prior period adjustments. Any adjustment(s) required to reconcile retained earnings on the Monthly Financial Report to the MFDA Financial Questionnaire and Report should be posted to the individual Statement ED line items on the first Monthly Financial Report that is filed after the adjustment(s) is known.

Housekeeping Amendments to MFDA Rule 3 -- Financial and Operations Requirements

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

HOUSEKEEPING AMENDMENTS TO MFDA RULE 3

(FINANCIAL AND OPERATIONS REQUIREMENTS)

Current Rule

Rule 3 sets out the minimum requirements that MFDA Members must observe regarding financial and operational considerations. These include minimum Member capital, segregation of client property, early warning provisions, financial filings and audit requirements.

In particular, Rule 3.5.3 requires Members to file, through their auditors, on an annual basis, such additional information relating to affairs of any related Members, as considered necessary by the MFDA.

Reasons for Amendments

Most of the amendments to Rule 3 have been proposed to clarify, update and address minor inconsistencies between terms used in the Rule and terms used in other contexts, such as the Canadian Institute of Chartered Accountants ("CICA") Handbook.

With respect to Rule 3.5.3, this Rule was initially included prior to the establishment of the MFDA Investor Protection Corporation. The Rule contemplated cases where there may be companies that are considered "related" and are both covered by the MFDA's investor protection fund, but are not both subject directly to the MFDA's audit jurisdiction. Given the fact that the MFDA Investor Protection Corporation only offers coverage to Members of the MFDA, Rule 3.5.3 is no longer considered relevant.

Description of Amendments

The following amendments to Rule 3 are proposed:

• MFDA Investor Protection "Fund" or "Plan" has been changed to MFDA Investor Protection "Corporation" (Rules 3.4.2(b)(ii)(C), 3.6.5 and 3.6.7).

• The word "inventory" has been changed to "investments" to more accurately state the Rule as mutual fund dealers do not typically have "inventory" balances (Rule 3.4.3).

• The word "consolidated" has been changed to "combined" as "consolidated" is a defined term under the CICA Handbook whereas the MFDA reporting requirements are specifically outlined in the Rule (Rule 3.5.2).

• Rule 3.5.3 has been deleted.

• The word "Canadian" has been added where there are specific references to "generally accepted accounting principles" or "generally accepted auditing standards" to clarify that it is Canada's standards that apply (Rules 3.5.4(b) and 3.6.1).

• Specific references to the CICA Handbook have been removed as section references have become outdated (Rules 3.6.2(a), 3.6.2(a)(i), 3.6.2(a)(ii) and 3.6.4).

• Early warning "reserves" has been changed to early warning "excess" to ensure consistency of terms used (Rule 3.6.2(a)(ii)).

• The word "prove" has been changed to "substantiate" to more accurately state the auditor requirements and ensure consistency with CICA Handbook terminology (Rule 3.6.2(b)(i)).

• Where terms are narrow in scope (i.e. "mutual fund", "security"), amendments have been made to clarify the requirement is broader in scope. For example, "securities" has been changed to "securities or other investment products" or "assets" to ensure that guaranteed investment certificates and other products are considered (Rules 3.6.2(b)(iii), 3.6.2(b)(v), 3.6.2(b)(vi)(B) and 3.6.2(b)(iv)(C)).

• Specific Rules have been updated to properly reflect changes in auditing practices resulting from advancements in technology over time (Rules 3.6.2(b)(iv) and 3.6.2(b)(vi)).

• Additional wording has been added for clarification of specific requirements (Rules 3.6.2(b)(v) and 3.6.2(b)(vi)(B)).

• Corrections have been made to cross-references (e.g. changing "(E)" to "(D)") (Rule 3.6.2(b)(vi)).

• The words "Cash and" have been added to the Rule to reflect the proper name of the Report in Form 1 (Rule 3.6.2(b)(ix)).

The proposed amendments are housekeeping in nature in that they are intended to clarify existing requirements and the current language of the Rule.

Effective Date

The amended Rule will be effective on a date to be subsequently determined by the MFDA.

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

FINANCIAL AND OPERATIONS REQUIREMENTS (Rule 3)

On May 22, 2008, the Board of Directors of the Mutual Fund Dealers Association of Canada made the following housekeeping amendments to MFDA Rule 3:

3.4 EARLY WARNING

3.4.2

(b) Requirements. If a Member is designated in early warning then, notwithstanding the provisions of any By-law or Rule, the following provisions shall apply:

(ii) the Corporation shall immediately designate the Member as being in early warning and shall deliver to the chief executive officer and chief financial officer a letter containing the following:

(A) advice that the Member is designated as being in early warning,

(B) a request that the Member file its next monthly financial report required pursuant to Rule 3.5.1(a) no later than 15 business days or, in the discretion of the Corporation if considered to be practicable, such earlier time following the end of the relevant month,

(C) a request that the Member respond to the letter as required under Rule 3.4.2(b)(iii) and confirmation that such response, together with the notice received pursuant to Rule 3.4.2(b)(i), will be forwarded to MFDA Investor Protection FundCorporation and may be forwarded to any securities commission having jurisdiction over the Member,

(D) advice that the restrictions referred to in Rule 3.4.2(b)(iv) shall apply to the Member,

(E) such other information as the Corporation shall consider relevant;

3.4.3 Restrictions. The Corporation may in its discretion, without affording the Member a hearing, prohibit a Member which is designated as being in early warning from opening any new branch offices, hiring any new Approved Persons, opening any new client accounts or changing in any material respect the inventoryinvestment positions of the Member. Any such prohibitions which have been imposed shall continue to apply until the Member is no longer designated as being in early warning, as demonstrated by the latest filed monthly financial report of the Member.

3.5 FILING REQUIREMENTS

3.5.2 Consolidated Combined Financial Statements. In calculating the risk adjusted capital of a Member, the financial position of the Member may, with the prior approval of the Corporation, be consolidated combined (in a manner as set out below) with that of any related Member provided that:

(a) the Member has guaranteed the obligations of such related Member and the related Member has guaranteed the obligations of the Member (such guarantee to be in a form acceptable to the Corporation and unlimited in amount).

(b) inter-company accounts between the Member and the related Member shall be eliminated;

(c) any minority interests in the related Member shall be eliminated from the capital calculation; and

(d) calculations with respect to the Member and the related Member shall be as of the same date.

3.5.3 Related Members. In addition to the statements under Rule 3.5.1, each Member shall file annually with the Corporation through the Member's auditor, particulars of the name and relationship to the Member of each related Member and such financial statements and reports with respect to the affairs of any such related Member as the Corporation considers necessary or advisable.

3.5.43.5.3 Members' Auditors

(b) Standards. The Member's auditor shall conduct his or her examination of the accounts of the Member in accordance with Canadian generally accepted auditing standards and the scope of his or her procedures shall be sufficiently extensive to permit him or her to express an opinion on the Member's financial statements in the form prescribed. Without limiting the generality of the foregoing, the scope of the examination shall, where applicable, include at least the procedures set out in Rule 3.6.

3.5.53.5.4 Assessments

3.6 AUDIT REQUIREMENTS

3.6.1 Standards. The audit under Rule 3.5 shall be conducted in accordance with Canadian generally accepted auditing standards and shall include a review of the accounting system, the internal accounting control and procedures for safeguarding assets. It shall include all audit procedures necessary under the circumstances to support the opinions which must be expressed in the Member's auditor's reports of Parts I and II of Form 1. Because of the nature of the industry, the substantive audit procedures relating to the financial position must be carried out as of the audit date and not as of an earlier date, notwithstanding that the audit is otherwise conducted in accordance with Canadian generally accepted auditing standards.

3.6.2 Scope

(a) Tests. The scope of the audit shall include the following procedures, but nothing herein shall be construed as limiting the audit or permitting the omission of any additional audit procedure which any Member's auditor would deem necessary under the circumstances. For purposes of this Rule tests fall into two basic categories (as described in CICA Handbook sections 5300.11 to 5300.21):

(i) specific item tests, whereby the auditor examines individual items which he or she considers should be examined because of their size, nature or method of recording (CICA Handbook Section 5300.13); and

(ii) representative item tests, whereby the auditor's objective is to examine an unbiased selection of items (Section 5300.13).

The determination of an appropriate sample on a representative basis may be made using either statistical or non-statistical methods in accordance with Canadian generally accepted auditing standards (CICA Handbook Section 5300.14).

In determining the extent of the tests appropriate in sub-sections (i), (ii) and (iii) of (b) below, the Member's auditor should consider the adequacy of the system of internal control and the level of materiality appropriate in the circumstances so that in the auditor's professional judgement the risk of not detecting a material misstatement, whether individually or in aggregate is reduced to an appropriately low level (e.g. in relation to the estimated risk adjusted capital and early warning reserves excess).

(b) Audit Procedures. The Member's auditor shall as of the audit date:

(i) compare ledger accounts with the trial balances obtained from the general and subsidiary ledgers and prove substantiate the subsidiary ledger totals with their respective control accounts (see Rule 3.6.4 below relating to Electronic Data Processing);

(ii) account for, by physical examination and comparison with the books and records, all securities in the physical possession of the Member;

(iii) review the reconciliation of all mutual funds companies and financial institutions where a Member operates a nominee name account and review the balancing of all security positions. Where a position or account is not in balance according to the records, ascertain that an adequate provision has been made in accordance with the Notes and Instructions for out of balance positions embodied in Statement B of Form 1 for any potential loss;

(iv) review bank reconciliations. After allowing at least ten business days to elapse, obtain bank statements, cancelled cheques and all other debit and credit memos directly from the banks and by appropriate audit procedures substantiate on a test basis the reconciliations with the ledger control accounts as of the audit date;

(v) where a Member operates a nominee name account or has its own securities or investment products, ensure that all custodial agreements are in place for securitiesthose lodged with acceptable locations and that such agreements satisfy the minimum requirements of the Corporation;

(vi) obtain written confirmation with respect to the following:

(A) bank balances and other deposits;

(B) cash, nominee name security positions and deposits with clearing houses and like organizations and cash and nominee name security positions with mutual fund companies and financial institutions;

(C) cash and securitiesinvestments loaned or borrowed (including subordinated loans) together with details of collateral received or pledged, if any;

(D) accounts with brokers or dealers;

(E) accounts of directors, partners or officers of the Member held by the Member where the Member operates a nominee name account;

(F) accounts of clients where a Member operates a nominee name account;

(G) statements from the Member's lawyers as to the status of lawsuits and other legal matters pending which, if possible, should include an estimate of the extent of the liabilities so disclosed; and

(H) all other accounts which in the opinion of the Member's Auditor should be confirmed.

Compliance with the confirmation requirements shall be deemed to have been made if positive requests for confirmation have been mailedsent by, and returned directly to, the Member's auditor in an envelope bearing the auditor's return address and second requests are similarly mailedsent to those not replying to the initial request. Appropriate alternative verification procedures must be used where replies to second requests have not been received. For accounts mentioned in (DE) and (F) above, the Member's auditor shall (1) select specific accounts for positive confirmation based on their size (all accounts with equity exceeding a certain monetary amount, with such amount being related to the level of materiality) and other characteristics such as accounts in dispute and nominee name accounts, and (2) select a representative sample from all other accounts of sufficient extent to provide reasonable assurance that a material error, if it exists, will be detected. For accounts in (DE) and (F) above that are not confirmed positively, the Member's auditor shall mailsend statements with a request that any differences be reported directly to the auditor. Clients' accounts without any balance whatsoever and those closed since the last audit date shall also be confirmed on a test basis using either positive or negative confirmation procedures, the extent to be governed by the adequacy of the system of internal control;

(vii) subject the Statements in Part I and Schedules in Part II of Form 1 to audit tests and/or other auditing procedures to determine that the margin and capital requirements, which are used in the determination of the excess (deficiency) of risk adjusted capital are calculated in accordance with the Rules and Form 1 in all material respects in relation to the financial statements taken as a whole;

(viii) obtain a letter of representation from the senior officers of the Member with respect to the fairness of the financial statements including among other things the existence of contingent assets, liabilities and commitments;

(ix) complete and report on the results of applying the prescribed procedures contained in the Report on Compliance for Segregation of Cash and Securities in Form 1.

3.6.3 Insurance and Subsequent EventsAdditional Reporting. In addition, the Member's auditor shall:

(a) complete and report on the results of applying the prescribed procedures contained in the Report on Compliance for Insurance in Form 1; and

(b) report on any subsequent events, to date of filing, which have had a material adverse effect on the excess (deficiency) of risk adjusted capital.

3.6.4 Systems Review. The Member's auditors' review of the accounting system, the internal accounting control and procedures for safeguarding securities prescribed in the above Audit Requirements should encompass any in-house or service bureau EDP operations. (This may include reliance on CICA Handbook Section 5900 report "Opinions on Control Procedures at a Service Organization"). As a result of such review and evaluation the Member's auditor may be able to reduce the extent of detailed checking of clients and other account statements to trial balances and security position records.

3.6.5 Retention. Copies of Form 1 and all audit working papers shall be retained by the Member's auditor for seven years. The two most recent years shall be kept in a readily accessible location. All working papers shall be made available for review by the Corporation and the MFDA Investor Protection PlanCorporation and the Member shall direct its auditor to provide such access on request.

3.6.7 Reliance. The reports and audit opinions required in respect of a Member under this Rule 3.6 shall be addressed to the Corporation and the MFDA Investor Protection PlanCorporation in conjunction with the Member who shall be entitled to rely on them for all purposes.

IIROC Amendments to Implement the CSA Registration Reform Project

INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA ("IIROC")

AMENDMENTS TO IMPLEMENT THE CSA REGISTRATION REFORM PROJECT

I OVERVIEW

The Canadian Securities Administrators, (the Securities Regulatory Authorities or SRAs), the Investment Industry Regulatory Organization of Canada Inc. (IIROC) and the Mutual Fund Dealers Association (MFDA) have worked jointly on a project -- the Registration Reform Project -- to modernize, streamline and harmonize registration and approval requirements for dealers and their registered individuals. The project has resulted in a proposal to harmonize securities legislation across the CSA jurisdictions and the development of proposed National Instrument (NI) 31-103 -- Registration Requirements, intended to be adopted by all CSA jurisdictions.

IIROC and its predecessor, the Investment Dealers Association of Canada (IDA) have been involved to provide policy recommendations and ensure that there is no inconsistency between CSA and IIROC regulations regarding registration requirements.

A Current Rules

Rule 1 contains the definitions of terms used in the Rules.

Rule 4 establishes rules regarding the establishment of branch offices of Dealer Members, branch membership in district councils and requirements for appointment and the qualification and approval of branch managers.

Rule 7 establishes requirements regarding the qualification and approval of partners, directors and officers of Dealer Members.

Rule 18 establishes requirements regarding the qualification and approval of Registered Representatives (RRs) and Investment Representatives (IRs) of Dealer Members.

Rule 20 establishes the authority and processes of decision-making panels. In particular, it establishes the authority of and the processes through which District Councils can accept or reject registration applications, impose terms or conditions on the approval of applications and grant exemptions to rule requirements.

Rule 29 sets a number of conduct standards for Dealer Members and Approved Persons. In particular, Rule 29.27 establishes supervision and compliance requirements.

Rule 38 establishes executive-level positions and processes within a Dealer Member designed to ensure that compliance becomes part of a Dealer Member's corporate governance, including the appointment of senior executives responsible for compliance and the involvement of a Dealer Member's Board of Directors or similar body.

Rule 40 establishes requirements for the filing of approval applications and notices of changes to information on Approved Persons through the National Registration Database.

Rule 1300 governs the opening and supervision of client accounts, including requirements for the handling of managed accounts and the qualification and approval of discretionary portfolio managers at Dealer Members.

Rule 1800 governs the conduct of exchange-listed commodity futures business by Dealer Members, including the qualification and approval of persons conducting or supervising such business.

Rule 1900 governs the conduct of exchange-listed options business by Dealer Members, including the qualification and approval of persons conducting or supervising such business.

Rule 2500 establishes minimum supervision standards for opening, operating and supervising retail accounts designed to meet the more general requirements of Rule 1300.

Rule 2700 sets the parameters under which an account can be treated as an institutional account and establishes minimum supervision standards for opening, operating and supervising institutional accounts designed to meet the more general requirements of Rule 1300.

Rule 2900 establishes proficiency requirements for approval in specific capacities. Part I establishes the requirement; Part II specifies exemptions from the Part I requirements and establishes requirements to re-qualify after periods of not being approved in a capacity.

B Issue

Changes need to be made to the current IIROC registration related rules to make them consistent with the objectives of the CSA Registration Reform Project proposals. The proposed new rules are designed to implement the approach and objectives of the Registration Reform Project in the IIROC Dealer Member Rules.

C Objectives

The objectives of the rule changes are for the most part those of the Registration Reform Project:

1. Simplify the categories of approval and eliminate rote, follow-on approvals, such as approvals to trade specific products that are based almost entirely on meeting specific proficiency requirements, in favour of notice processes.

2. Derive approval requirements from functions rather than titles. In this regard, the rule changes propose ceasing to approve all those with specific officer titles, instead approving those exercising executive management functions at a Dealer Member -- the "mind and management" of the Dealer Member.

3. Modernize registration-related requirements on Dealer Members, moving to the extent reasonable to a principles-based approach. In this regard they remove as far as possible prescriptive structural requirements that are not appropriate to all of the different types of Dealer Members' businesses and business models, such as requirements to place supervisory responsibilities on resident branch managers of all business locations about a certain size. They will therefore give Dealer Members greater flexibility to develop compliance and supervision structures and processes appropriate for their size, type(s) of business, business structures, systems and resources.

4. Harmonize as far as possible the IIROC Rules with those of the SRAs and MFDA. Where harmonization is not possible, ensure that there is no conflict between SRA and IIROC rules. In general, conflicts occur where IIROC has more elaborate rules, such as capital rules and the suitability regime, and in those cases the proposal includes a provision that some sections do not apply to IIROC Dealer Members. Where NI 31-103 sets a standard applicable to IIROC Dealer Members that would be in conflict, such as eligibility for registration/approval as Ultimate Designated Person, the proposed rule changes harmonize the IIROC Rules with proposed NI 31-103.

Some of the proposed rule changes are housekeeping or are directed at improving the clarity of the rules. Where extensive changes are made the revised rules are written in plainer language, and related but unchanged parts have been rewritten to conform to the plain language style of the new provisions{1}. There have also been a few deletions of transitional provisions that are no longer required, such as the transition provisions in Rule 40 required to get Approved Person data into the NRD System.

D Effect of Proposed Rules

The proposed amendments will make the Rules consistent with the goals of the CSA Registration Reform Project.

The proposed amendments will give Dealer Members greater flexibility in designing their compliance systems. In doing so they may result in savings to Dealer Members by permitting them to take more efficient approaches. However, cost savings are not the objective of the proposed amendments and the Corporation will review changes to Dealer Member systems as part of its normal business conduct reviews to ensure that changes result in systems that are at least as effective as those prescribed by the current Rules.

The proposed amendments will require Dealer Members to maintain extensive records of both Approved Persons and assignment of responsibilities. In the case of Approved Persons, some Dealer Members currently rely on the NRD System for their own record keeping in ways that they will not be able to after implementation of the proposed amendments. In that case the proposed amendments may increase registration record keeping costs of some Dealer Members.

II DETAILED ANALYSIS OF RECOMMENDED PROPOSAL

A Proposed Amendments

Overview

The following describes the main overall effect of the proposed amendments. Some of the changes necessary to achieve the results described are spread through more than one Rule.

1. Simplification of approval categories

The Corporation currently has 46 approval categories for individuals; the proposed amendments reduce the number to 9{2}.

Each category now represents a different conjunction of five elements:

(1) the type of trading activity -- trading, order-taking only, advisory or portfolio management;

(2) the type(s) of product(s): securities, mutual funds only, options or commodities;

(3) type of client: retail or non-retail

(4) the individual's position with the Dealer Member: representative, partner, officer or director;

(5) supervisory responsibilities: Ultimate Designated Person, Chief Financial Officer, Chief Compliance Officer, Alternate Designated Person or Branch Manager; and

Each element of an approved person's function includes a specific proficiency requirement. As any of these items changes, the Dealer Member has to file an application for a category change and, if necessary, notification of completion of the applicable proficiency requirements.

The proposed amendments simplify the categories by focusing solely on functions. These are:

(1) Investment Representative: approved to take unsolicited orders

(2) Registered Representative: approved to give investment advice

(3) Trader: approved to enter orders into the trading systems of specific exchanges

(4) Supervisor: approved to supervise the business activities of other approved persons

(5) Executive: approved to participate in the executive management of a Dealer Member

(6) Director: approved to sit on the Board of Directors of a Dealer Member or occupy a similar position in a Dealer Member not organized as a corporation

(7) Ultimate Designated Person: the Chief Executive Officer of a Dealer Member or person in a similar position, approved to have overall responsibility for the Dealer Member's compliance with laws and regulations, including the Rules, governing its securities-related activities;

(8) Chief Financial Officer, approved to be responsible for ensuring that the Dealer Member complies with the financial adequacy requirements of the Rules;

(9) Chief Compliance Officer, approved to be responsible for ensuring that the Dealer Member has systems and controls reasonably designed to ensure its compliance with laws and regulations, including the Rules, governing its business conduct.

Under the proposal, specifics as to the types of products, clients and services will be information items, but will remain subject to proficiency requirements. They will be reported in initial applications, but subsequent changes will require only notification that the Approved Person has completed the necessary proficiencies and will be undertaking the applicable business activity. There will be no approval by IIROC staff, only a check, which may come after the fact, that the Dealer Member has disclosed the completion of the necessary proficiency requirements.

2. Merging of supervisory categories and implementation of a principles-based approach to supervision

The Rules currently require that each location of a Dealer Member have a Branch Manager who is approved as such by the Corporation. A location having less than 3 or 4 RRs (depending on the rules of local SRA) may be designated as a sub-branch supervised by the resident Branch Manager of a full branch. Dealer Member Rule 2500 sets out specific account supervision requirements for Branch Managers of retail branches.

While establishing one effective method of supervising branch retail activity, the current requirements restrict Dealer Members from adopting any other supervisory structure and therefore from being innovative in the way they supervise business conduct. They are inappropriate for Dealer Members conducting non-retail or non-advisory other businesses, for example institutional sales and trading, proprietary trading and suitability-exempt discount brokerage.

The current requirements do not fit many business models of Dealer Members. For example, under the current regulations a Branch Manager is responsible for all activity in the branch. However, a large branch may also do institutional business, research and corporate finance that a Branch Manager does not have the necessary expertise to supervise. Those doing those types of business may in fact report directly to a department supervisor in the Dealer Member's head office.

The proposed rule changes remove the forced structural element of the Branch Manager requirements, merging all supervisory categories into one: Supervisor. Current Branch Managers will become approved in that category, as will other specific supervisory categories including product-specific supervisors such as options and futures contracts principals. As with trading categories, the proficiency requirements to supervise specific types of activity will remain. Changes in proficiency and types of business being supervised will be matters of notice.

In place of the prescribed positions and functions, Dealer Members will be required to maintain detailed historical records of their supervisory structures and the persons responsible for fulfilling specific supervisory functions.

The proposed rule changes continue to require that specific persons be designated to perform specific functions, such as overall supervision of options or futures trading, portfolio supervision and retail account supervision. However, under the proposed rules those fulfilling those functions will no longer have a separate category and approval requirement; they will be approved as Supervisors{3}. Dealer Members will be required to maintain historical records as to who fulfills those designated roles, and their alternates.

The proposed amendments are not intended to eliminate the branch manager structure as a viable way of supervising business activity. Dealer Members will still be able to designate branch managers and assign them the same responsibilities currently contained in the Rules. However, they will be approved as Supervisors. The proposed rules contain no restrictions on the use of most currently used titles such as Branch Manager.

Proposed changes to Dealer Member Rule 2500 make it more of a guidance document, but establish the two-tier method of retail account supervision prescribed in the current Rule as an acceptable option rather than a specific requirement. This change will permit Dealer Members to develop alternative approaches to supervision.

The proposed revisions to Dealer Member Rule 2500 also include new guidance designed to give effect to the more principles-based approach, and additions designed to more fully delineate some requirements, including:

• Guidelines for a risk-based approach to selecting accounts for supervisory review;

• A general requirement that Dealer Member's account opening procedures take into account gatekeeper obligations;

• A restriction preventing ongoing trading in an account when a fully completed new account form has not been approved;

• A requirement that Dealer Members restrict the ability to update customer information on their electronic systems and have means independent of the RR handling an account for verifying significant changes to client information;

• Expanded descriptions of requirements regarding placing restrictions on the types of strategies to be used in options and futures accounts;

• An expanded description of the available means of monitoring losses and loss limits in futures accounts.

3. Limiting partner / officer / director registration to the mind and management of the Dealer Member

The current rules require approval of all partners, directors and senior officers of Dealer Members. "Senior officers" include any persons having titles listed in Dealer Member Rule 1: Chairman, Vice-Chairman, President, Vice-President, Treasurer, Secretary and General Manager. Anyone using any of those titles is required to have the Approval of the Corporation in the position and to complete the Partners, Directors and Senior Officers Qualifying Examination (PDO).

Many Dealer Members appoint individuals to positions like Vice-President in recognition of seniority and accomplishment, even though they have no involvement in the actual management of the Dealer Member. They are first required to complete the PDO, which focuses on corporate governance issues in the securities industry that are irrelevant to their actual functions.

Changes to partnership structures have also made the current rules outdated. Partnership interests set up for compensation purposes but that do no include the ability to bind the partnership continue to be treated as full partnerships, requiring Approval by the Organization and completion of the PDO.

The proposed rules deal with these problems by focusing on the function of managing a Dealer Member rather than on specific titles. Those filling executive management functions, the "mind and management" of the Dealer Member, will have to apply and be approved in the Executive category, whatever their title, and will continue to have to complete the PDO.

4. Bringing the Ultimate Designated Person and Chief Compliance Officer categories into the approval system and making them consistent with NI 31-103

Dealer Member Rule 38.1 requires the appointment of one of a Dealer Member's senior management to the role of Ultimate Designated Person (UDP) to "be responsible to the [Corporation] for the conduct of the firm and the supervision of its employees." Those eligible to take the position are "its Chief Executive Officer, its President, its Chief Operating Officer or its Chief Financial Officer (or such other officer designated with the equivalent supervisory and decision-making responsibility)."

Dealer Member Rule 38.1 ensures that at least one person in a senior management position has direct, individual responsibility for compliance and supervision matters.

Proposed NI 31-103 adopts the UDP requirement, but requires that it be occupied by the Chief Executive Officer. The proposed changes include an amendment to Dealer Member Rule 38 to make it consistent with proposed NI 31-103 in that regard. Dealer Members will be subject to the NI 31-103 provision therefore it would be impractical and confusing to retain the current Rule provision and risk having different people in the same role, one under NI 31-103 and the other under Dealer Member Rule 38.

Proposed NI 31-103 includes UDP and CCO as registration categories. At present Dealer Member Rule 38 requires a Dealer Member to appoint senior officers to those positions, but does not contain any requirement for them to be Approved by the Corporation to occupy those roles. The proposed amendments require Approval by the Corporation of UDPs and CCOs, giving the Corporation authority refuse Approval or grant it subject to conditions.

5. Eliminating transfer of Approval delays

The current process for an IR or RR to transfer from one Dealer Member to another involves an application for transfer filed through NRD and Approved by the Corporation. NI 31-103 proposes a new process under which an individual's registration with a new firm will, for the first 90 days after termination of employment at the previous registered firm, be granted automatically at the time a transfer filing through NRD. The exact details of the filing are not yet determined because of NRD technical issues. The new process will eliminate any waiting time for the review and approval of a transfer application.

The proposed amendments will implement the same process for the transfer of Approved Persons between Dealer Members. As with the proposed NI31-103, automatic transfers will be made only when there is no change of category involved.

Because there is no waiting for transfer of an Approval, it is essential that the Corporation have the power to act if it later receives information that calls into question the fitness or propriety of the transferring person. In most cases, such as when an investigation has been launched, information received is not sufficient to deny or revoke Approval, but raises enough questions to warrant putting conditions on the individual's Approval until the matter is resolved. The most frequent conditions are close or strict supervision.

It is therefore important to ensure that the Corporation has the authority to impose conditions on an existing approval. The proposed amendments include changes to Dealer Member Rule 20.18 to make that authority clear.

6. Repeal or amendment of Outmoded or Redundant Provisions

The proposed amendments include deletion or amendment of the following outmoded provisions{4}:

• Dealer Member Rule 7.4(c) requiring a Dealer Member to have two officers, at least one of whom must be full-time;

• Dealer Member Rule 7.7 regarding multiple employment of officers

• Dealer Member Rule 18.13 requiring notice of Approvals by the Corporation to be sent to SRAs and SROs.

• Dealer Member Rule 18.14 requiring an undertaking by Dealer Members to supervise employees with outside business activities

• Dealer Member Rules 40.1(17) and (18), 40.10 and 40.13 governing requirements for the transition to NRD

• Dealer Member Rule 1300.5 regarding a reference to a Corporation staff position that no longer performs the function

• Dealer Member Rules 1300.5(e) and 1300.8(d) regarding use of a specific delivery method for a notice

• Dealer Member Rules 1800.2(e) and (f) requiring an office trading futures contracts or futures contracts options to have two people approved to do so

• Dealer Member Rule 1800.6 regarding dealings in futures with institutions and registered firms

• Dealer Member Rule 1900.4 and 1900.7 regarding opening and supervision of options accounts

• Dealer Member Rule 2500, Part VII.E regarding managed accounts

7. Miscellaneous changes

The proposed amendments include miscellaneous amendments designed to promote consistency and reflect current practice:

• References in Dealer Member Rules 7 and 18 to remuneration in relation to the sale or placement of securities are changed to refer to "securities-related activities" to reflect the application of the Rules to ancillary activities that may fall outside of a strict definition of "placed or sale of securities."

• A new Dealer Member Rule 1.3 has been added to clarify that the onus for compliance with the Rules falls on both Dealer Members and their Approved Persons where the Rules refer only to Dealer Members. Similarly, Dealer Member Rule 18.2 has been amended to clarify the onus on both Dealer Members and individuals.

• In places such as Dealer Member Rule 18.2 where rules relating to securities also cover futures contracts, references to futures contract have been added.

• Proposed new Dealer Member Rule 18.7 limits the period during which an IR or RR can be restricted to mutual funds business.

• A proposed replacement for Dealer Member Rules 18.16 and 18.17 regarding use of titles contains a general prohibition against the use of misleading titles or designations.

• Proposed amendments to Dealer Member Rule 1300.4 regarding discretionary accounts makes controls on such accounts consistent with those on managed accounts

• A proposed amendment to Dealer Member Rule 2700 makes it consistent with proposed NI 31-103 by incorporating the concept of "permitted clients" from NI 31-103. For most "permitted clients" the Dealer Member can accept a waiver from the client that removes any suitability obligation to the client. The proposed provision is limited because it does not apply to the individuals that can be "permitted clients" under the proposed NI 31-103 definition.

• A proposed amendment to Dealer Member Rule 2900, Part I.A.6 adds options for the supervision of those managing discretionary portfolios during the first two years of their portfolio management, a period during which they would be in the category Associate Portfolio Manager under the current categories. The amendment permits the supervision to be done by a qualified person at another Dealer Member or a registered adviser under Canadian securities legislation.

Detailed descriptions of specific amendments

The following explains the specific proposed amendments, rule by rule:

Dealer Member Rule 1

A definition of "Business Location" will be added. The term is used in the proposed changes to Dealer Member Rule 4 with regard to membership in a District, and the proposed changes to Dealer Member Rule 40 to require notification through NRD of business locations. It is limited to those locations housing individuals requiring Approval by the Corporation, i.e. it excludes those housing only operations such as back office functions. It refers only to locations used on a regular and ongoing basis. The factors to be taken into account in determining whether a location is used on a regular and ongoing basis will be the subject of guidance.

The term "Designated Person" will be replaced with "Designated Supervisor." The current definition lists a number of registration categories or positions that will be eliminated or changed under the proposed amendments. The definition of "Designated Supervisor" is more general, referring to anyone assigned a supervisory role defined in the Rules, whether or not listed in the definition. Those positions already designated under the proposed Dealer Member Rules are listed as exemplary rather than exhaustive of the general definition. "Designated Supervisor" is not itself an Approval category. Those having specific designated roles will be Approved as Supervisors.

A definition of "Director" will be added, to include members of the Board of Directors of the Corporation or of a Dealer Member, as the context indicates, or anyone performing a like function in a Dealer Member that is not a corporation.

"Executive" will be defined to be a partner, director or officer of a Dealer Member involved in its management as a corporation or other entity. The definition includes a non-exhaustive list of typical roles or titles for such people drawn in part from the deleted definition of "Senior Officer," and adds members of any executive management committee.

A definition of "Institutional Customer" will be been added, drawn from Dealer Member Rule 2700, as the revisions use the term in other Rules.

The definitions of "Investment Representative" and "Registered Representative" will be broadened. The current definitions:

• exclude those who trade in or advise on exempt debt securities and non-exchange traded options and futures (because of the definitions of those products in Dealer Member Rules 1800 and 1900);

• exclude investment products not defined as securities under Provincial securities legislation such as guaranteed investment certificates

• exclude those who only trade on the Dealer Member's behalf.

All of these activities fall within the Corporation's regulatory ambit and should trigger a requirement for Approval, so the exclusions will be deleted. Proposed NI 31-103 also makes it clear that proprietary trading falls within the registration requirements.

A definition of "Retail Customer" will be added, being any customer that is not an institutional customer. The term is used with regard to the requirement to disclose the types of business in which an IR or RR will engage under the revisions to Approval categories in Dealer Member Rule 1800.

The definitions of "Officer," "Sales Manager," "Senior Officer," and "Sub branch Office" will be deleted as they are no longer necessary under the proposed revisions.

A definition of "Supervisor" will be added. It defines the new Approval category for anyone given supervisory responsibility by a Dealer Member. It requires that a Supervisor have both the responsibility and authority to supervise others, but restricts the goal of that supervision to compliance with laws or regulations dealing with the Dealer Member's securities-related activities. The restriction means that there may be supervisors whose authority deals solely with operational or other issues that are not subject to securities-related legal or regulatory requirements and who are not, therefore, required to be approved by the Corporation as Supervisors.

A new Dealer Member Rule section 1.3 will be added to state that where the context indicates, references in any Rule to a Dealer Member includes its partners, directors, officers, employees and agents. The numbers of subsequent sections have been increased accordingly. The new section is intended to make it clear that a requirement or prohibition placed on a Dealer Member is equally applicable to the individuals through whom the Dealer Member acts.

Dealer Member Rule 4

Dealer Member Rule 4 will be changed to refer to Business Locations instead of Branch and Sub-Branch Offices.

Most of Dealer Member Rule 4 will be repealed to reflect the elimination of the currently mandatory Branch Office supervision structure.

Dealer Member Rule sections 4.1 through 4.5 deal with eligibility to join a District and attend District meetings. The term "Branch Office Member" of a district will be retained for that purpose.

The proposed amendments rewrite the remaining sections in plain language.

Current Dealer Member Rule section 4.6(c) will be kept as Rule 4.6; Rules 4.6(a) and (b) will be deleted. The current provisions require the Approval of the Corporation to open or close Branch and Sub-Branch Offices; the proposed section 4.6 will require Dealer Members to notify the Corporation of the opening and closing of Business Locations. The Corporation staff uses Business Location information in conducting its oversight of Dealer Members' compliance and supervision systems so it is important that the Corporation know where Dealer Members conduct business with the public.

Dealer Member Rule 7

Under the proposed amendments, Dealer Member Rule 7 will be amended to replace requirements relating to partners and directors with requirements relating to Directors and requirements relating to officers with requirements relating to Executives, limiting their application to the "mind and management" of the Dealer Member.

The proposed amendments to Dealer Member Rule section 7.3 change the requirements as described above with regard to a Dealer Member's Directors. 40% must meet proficiency and experience requirements and be actively involved in the Dealer Member's business or occupy an Executive or Director role at a related or affiliated dealer or financial institution.

The proposed amendments to Dealer Member Rule section 7.4 change the requirements as described above with regard to a Dealer Member's Executives, who must all meet proficiency and experience requirements and be actively involved in the Dealer Member's business or be an Executive or Director or have a similar role to Executive or Director in a related or affiliated dealer or financial institution.

Current Dealer Member Rule sections 7.3 and 7.4 give examples of affiliated financial institutions, all Canadian. The Corporation now has Dealer Members, some resident primarily in the United States, in which the Executives are also Executives of U.S. parent companies or affiliates. The examples of affiliated or related financial institutions will therefore be removed in the proposed amendments.

Dealer Member Rule subsection 7.4(c) currently requires a Dealer Member to have two officers, at least one full-time. The diversification of business types among Dealer Members has made this provision obsolete. Some Dealer Members only have officers that spend most of their time working for an affiliate. The Corporation has also had small Dealer Members, introducing brokers, having only one Executive but forced to appoint someone else simply to fulfill the requirements of the section. The proposed amendments therefore include repeal of section 7.4(c).

Dealer Member Rule section 7.5 establishes a requirement for a Dealer Member to appoint a Chief Financial Officer (CFO) and the proficiency requirement at the CFO must meet. Under the proposed amendments the requirement will be moved to Dealer Member Rule 38 so that all of the requirements for specific Executive positions are in one Rule. Dealer Member Rule 38 contains the requirements to appoint an Ultimate Designated Person and a Chief Compliance Officer. All following sections will be renumbered accordingly.

Current Dealer Member Rule section 7.7 (renumbered 7.6) permits an officer to be employed at an affiliated Dealer Member or non-Dealer Member dealer, subject to conditions and where permitted by the laws of the jurisdiction where the individual is employed. This section will be deleted as unnecessary. There is no prohibition from such multiple employment under NI 31-103 so a permissive section is unnecessary. NI 31-103 prevents multiple registrations except with affiliates. The current section also contains specific disclosure requirements to deal with conflicts of interest, while proposed NI 31-103 takes a principles-based approach to dealing with conflicts of interest. The NI 31-103 approach will apply to Dealer Members after the repeal of current Dealer Member Rule 7.7.

Current Dealer Member Rule section 7.8, to be renumbered 7.6, deals with proficiency requirements for individuals owning more than 10% of the voting securities of a Dealer Member. The references to voting securities will be changed to "a voting interest of 10% or more in the Dealer Member" to recognize the multiple forms of organization of Dealer Members.

Current Dealer Member Rule section 7.9, to be renumbered 7.7, prohibits Directors and Executives from accepting compensation from anyone other than the Dealer Member or its affiliates or related companies "in connection with the sale or placement of securities on behalf of any of them." The latter reference will be changed to the "securities-related activities of any of them." As the variety of services provided by Dealer Members in relation to securities transactions has broadened, to include such activities as advisory services to issuers and financial planning services to clients, application of the Rules has also broadened to ensure that such activities are conducted and compensated through the Dealer Member. The reference to the placement or sale of securities is therefore narrower than required.

Dealer Member Rule 18

Dealer Member Rule section 18.1 defines "recognized stock exchange" for the purposes of the Rule. The term is not used in the proposed revisions, so the section will be repealed.

Dealer Member Rule section 18.2 contains the requirement for RRs to be Approved. It will be amended as follows:

• It currently prohibits a Dealer Member employing anyone as an RR or IR unless registered by the appropriate SRA and approved by the Corporation. It will be rewritten to prohibit individuals from acting as RRs or IRs unless registered or approved and to eliminate the reference to employment in favour of one to acting on a Dealer Member's behalf, which encompasses both employer/employee and principal/agent relationships.

• References to trading in securities will be amended to add trading in futures contracts.

• The registration requirement will made more explicit by adding that it applies to both the Dealer Member and the individual RR or IR, that it applies in any jurisdiction in which a customer of the Dealer Member or RR resides and that the Dealer Member or individual need not be registered if they are exempt from the jurisdiction's registration or licensing requirements.

• A new subsection (b) will require a Dealer Member to notify the Corporation prior to an IR or RR beginning to conduct any of the following types of business: retail, institutional, mutual funds only, options, futures and portfolio management. This will replace previous requirements to apply for approval in specific categories dealing with each type of business. The types of business are aligned similarly to current categories -- related to types of customers, products and services. They are defined to show where an IR or RR is restricted to a particular type of customer or product or can combine multiple types of customer or product.

• A new subsection (c) will prohibit an IR or RR from conducting a type of business and the Dealer Member from permitting him or her doing so before the notice in subsection (b) has been made and notice has been provided to the Corporation that the IR or RR has completed the required proficiencies. The section also notes, for greater clarity, that the initial application for approval of an IR or RR is a form of notice of the types of business listed on the application.

Dealer Member Rule section 18.3 establishes the requirement that RRs and IRs complete the applicable proficiency requirements in Dealer Member Rule 2900. It will be rewritten to note that an exemption is an alternative to completing the proficiency requirement.

The current provision of Dealer Member Rule section 18.3 will be renumbered 18.3(a) and a new subsection (b) will be added containing a new statement of principle regarding proficiency: that a Dealer Member has an obligation to take reasonable steps to ensure that its IRs and RRs are proficient and understand the products they trade in as necessary to meet their regulatory obligations. A similar statement of principle is included in section 4.3 of proposed NI 31-103.

Current Dealer Member Rule sections 18.5 and 18.6 are duplicative. They set out the requirement for a new retail RR or IR to be closely supervised for his or her first six months. Current section 18.5 will therefore be repealed and 18.6 amended as follows:

• The starting date for the supervision will be the date of notification to the Corporation that the person will be conducting retail business. It therefore applies to a person who has previously conducted only non-retail business.

• The revised rule provides an exemption for anyone with six months of prior retail experience.

Dealer Member Rule section 18.7 currently permits RRs or IRs to be restricted to mutual funds only where permitted under Provincial securities laws and regulations. Several SRAs permit RRs and IRs with Dealer Members to be restricted permanently to mutual funds advice and trading. Others require that such persons complete the proficiencies to conduct full retail business within 270 days of initial registration with a Dealer Member. At present, some require that such persons upgrade to unrestricted registration, although the restricted category will no longer be included in proposed NI 31-103.

In order to develop a uniformity of practice across the country, a proposed revision to Dealer Member Rule section 18.7 will add a requirement for IRs and RRs restricted to mutual funds business to complete the necessary proficiency requirements to conduct full retail securities business within 270 days of initial approval, and to complete an upgrade to full retail or institutional business within a 18 months of initial approval. The 18 months provides time to complete the 6 month internal training program required for to conduct full retail business. Thereafter such persons will be required to complete the post-licensing requirements relevant to full retail or institutional business.

Because it would be unfair to force an upgrade on those already employed at Dealer Members who joined them with the intention, compatible with the rules at the time, of limiting their business to mutual funds only, the proposed revisions include a grandfathering provision for those restricted to mutual funds business on the effective date of the proposed amendments who are registered only in Provinces permitting the permanent restriction for employees or agents of Dealer Members.

Dealer Member Rule sections 18.8 and 18.9 establish approval categories that will not longer exist. They will therefore be repealed.

Dealer Member Rule section 18.11 is a statement of the Corporation's jurisdiction over RRs and IRs and their obligation to comply with the Rules and Rulings of the Corporation. It requires that an RR or IR cease acting as an RR or IR of a Dealer Member if their approval is revoked. It will be subdivided and rewritten to eliminate references to employment, since some RRs and IRs are agents rather than employees. However, the import of its provisions remains unchanged.

Dealer Member Rule section 18.13 requires the Corporation to give notice to all recognized stock exchanges and securities commission in Canada of approvals and terminations of approval of RRs and IRs. It has been rendered obsolete by the National Registration Database, to which all SRAs have access, and the transfer of member regulation functions from the stock exchanges to the Corporation. It will therefore be repealed.

Dealer Member Rule section 18.14 governs outside business activities of Approved Persons. Under the proposed rule changes, subsection (b) will be repealed. It requires that a Dealer Member acknowledge in writing its responsibility to supervise RRs or IRs with outside business activities. This section is unnecessary. A Dealer Member's duty to supervise RRs and IRs flows from its general supervision obligations and an acknowledgement is superfluous.

Dealer Member Rule section 18.15 prohibits RRs and IRs from accepting compensation from anyone other than their Dealer Member sponsor or its affiliates or related companies "in connection with the sale or placement of securities on behalf of" the Dealer Member or its affiliates or related companies. The reference to "sale or placement of securities" will be changed to "securities-related activities" so as to capture all activity, such as trading advice and financial planning, that is related to securities advice but is not directly the sale or placement of securities.

Dealer Member Rule section 18.16 limits the use of titles for RRs and IRs. When originally passed it proposed the use of the term "investment advisor" for RR's, but was rejected by some SRAs because of possible confusion with their Advisor registration category. It was then changed to use the terms "registered representative" and "investment representative" but has never been implemented because doing so would cause unnecessary cost and confusion at firms that use other designations. The proposed amendments change the section to a prohibition against using a designation that wrongly indicates that the RR or IR has been approved to or does conduct a type of business or fulfills a role requiring approval by the Corporation. An example would be calling an RR an "investment manager" when the RR is not qualified to manage client portfolios on a discretionary basis.

Dealer Member Rule section 18.17 permits an RR or IR to use a designation for which he or she has been approved under the Rules of the Corporation. The changes to section 18.16 noted above make it redundant and it will be deleted in the proposed amendments.

Dealer Member Rule 20

Dealer Member Rule 20 gives District Councils authority to grant initial Approval of individuals at a Dealer Member and their transfer to another Dealer Member.

Proposed amendments to Dealer Member Rule section 20.18 change the references to categories of approval to the new categories.

Proposed amendments to Rule 38 make appointments to the positions of Ultimate Designated Person, Chief Financial Officer and Chief Compliance Officer subject to Corporation. A proposed amendment to Rule 20.18(1) adds the granting of those approvals to the District Councils' authority.

The proposed amendments also remove references to the power of District Councils to grant applications for transfer. Changes to National Instrument 33-109 which are part of the CSA Registration Reform proposals will make transfers of SRA registration automatic provided that an application for transfer is made within 90 days of the termination of the individual's registration at another registered firm and there is no change of registration category. Proposed amendments to Dealer Member Rule 40 will make Corporation's transfer process consistent with that of the NI 33-109 revisions.

Proposed new section 20.18(3) gives District Councils the explicit authority to place conditions on the current approval of an Approved Person where it finds those conditions to be appropriate and in the interest of the public. This authority was inadvertently taken out of IDA By-law 20 during a previous revision.

The need for the Corporation to have the authority to impose conditions on an Approved Person is increased under the CSA Registration Reform proposals because individual transfers from one Dealer Member to another will be automatic on filing, within 90 days of termination from another Dealer Member, of an application to join a new Dealer Member. The Corporation needs the authority to impose terms and conditions if it discovers from a termination notice regarding a transferred Approved Person that there were problems at a previous firm giving cause to impose a condition such as strict supervision.

The proposed amendment will give a District Council the same authority to delegate the power in section 20.18(3) to a Sub-Committee as it has with the authorities to approve, refuse or impose conditions on an approval application.

A proposed amendment to section 20.19 makes it clear that Corporation staff or the Approved Person involved can appeal any decision under Rule 20.18, including a decision to impose conditions on an existing approval. It has been established through a Hearing Committee decision at the IDA that the individual has a right to be heard when the Registration Staff proposes to recommend conditions on an approval. That right is exercised through an opportunity to make written submissions.

Dealer Member Rule 29

Dealer Member Rule 29 includes a variety of provisions regarding business conduct.

Dealer Member Rule section 29.7 sets content and supervision standards for advertising, sales literature and correspondence of Dealer Members.

Dealer Member Rule sub-section 29.7(3) requires the appointment of partners, directors, officers or branch managers to review certain types of advertising, sales literature and correspondence prior to use. The proposed revisions will require the designation of one or more Supervisors to pre-approval each type of material. More than one Supervisor may be necessary because such material can be issued in multiple locations, to different types of clients and covering different types of products or trading. It is therefore appropriate to allow Dealer Members to appoint different Supervisors to accommodate differences in the material or location.

Dealer Member Rule section 29.27 outlines requirements on Dealer Members to supervise their business activity in a way reasonably designed to achieve compliance with laws and regulations, including the Corporation's, governing their securities and futures business.

The change in the proposed amendments in the direction of a more principles-based approach makes it appropriate to include the broad provisions regarding Dealer Member's compliance and supervision infrastructure in one place. The revisions therefore propose repealing section 29.27 and moving its provisions into an expanded Dealer Member Rule 38, which contains the high-level structural and accountability requirements, including the appointment of the UDP, CFO and CCO and the involvement of the Dealer Member's Board of Directors (or similar body) in its compliance system.

Dealer Member Rule 38

As noted above, the proposal includes the movement of current Dealer Member Rule section 7.5 regarding the Chief Financial Officer and Dealer Member Rule section 29.27 regarding general supervision requirements into Dealer Member Rule 38 to make Rule 38 a general regulation regarding compliance and supervision. The combined rule proposal is reorganized.

Dealer Member Rule 38 contains sections outlining the general duties of the Ultimate Designated Person (UDP) and Chief Compliance Officer (CCO). In order to make the description of the Chief Financial Officer role consistent, a new subsection 38.6(c) is added in the proposed amendments, setting out the general obligation of the Chief Financial Officer to ensure that the Dealer Member monitor adherence to the Dealer Members policies and procedures to provide reasonable assurance that the Dealer Member meets the financial rules of the Corporation.

The proposed changes include the following changes to the requirements currently in Dealer Member Rule section 29.27, both to ensure the adequacy of supervisory records maintained by Dealer Members:

• A provision in Dealer Member Rule subsection 38.1(v) requiring that Dealer Members keep records of the assignment of supervisory responsibility has been changed to include recording of the scope of the responsibility assigned;

• A new Dealer Member Rule subsection 38.4(b)(iv) in the section regarding delegation of functions. It will require that the Dealer Member record the terms of the delegation and the follow-up and review done to ensure that the delegate is properly conducting the delegated function.

A new Dealer Member Rule section 38.3 will establish the requirement from all Supervisors to be Approved by the Corporation. To ensure an onus on all parties, it will prohibit anyone from acting as a Supervisor and a Dealer Member from permitting any person to act as a Supervisor without the approval of the Corporation.

Proposed NI 31-103 limits eligibility for appointment as Ultimate Designated Person (UDP) to the Chief Executive Officer or someone holding a similar position. In order to make Dealer Member Rule 38 consistent with that limit, the proposed amendments will remove from Rule 38 the eligibility of the Chief Operating Officer or Chief Financial Office to occupy the UDP position.

Appointments to the UDP and Chief Compliance Officer (CCO) position are currently done by the Dealer Member with notice to the Corporation. Under proposed NI 31-103 they will be registration categories subject to an application process. As two critical roles in a Dealer Member's compliance system, it is appropriate that those appointed to them go through an application and approval process. The proposal therefore amends Dealer Member Rule 38 to require approval by the Corporation of both the UDP and CCO.

The current requirement is for the CCO to be an Alternate Designated Person (ADP), but the proposed amendments eliminate that category. The proposed amendments will therefore require that the CCO be an Executive.

Although not included explicitly in proposed NI 31-103, the SRAs have indicated that they are prepared to allow a registered firm to have more than one UDP and/or CCO where the firm is separated into distinct businesses having different reporting lines up to the Board level. The proposed amendments will continue to permit the appointment of more than one UDP and CCO under those circumstances, but will make doing so subject to approval by the Corporation so that Corporation and SRA staff can maintain consistency regarding the circumstances in which allowing more than one UDP and/or CCO is permitted.

As noted above, the Alternate Designated Person category is eliminated in the proposed amendments. Current ADPs will become Supervisors. The proposed amendments to current Dealer Member Rule section 38.6, moved in the amendments to section 38.2, will:

• Change the references to ADP to Supervisor.

• Add a general statement that a Dealer Member needs to appoint enough Supervisors to meet the goal of compliance with applicable laws and regulations.

• Add a requirement that the Dealer Member take reasonable steps to ensure that Supervisors understand the businesses they are supervising, including a minimum requirement that they meet the applicable proficiency requirements of Dealer Member Rule 2900.

Current Dealer Member Rule section 38.10 requires that ADPs report to the UDP as necessary. Supervisory structures will vary between firms depending on their size and the nature of their business. While all Supervisors may ultimately report to the UDP, section 38.10 implies a more direct reporting relationship that may be the case or may be necessary. The proposed amendments therefore include the repeal of current section 38.10.

Current Dealer Member Rule section 38.11 requires an annual compliance report to the Board by the CCO. The proposed amendments will add a requirement in Dealer Member Rule subsection 38.7(h), consistent with requirements in proposed NI 31-103, that the CCO have access to the UDP and Board at other times to report significant issues requiring their attention.

A proposed amendment to current Dealer Member Rule section 38.9, renumbered 38.8 in the proposed amendments, will require that the Board of a Dealer Member, or its equivalent, maintain records of the actions it decides to take in response to the annual compliance report and its monitoring to ensure that those actions are carried out.

Dealer Member Rule 40

Dealer Member Rule 40 sets out the requirements for filing of applications for Approval and notices related to Approval or changes in information regarding Approved Persons through the National Registration Database (NRD).

Many of the changes of category under the current rules will become changes of business type under the proposed amendments. They will become matters for filing notice rather than requiring an application and approval. The proposed amendments therefore include additions to Dealer Member Rule section 40.4, which deals with changes of category, to include notification through NRD of changes in business type. The amendments will require Dealer Members to ensure that the Corporation has received notice through NRD that the individual has completed the proficiencies (or received an exemption from them) necessary to conduct the new type of business. In some cases the individual may have completed them in the past, so no new notice will be required. In others the Dealer Member will be required to ensure that a notice that the person has met the proficiency requirements is filed at the same time as the notice of change in business type.

Under the proposed amendments, Dealer Member Rule 4 will no longer contain requirements regarding the approval of branch offices. However, the Corporation will continue to require information on the locations in which a Dealer Member conducts business with the public. Proposed amendments to Dealer Member Rule 40 therefore refer to "business locations" instead of branch or sub-branch offices and will require that Dealer Members notify the Corporation through NRD of the opening or closing of business locations.

Dealer Member Rule subsections 40.1(17) and (18) and sections 40.10 and 40.13 are transitional provisions. As the transitional phases that they governed are now over, they are no longer necessary and will be repealed by proposed amendments.

Dealer Member Rule 1300

The proposed changes to Dealer Member Rule 1300 presuppose the approval and implementation of the proposed new account application guidelines in Dealer Member Rules 2500, 2700 and 3200 which are currently awaiting CSA approval.

Dealer Member Rule section 1300.2 will be amended to change references to a designated partner, officer or director to a designated Supervisor having overall responsibility for the opening of new accounts. A new subsection will permit a Designated Supervisor for each of retail business, institutional business and suitability-exempt discount business

The current requirements permit branch managers to approve the opening of new accounts. The proposed revisions will change this to Supervisors designated in the firm's policies and procedures. The section will also specify that the approval must be recorded.

The definitions in Dealer Member Rule section 1300.3 of "associate portfolio manager" and "futures contracts portfolio manager" will be repealed as they refer to categories that are being eliminated. The definition of "portfolio manager" will changed to refer to an RR that has discretionary authority over managed accounts. These changes reflect the change from portfolio manager being a separate category to portfolio management being a separate service or type of business that qualified RRs can conduct.

Dealer Member Rule section 1300.4 provides for controls on discretionary accounts. The proposed amendments include a new requirement to designate a Supervisor to be responsible for discretionary accounts, who must approve each discretionary account and record that approval. A proposed amendment to Dealer Member Rule section 1300.6 will place special supervision responsibilities on the Designated Supervisor. Currently no specific supervisor needs to be designated for discretionary accounts; the approval and supervision roles fall to the partner, director or officer designated in Dealer Member Rule section 1300.2 as responsible for the opening and supervision of all accounts. While in some firms one person may be designated to fulfill both roles, it is important that there be specific designation of responsibility for discretionary accounts because of the additional risks of those accounts.

Another addition to Dealer Member Rule section 1300.4 will specify that a representative can only exercise discretionary authority over an account at his or her Dealer Member.

Proposed amendments to Dealer Member Rule subsections 1300.5(e) and 1300.8(d) will eliminate outmoded requirements to use prepaid mail to deliver notices.

A proposed amendment to Dealer Member Rule section 1300.7 governing managed accounts will eliminate a reference to approval of a portfolio manager. The section will continue to refer to "portfolio manager," but will be a defined term in the Rule rather a separate Approval category. A proposed amendment to subsection (c) will require that the approval of managed accounts by a Supervisor be recorded.

Dealer Member Rule sections 1300.9 through 1300.13 provide for portfolio manager categories that are eliminated under the proposed new category structure. They are therefore repealed in the proposed amendments.

References in Dealer Member Rule section 1300.15 to designated partners, officers, directors or futures contract principals will be replaced by the proposed amendments with references to Supervisors.

The current registration categories include "Associate Portfolio manager." An Associate Portfolio Manager must be supervised by a full Portfolio Manager for two years before he or she is eligible to become a full Portfolio Manager. The proposed amendments make portfolio management a service rather than a registration category.

A new Dealer Member Rule subsection 1300.15(c) will replace the Associate Portfolio Manager with a supervision requirement. It will require that a person who has not previously provided portfolio management to clients for at least two years with a Dealer Member, a Provincially registered Advisor or a government-regulated institution (for example a trust company) must be supervised by another portfolio manager who is not under such supervision or by a Provincially registered Advisor under contract. The latter option is necessary because in smaller centres it can be difficult for Dealer Members wanting to provide portfolio management to hire a qualified person to provide the management or supervise those attempting to qualify to provide portfolio management.

Dealer Member Rule section 1300.15 requires a Dealer Member having managed accounts to establish a committee to conduct an annual review of its policies and procedures to supervise managed accounts. An amendment to this provision will require that the Chief Compliance Officer be a member of this committee because of the Chief Compliance Officer's overall responsibility for monitoring the effectiveness of the Dealer Member's policies and procedures.

Dealer Member Rule 1800

The proposed changes to Dealer Member Rule 1800 will change references to futures contracts and futures contracts options principals to Supervisors as the current categories will no longer exist. They will also consolidate the provisions regarding futures contracts and futures contracts options, which are identical, into one section instead of listing the provisions separately with regard to the two products.

Current Dealer Member Rule subsections 1800.2(e)(1) and (f)(1) require that a Dealer Member have at least two people approved to trade, respectively, the futures contracts and futures contracts options available at every office where they are traded. This provision is designed to ensure that, because of the volatility and high leverage of futures contracts and futures contract options, customers can at all times during trading hours get access to a person who can give them advice or take and enter orders.

However, with modern communications systems it is unnecessary that there be two persons physically located in the same office in order to provide the necessary back-up. The proposed revisions will therefore replace the sections with a requirement (in revised Dealer Member Rule subsection 1800.2(e)) that the Dealer Member ensure that clients have access at all times during normal business hours to an IR or RR qualified to trade in or advise on futures contracts or futures contracts options.

Current Dealer Member Rule subsection 1900.2(e) requires the delivery of a disclosure statement regarding options that is in compliance with securities legislation. As the Corporation approves such document as they change, the rule will be amended to refer to a disclosure document approved by the Corporation.

Dealer Member Rule section 1800.5 outlines the supervisory duties of the designated futures contracts principal, a category being eliminated. None of the specific duties varies from general supervisory responsibilities outlined in the proposed amendments to Dealer Member Rule 38 and the specific duties outlined in proposed Dealer Member Rule section 1800.2; therefore section 1800.5 is repealed in the proposed amendments.

Dealer Member Rule section 1800.6 governs suitability requirements in dealings with registered advisers, dealers, acceptable institutions and acceptable counterparties. As these requirements are dealt with in proposed NI 31-103 and Dealer Member Rule 2700, the section is redundant and is repealed in the proposed amendments.

Dealer Member Rule subsection 1800.11(b) requires the retention of completed orders for six years. The proposed revisions change this to seven years to make the requirement consistent with the records retention requirements of NI 31-103.

Dealer Member Rule 1900

Dealer Member Rule 1900 governing options trading will be amended to change references to options approvals. Options activity will be a type of business and involvement in it a matter of notice. Specifically, the amendments will replace references to the "registered options principal," currently an Approval category, with "Supervisor qualified to supervise options trading."

Current Dealer Member Rule subsection 1900.2(e) requires the delivery of a disclosure statement regarding options that is in compliance with securities legislation. As the Corporation approves such documents as they change, the rule will be amended to refer to a disclosure document approved by the Corporation.

Dealer Member Rule section 1900.4 reiterates account opening and supervision requirements covered in Dealer Member Rules 1300, 2500 and 2700. It will therefore be repealed in the proposed amendments.

Dealer Member Rule section 1900.7 states that other Corporation rules regarding trading and advising in securities apply, as appropriate, to options trading and advising. Those rules apply without the need of an additional rule; therefore the section is repealed in the proposed amendments.

Dealer Member Rule 2500

The proposed changes to Dealer Member Rule 2500 will change it from a prescriptive delineation of required structures and procedures for the supervision of retail accounts to principles-based guidelines. However, the structures and procedures established in the current Rule 2500 will continue to work for many multi-branch retail firms. The proposed amendments to Rule 2500 will therefore include the currently prescribed two-tier structure of branch and head office supervision as one that will meet the requirements of the Rule, but not as the only option.

As with the current Rule 2300, the proposed revisions will include reiterations of some of the principles and requirements regarding supervision found in other Rules. Dealer Members have found that including them in one place with the guidelines found only in Rule 2500 make it a more useable resource.

The proposed revisions presume that the repeal of Part VIII -- Client Complaints passed by the IDA Board on October 17, 2007 will have been implemented prior to the implementation of the proposed changes.

Dealer Member Rule 2500 -

Introduction

The last paragraph of the introduction will be deleted. It presumes the current prescriptive requirements of Dealer Member Rule 2500, but gives Dealer Members the option of developing alternative supervision systems with the approval of the Corporation. It is no longer applicable because of the change from the prescriptive branch/head office structure to a principles-based approach. Dealer Members will be permitted to develop their own supervisory structures, subject to the principles enunciated in Dealer Member Rule 38 and guidelines in the revised Rule 2500, but will not require advance approval to implement them. Instead, they will be reviewed in operation during business conduct examinations.

Part I -- Establishing and Maintaining Procedures, Delegation and Education

A proposed amendment to Dealer Member Rule 2500, Part I, section A.2 will replace a statement that new and amended policies should have senior management approval to a statement with a requirement to have a procedure for approving new policies and procedures. It will state that those have a significant impact on the Dealer Member' compliance system should have senior management approval. This change will give Dealer Members the option of having minor changes approved at lower levels in the organization.

Dealer Member Rule 2500, Part I, section .B.1 requires the maintenance of evidence of account reviews that are part of a Dealer Member's compliance process. Because record-keeping is critical to an effective system and the Corporation's review of the system, the requirements in subsection I.B.1 will be moved into a new record-keeping section: I.F.

The new Dealer Member Rule 2500, Part I, section F adopts the record retention requirement of NI 31-103. Account review records will be considered "activity records" under the terms used in NI 31-103 and must therefore be kept for seven years from the date of creation, in a form in which they can be provided to the Corporation promptly for two years and within a reasonable time for the rest of the retention period.

Proposed Dealer Member Rule 2500, Part I, section C is new. It will provide for a risk-based approach to selecting accounts for review and gives examples of the factors that can be taken into account in a risk-based analysis. The current Rule 2500 uses only commission amount as a basis for account selection. Commission level does not take into account such factors as size of account. The same commission level can mean little for a very large account and a great deal for a small one or one trading in derivatives where the commission may be small in relation to the risk. While not mandatory, a well-designed risk based approach can develop a better focus on accounts requiring review.

Subsections 2 and 3 of the proposed new Dealer Member Rule 2500, Part I, section C establish requirements for a risk-based approach, including documentation of the analytical approach and its consistent application across retail accounts. This does not mean that a Dealer Member will be required to use a single-factor analysis. For example, a Dealer Member might have different analyses or triggers for the review of equities-only or derivatives accounts, but the Dealer Member will be required to apply those analyses or triggers consistently across accounts of a similar type within its analytical framework.

Proposed Subsection 4 of new Dealer Member Rule 2500, Part I, section C is an expansion of current section I.B.3. It will require enhanced supervision of "Approved Persons who have had a history of questionable conduct." The proposed revision adds examples of what should be considered as "questionable conduct."

A proposed change to current Dealer Member Rule 2500, Part I, subsection D.1, renumbered E.1 in the proposed revisions, will change the requirement to provide sales policies and procedures to all sales and supervisory personnel. It will limit the requirement to those policies and procedures relevant to the individual's function. A similar relevance criterion is added to proposed subsection I.E.3 regarding communication of the information contained in compliance-related bulletins. In addition, the proposed revision will explicitly accept access to policies and procedures maintained on electronic systems as one method of providing them, but with the proviso that personnel must be trained on the use of the electronic systems.

Part II -- Opening New Accounts

The proposed revisions will change references to account application forms throughout Dealer Member Rule 2500 by dropping the word "forms" to recognize that account applications are frequently completed electronically. They will also change references to "branch manager" to "Supervisor."

The proposed amendments to Dealer Member Rule 2500, Part II contain a new paragraph in the introduction referring to gatekeeper obligations. It will explicitly require Dealer Members to ensure that their know-your-client procedures are directed at meeting gatekeeper obligations by identifying clients that present a high risk to the Dealer Member or the securities markets. It also makes reference to anti-money laundering and terrorist financing requirements, one important and specific type of gatekeeper obligation to which Dealer Members are subject.

Current Dealer Member Rule 2500, Part II, section A.1 requires that a Dealer Member complete a New Account Application Form for each account. A proposed revision will change the requirement to completing an account application for each customer. The proposed revision will make it clear that an additional application will not have to be completed if the same customer opens another account, unless a separate application is specifically required.

A proposed amendment to Dealer Member Rule 2500, Part II, subsection A.2 on approval of new accounts adds a new requirement to restrict a new account to liquidating trades if an account application received for approval after the first trade is not fully completed. The Corporation staff believes that this is a necessary control to prevent ongoing trading by accounts that have not been properly documented and approved. It is consistent with a revision to the anti-money laundering rules that prohibits a Dealer Member from trading for a new client until the client's identity has been verified.

Dealer Member Rule 2500, Part II, subsection A.4 currently requires that the RR maintain a copy of the new account forms of his or her clients. A proposed amendment will modernize the requirement by stating that this requirement can be met by maintaining the information on the form in an electronic form accessible to the RR.

Dealer Member Rule 2500, Part II, subsection A.5 requires RRs to update new account information when there is a material change. Proposed amendments will specify controls on the processes for updating information that the Corporation already requires Dealer Members to implement as part of a proper internal control system. These are:

• Restricting access to electronic systems containing customer information so that it is not changed without proper approval, currently required in subsection II.C.1, and

• Having procedures independent of the RR to verify material changes in customer information such as change of address, financial situation, investment objectives or risk tolerance.

Proposed new Dealer Member Rule 2500, Part II, subsection B.2 will support client agreement requirements found elsewhere in the rules in terms of a requirement to have systems and procedures to prevent trading before the required agreements have been obtained from the client.

Part III -- Account Supervision Generally [New]

Proposed Dealer Member Rule 2500, Part III is a new section that will provide guidance on determining how to meet the general supervision requirements in proposed Dealer Member Rule section 38.1. It encapsulates the considerations informing the current prescriptive requirements and includes guidelines on supervision of retail business in locations remote from Head Office. The guidance applies to supervision of trading in all instruments.

Dealer Member Rule 2500, Part III, section A sets out guidelines for establishing a supervisory structure:

• Taking all necessary factors into account in designing a supervisory structure and appointing supervisors.

• Ensuring proper supervision of remote business locations through the assignment of a specific Supervisor, an analysis of the need for a resident Supervisor and, where there is no resident Supervisor, the necessity for periodic visits to the location by the assigned Supervisor.

• Independent supervision of a Supervisor's handling of his or her own client accounts;

• Ensuring that a Supervisor with other duties devotes sufficient time and attention to Supervision.

• Ensuring that Supervisors are qualified to supervise trading in all products and provision of all services by those under his or her Supervision. The guideline notes that it is possible to split supervisory duties provided there is adequate communication between the Supervisors involved, an overall view of the client's situation and clear assignment of responsibilities.

• Ensuring that Supervisors have the necessary information.

• Ensuring proper back-up during a Supervisor's absence.

• Providing oversight to ensure that Supervisors are properly fulfilling their assigned roles.

• Ensuring that Supervisors have the necessary authority to take appropriate remedial action. This provision notes that escalation to a more senior Supervisor or Executive is an acceptable form of action.

Dealer Member Rule 2500, Part III, section B sets out guidelines regarding supervision of retail account activity including possible methods of conducting reviews and the scope of matters to be looked for.

Part IV -- Two-Tier Supervision

Dealer Member Rule 2500 currently prescribes a two-tier system of supervision requiring Branch Office (Part III) and Head Office (Part IV) daily and monthly reviews of account activity. While its current form is not in keeping with a more principles-based approach to supervision, it is a good system that many Dealer Members may wish to keep. The proposed amendments therefore retain in large part Parts III and IV so that those firms that choose to retain such a system have assurance that it continues to meet the requirements of the Corporation. The two parts are conjoined in a new Part IV and revised to refer to first and second level reviews rather than branch and head office reviews.

The proposed Dealer Member Rule 2500, Part IV is less prescriptive. The introduction notes, for example, that the first level review can be conducted by head office or on a regional basis. The sections on selecting accounts for monthly review allow for alternative selection criteria, while leaving the current prescribed criteria as one choice that meets the guidelines.

Part V -- Option Account Supervision

Proposed revisions to Dealer Member Rule 2500, Part V will remove references to the category Designated Registered Options Principal, which will be merged into the general Supervisor category. It will introduce the term "Designated Options Supervisor" for ease of reference to the Supervisor required to be designated in the proposed revisions to Dealer Member Rule section 1900.2.

Current Dealer Member Rule 2500, Part V, subsection A.4 notes that the DROP must indicate trading restrictions on the option account application form. The proposed revision will remove the reference to the DROP and expand on the nature of these restrictions, giving as their purpose the prevention of the use of strategies that are not in keeping with the customer's investment objectives or risk tolerance.

The proposed revision is less prescriptive than the current version, permitting a Dealer Member to develop its own criteria to select activity for review. However, with one exception it adopts the current criteria for branch and head office reviews as meeting the requirements of the Rule. The exception is the selection of accounts for monthly review. At present Part V permits use of the same criteria as for head office review of non-options accounts. Because of the high leverage of options, the commission-level criteria may not be appropriate for accounts that concentrate in options trading and the proposed revision therefore suggests the development of alternate criteria for such accounts.

Current Dealer Member Rule 2500, Part V, section D requires the involvement of the DROP in establishing specific procedures related to options accounts. The section has been rewritten in the proposed revisions to require implementation of the same procedures without specific prescribing that the designated options supervisor be responsible for the conduct of those procedures.

Part VI -- Futures/Futures Options Account Supervision

Proposed amendments to Dealer Member Rule 2500, Part VI will remove references to the category Designated Registered Futures Principal, which will be merged into the general Supervisor category. The proposed amendments introduce the term "Designated Futures Supervisor" for ease of reference to the Supervisor required to be designated in Dealer Member Rule section 1800.2.

Dealer Member Rule 2500, Part VI, subsection A.5 currently requires that the DRFP indicate trading restrictions on the futures account application form. The proposed amendments will remove the reference to the DRFP and expand on the nature of those restrictions, giving as their purpose the prevention of the use of strategies that are not in keeping with the customer's investment objectives or risk tolerance.

New Dealer Member Rule 2500, Part VI, subsection A.5 will expand on requirements regarding loss limits. Current Dealer Member Rule 2500, Part VI, subsection B.1 requires supervisors to look for cumulative losses exceeding the customer's stated risk capital. However, some Dealer Members do not have systems that can track cumulative losses beyond a year. In those cases, Dealer Members have adopted an annual risk limit, to be updated annually taking into account any losses during the previous year. This alternative approach will be recognized in the new section.

Current Dealer Member Rule 2500, Part VI contains no specific criteria establishing what must be reviewed at the branch or head office or for selecting accounts for review. The proposed amendments will require a system reasonably designed to detect improper activity, and will include the current list of examples of improper activity that supervision should identify

Current Dealer Member Rule 2500, Part VI, section C requires the involvement of the DRFP in establishing specific procedures related to discretionary futures accounts. The proposed amendments will require implementation of the same procedures without prescribing the Designated Futures Supervisor's role in the regular conduct of those procedures. It will also be expanded to include other necessary procedures, generally parallel to those in Part V on options, re-named "Other Futures Policies and Procedures."

Part VII -- Discretionary Account Supervision

The proposed amendments to Dealer Member Rule 2500, Part VII eliminate references to categories being eliminated.

Current Dealer Member Rule 2500, Part VII includes both discretionary and managed accounts. However, Dealer Member Rule 2500, Part VII, section E on managed accounts is solely a reiteration of the requirements of Dealer Member Rule 1300. The proposed revisions will therefore delete section VII.E and deal solely with discretionary accounts.

Current Dealer Member Rule 2500, Part VII, section A.3 states that an Approved Person cannot have discretionary authority over an account anywhere else than at his/her Dealer Member. This provision is in place in Dealer Member Rule 1300 and follows from registration requirements, so will be deleted.

A proposed new Dealer Member Rule 2500, Part VII, section A.3 will require that discretionary accounts be identified in a Dealer Member's books and records in a manner that ensures they can be supervised. It will not prescribe the method used. This proposed requirement flows out of supervisory necessities in any event, but has been an occasional point of contention during business conduct examinations and will therefore be added for clarity.

Dealer Member Rule 2700

Several proposed amendments to Dealer Member Rule 2700 are technical. One will remove a reference to Dealer Member Rule section 29.27, which under the proposed amendments will become part of Dealer Member Rule 38. Two others will replace references to partners, directors or officers with references to Supervisors.

The proposed amendments will delete the definition of "Institutional Customer" in Dealer Member Rule 2700 as it will be added to Dealer Member Rule section 1.1.

Proposed National Instrument 31-103 contains a definition of and suitability exemption regarding "permitted clients." It contains the same general suitability exemption regarding trades for financial institutions and other registered entities as currently included in Dealer Member Rule 2700, but adds a suitability exemption for other "permitted clients" that sign a suitability waiver. A proposed amendment to Rule 2700 will include the suitability waiver approach for "permitted clients" as defined in NI 31-103, other than:

• those to which the exemption for financial institutions and dealers already applies, and

• individuals. Proposed NI 31-103 includes some individuals in the definition of "permitted client" based on an asset test, whereas the definition of "institutional customer" in current Dealer Member Rule 2700, proposed to be moved into Dealer Member Rule section 1.1, excludes individuals.

The Corporation staff does not believe that it is appropriate to grant a suitability waiver option to individuals.

Dealer Member Rule 2900, Part I

The proposed amendments to Dealer Member Rule 2900, Part I include technical amendments such as the replacement of the term "registered" with "approved" and of "Canadian Securities Institute" with "CSI Global Education Inc." They will not change the proficiency requirements except where specifically noted below, but will change references to how the requirements apply that mirror the changes in the category structure. For example, the proficiency requirements currently referring to portfolio managers in the current Dealer Member Rule 2900, Part I refer in the proposed amendments to Representatives who conduct discretionary portfolio management.

Currently Dealer Member Rule 2900, Part I, section A.1 deals with branch managers and sales managers. Under the proposed amendments it will apply to Supervisors who supervise Approved Persons. It will retain the specific course requirements related to different kinds of business, which will be moved into the section on Supervisors from the current product-related sections. It will remove the requirement for Supervisors of branches in which options business is conducted to do the proficiencies for options supervision. This change will permit Dealer Members to develop alternative means of supervising options business where a resident Supervisor is not qualified to supervise it, subject to the general provisions of Dealer Member Rule 2500 regarding supervisory systems.

The proposed amendments will make Dealer Member Rule 2900, Part I, section A.2 applicable only to Directors and Executives, not to all partners and officers. The section will continue, with appropriate reference changes, to make it clear that Directors and Executives must also meet the proficiency requirements for other approved positions they hold, including RR or IR for trading or advising customers and Supervisor for directly supervising others. The Director and Executive categories deal solely with the overall management of the firm.

Proposed amendments to Dealer Member Rule 2900, Part I, section A.6 regarding portfolio managers will remove the current requirements for the current associate portfolio manager categories. As noted above, the category will be replaced by a supervision requirement in revised Dealer Member Rule 1300.15(c).

Rule 2900, Part II

Dealer Member Rule 2900, Part II on course and examination exemptions has been rewritten extensively in the proposed amendments without changing its requirements. The most significant change is to the re-writing requirements, in the form of the reduction of an exhaustive list of categories with numerous exemptions for current and re-applying Approved Persons to two general requirements in proposed part A. In summary, the courses of a person who has been Approved in a category under the current categories, or conducted a type of business under the new approach, will remain valid for three years after their approval lapses or they cease to do the type of business.

If a person completes required courses but never obtains approval in a category or, in the new system, does the type of business, the course validity will expire after two years.

A new general exemption is proposed for both the writing and re-writing sections of Dealer Member Rule 2900, Part II. It will exempt Approved Persons from having to fulfill new requirements not in place when they were approved unless the rule implementing the change specifically requires them to do so. This is necessary so that every course change is not applied to those who are already qualified to do the type of business or hold the category covered by the change. It will also exempt applicants whose approval has lapsed but are re-applying for approval while their previous courses are still valid under the re-write requirements. This will not change the current requirements.

B Comparable Rules in Other Jurisdictions

The proposed rules are designed to conform to the rules and principles of the Registration Reform Project and particularly NI 31-103. Rules in other jurisdictions including Australia, the United Kingdom and the United States were reviewed and considered in developing the CSA Registration Reform Proposals. They were not considered further in developing the IIROC rule proposals, which do not deviate from the principles of the larger project.

C Alternatives Considered

No other alternatives were considered.

D Systems Impact of the Amendments

Implementation of the proposed amendments will require changes to the NRD System. These changes are under development by the NRD operator in coordination with the changes necessary to implement NRD changes related to the CSA Registration Reform Project.

E Public Interest Objective

IIROC has determined that the proposed amendments are Public Comment Rule changes.

According to the Joint Rule Review Protocol for IIROC (the "Protocol), forming part of the Memorandum of Understanding regarding oversight of IIROC, the Corporation must provide "a concise statement, together with supporting analysis, of the nature, purpose and effect of the proposed Rule." Statements have been made elsewhere as to the nature and effects of the proposed Rule, as well as analysis. The purposes of the proposed Rule are to:

• promote the protection of investors;

• foster fair, equitable and ethical business standards and practices;

• promote just and equitable principles of trade and the duty to act fairly, honestly and in good faith; and

• prevent fraudulent and manipulative acts and practices.

The proposed Rule does not impose any burden or constraint on competition or innovation that is not necessary or appropriate in furtherance of IIROC's regulatory objectives. It does not impose costs or restrictions on the activities of market participants that are disproportionate to the goals of the regulatory objectives sought to be realized.

F Anticipated Effective Date

IIROC anticipates that the proposed Rule will be made effective on the same date as National Instrument 31-103 and the related changes to implement the CSA Registration Reform Project. The coordination of the two sets of changes is necessary because of the significant changes in the NRD System that must be made at the same time.

III COMMENTARY

A Filing In Other Jurisdictions

The proposed Rule amendments will be filed with each of IIROC's Recognizing Regulators, in accordance with s.3 of the Protocol.

B Effectiveness

The proposed Rule amendments should be effective in ensuring Dealer Members meet minimum standards in relation to the proficiency and supervision of Approved Persons and in ensuring that they meet their obligations under the IIROC Rules and other laws and regulations affecting the conduct of their securities-related business.

C Process

The proposed Rule amendments were developed by IIROC staff after initial discussions with District Councils, the Compliance and Legal Section and the Private Client Advisory Committee. They were reviewed in draft by and technical changes were made after comments by District Councils, a special task committee of the Compliance and Legal Section and the Private Client Advisory Committee.

IV SOURCES

References:

• Proposed National Instrument 31-103, Companion Policy 31-103CP and related amendments to National Instrument 31-102 and 33-109.

http://www.osc.gov.on.ca/Regulation/Rulemaking/Current/Part3/rule_20080229_31-103_rfc-reg-req.pdf

• IIROC Dealer Member Rules 1, 4, 7, 18, 20, 29, 38, 40, 1300, 1800, 1900, 2500, 2700 and 2900 http://iiroc.knotia.ca/Knowledge/Browse/BrowseToc.cfm?kType=445&nc=12175786428220080624

V REQUIREMENT TO PUBLISH FOR COMMENT

IIROC proposes to publish for comment the accompanying proposed amendments. The IIROC Board has determined that the proposed amendments would not be contrary to the public interest. Comments are sought on the proposed amendments. Comments should be made in writing. One copy of each comment letter should be delivered within 30 days of the publication of this notice, addressed to the attention of Larry Boyce, Vice-President, Business Conduct Compliance, Investment Industry Regulatory Organization of Canada, Suite 1600, 121 King Street West, Toronto, Ontario, M5H 3T9 and one copy addressed to the attention of the Manager of Market Regulation, Ontario Securities Commission, 20 Queen Street West, 19th Floor, Box 55, Toronto, Ontario, M5H 3S8.

Those submitting comment letters should be aware that a copy of their comment letter will be made publicly available on the IOROC website (www.iiroc.ca) under the heading "IIROC Rulebook - Dealer Member Rules - Policy Proposals and Comment Letters Received").

Questions may be referred to:

INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA

AMENDMENTS TO IMPLEMENT THE REGISTRATION REFORM PROJECT

BOARD RESOLUTION

THE BOARD OF DIRECTORS of the Investment Industry Regulatory Organization of Canada hereby makes the following amendment to the Rules and Forms of the Corporation:

1. Dealer Member Rule 1 is amended by:

(a) Repealing the definitions of the terms "Designated Person", "Officer", "Sales Manager", "Senior Officer" and "Sub branch Office" in section 1.1.

(b) Repealing and replacing the definitions of the terms "Investment Representative" and "Registered Representative" in section 1.1 with the following:

"Investment Representative" means a partner, director, officer, employee or agent of a Dealer Member who trades in but does not advise on an investment product on behalf of the Dealer Member;

"Registered Representative" means a partner, director, officer, employee or agent of a Dealer Member who trades and advises on trades in an investment product on behalf of the Dealer Member;

(c) Enacting definitions for the terms "Business Location", "Designated Supervisor", "Director", "Executive", "Institutional Customer", "Retail Customer" and "Supervisor" in alphabetical order in section 1.1 as follows:

"Business Location" means a physical location at which any employee or agent of a Dealer Member conducts on a regular and ongoing basis business requiring approval of the Corporation or registration under Provincial securities legislation;

"Designated Supervisor" means a Supervisor designated by a Dealer Member as having responsibility to fulfill a supervisory role defined in a Rule, including but not limited to:

(1) the Supervisor designated to be responsible for the opening of new accounts and the supervision of account activity under Rule 1300.2

(2) the Supervisor designated to be responsible for the supervision of discretionary accounts under Rule 1300.4

(3) the Supervisor designated to be responsible for the supervision of managed accounts under Rule 1300.15

(4) the Supervisor designated to be responsible for the supervision of options accounts under Rule 1800.2(a)

(5) the Supervisor designated to be responsible for the supervision of futures contract accounts under Rule 1900.2

(6) the Supervisor or Supervisors designated to pre-approve advertising, sales literature and correspondence, including research reports, under Rule 29.7(3) and Rule 3400, Guideline 7;

"Director" means a member of the Board of Directors of, as the context dictates, a Dealer Member or the Corporation or a person performing a similar function in a Dealer Member that is not a corporation;

"Executive" means a partner, director or officer of a Dealer Member who is involved in the management of the Dealer Member, including but not limited to anyone fulfilling the role of chair or a vice-chair of the Board of Directors, chief executive officer, president, chief administrative officer, chief financial officer, chief compliance officer, member of an executive management committee or any position designated by a Dealer Member as being an Executive position;

"Institutional Customer" means:

(1) An Acceptable Counterparty (as defined in Form 1);

(2) An Acceptable Institution (as defined in Form 1);

(3) A Regulated Entity (as defined in Form 1);

(4) A Registrant (other than an individual registrant) under securities legislation; or

(5) A non-individual with total securities under administration or management exceeding $10 million;

"Retail Customer" means a customer of a Dealer Member that is not an institutional customer;

"Supervisor" means a person to whom a Dealer Member has given responsibility and authority and who is approved by the Corporation to manage the activities of other partners, directors, officers, employees or agents of the Dealer Member so as to ensure their compliance with laws and regulations governing their and the Dealer Member's securities-related activities;

(d) Enacting new section 1.3 as follows:

1.3 Where the context indicates, references to a Dealer Member include the partners, directors, officers, employees and agents of the Dealer Member.

(e) Renumbering sections 1.3 through 1.5 as sections 1.4 through 1.6.

2. Dealer Member Rule 4 is repealed and replaced by:

RULE 4

BUSINESS LOCATIONS

4.1. Every Business Location of a Dealer Member in a District having a Supervisor who is normally present at the Business Location is a Branch Office Member of the District.

4.2. There is no Membership or other fees for Branch Office Membership.

4.3. A Branch Office Member has the same privileges in its District as any other Branch Office Member except that at a District meeting each Dealer Member has only one vote no matter how many Branch Office Members it has in the District.

4.4. The representative of any Branch Office Member in any District is eligible for election as Chair or member of the District Council of the District.

4.5. Each Branch Office Member may send one or more representatives to the Annual Meeting of the District.

4.5A. Repealed.

4.6. A Dealer Member must notify the Corporation in accordance with Rule 40 of the opening or closure of a Business Location.

4.7. Repealed.

4.7A. Repealed.

4.8. Repealed.

4.9. Repealed.

4.9A. Repealed.

4.10. Repealed.

4.11. Repealed.

4.12. Repealed.

4.13. Repealed.

4.14 Repealed.

3. Dealer Member Rule 7 is repealed and replaced by:

RULE 7

DEALER MEMBER DIRECTORS AND EXECUTIVES

7.1 Definitions

For the purposes of this Rule 7, "actively engaged in the business of the Dealer Member" means, participating in any regular business activities of the Dealer Member including but not limited to trading in securities or futures contracts and related services, research, investment banking, operations or promotion of the Dealer Member's services, but shall not include participation in meetings of the board of directors or related corporate governance committees of the board of directors or occasional referrals to the Dealer Member where such referrals do not result from solicitation of business on behalf of the Dealer Member.

7.2 Approval

No person may be a Director or Executive of a Dealer Member unless that person has been approved as such by the Corporation.

7.3 Directors

(a) At least 40% of the Directors of a Dealer Member must:

(1) Either:

(A) Be actively engaged in the business of the Dealer Member and devote the major portion of their time to the securities industry, except those on active government services, or who for health reasons are prevented from such active engagement; or,

(B) Occupy positions at related or affiliated securities dealers or affiliated financial institutions that a equivalent to that of a Director or Executive;

and

(2) Have satisfied the applicable proficiency requirements in Rule 2900, Part I.A(2); and

(3) Have experience acceptable to the Corporation in the financial services industry for at least five years or such lesser period as may be approved by the Corporation.

(b) The remaining Directors, if actively engaged in the business of the Dealer Member or a related company of the Dealer Member must have the qualifications described in paragraphs 7.3(a) (1) and (2).

7.4 Executives

(a) All of the officers of a Dealer Member must:

(1) Be actively engaged in the business of the Dealer Member and devote the major portion of their time to the securities industry, except those on active government services, or who for health reasons are prevented from such active engagement; or,

(2) Be Executives or Directors of related or affiliated securities dealers, or affiliated financial institutions; and

(3) Have satisfied the applicable proficiency requirements outlined in Rule 2900, Part I.A(2);

(b) Not less than 60% of the Executives of a Dealer Member must have experience acceptable to the Corporation in the financial services industry for at least five years or such lesser period as may be approved by the Corporation.

7.5 Exemptions

The applicable District Council may grant an exemption, in whole or in part, from any requirement under Rules 7.3 and 7.4, where it is satisfied that to do so would not be prejudicial to the interest of the Dealer Member, its clients, the public or the Corporation and, in granting such an exemption, it may impose such terms and conditions as it considers necessary.

7.6 Persons Owning or Controlling a Significant Equity Interest in a Dealer Member

(a) Any Director of a Dealer Member who directly or indirectly owns or controls a voting interest in the Dealer Member of 10% or more must have the proficiency requirement outlined in Rule 2900, Part I.A(2)(a);

(b) Any person other than a Director, who is actively engaged in the business of a Dealer Member and directly or indirectly owns or controls a voting interest in the Dealer Member of 10% or more must have the proficiency requirement outlined in Rule 2900, Part I.A(2)(a).

7.7 Remuneration of Directors and Executives

No Director or Executive of a Dealer Member shall accept or permit any associate to accept, directly or indirectly, any remuneration, gratuity, advantage, benefit or any other consideration from any person other than the Dealer Member, its affiliates or related companies, in respect of the activities carried out by the Director or Executive on behalf of the Dealer Member, its affiliates or related companies in connection with the securities-related activities of any of them.

7.8 Jurisdiction

Every person whose application for approval as a Director or Executive of a Dealer Member has been accepted is subject to the jurisdiction of the Corporation, must comply with the Rules of the Corporation as they are from time to time amended or supplemented and, if such approval is subsequently revoked, must forthwith terminate his or her relationship as a Director or Executive with the Dealer Member in respect of which he or she is approved at the time of such revocation.

7.9 Late Filing Fees re Executive and Directors

A Dealer Member is liable for and must pay the Corporation fees in the amounts prescribed from time to time by the Board of Directors for the failure of the Dealer Member to file within ten business days after the end month a report in writing with respect to the conditions imposed on approval or continued approval of a Director or Executive of the Dealer Member pursuant to Rule 20.

4. Dealer Member Rule 18 is repealed and replaced by:

RULE 18

REGISTERED REPRESENTATIVES AND INVESTMENT REPRESENTATIVES

18.1. Repealed.

18.2.

(a) No person may act and no Dealer Member may permit any person to act as a registered representative or investment representative on behalf of the Dealer Member unless:

(i) The Dealer Member is registered or licensed to trade, as the case may be, in securities or futures contracts under the statutes relating to the sale of securities or futures contracts in all jurisdictions in which customers of the Dealer Member reside or is exempt from the registration or licensing requirements under those statutes;

(ii) The person is registered or licensed to trade, as the case may be, in securities or futures contracts under the statutes relating to the sale of securities or futures contracts in all jurisdictions in which customers of the person reside or is exempt from the registration or licensing requirements under those statutes; and

(iii) The Corporation has approved the person as a Registered Representative or Investment Representative under this Rule.

(b) A Dealer Member must notify the Corporation of the types of businesses which a Registered Representative or Investment Representative will conduct, as follows:

(i) Customer Type: the types of customers the Registered Representative or Investment Representative will deal with, either:

A. retail business -- taking orders from or giving advice to all types of customers regarding trades in securities, or

B. institutional business -- restricted to taking orders from or giving advice to institutional customers

(ii) Product(s): the types of financial instruments in which the Registered Representative or Investment Representative will deal, being:

A. restricted to mutual funds, Government or Government-guaranteed debt instruments and deposit instruments issued by a federally-regulated bank, trust company, credit union or caisse populaire, excluding those on which all or part of the interest or return is indexed to the performance of another financial instrument or index

B. general securities business, including equities, fixed income and other investment products other than options or futures

C. options business

D. futures contracts and futures contracts options

(iii) Portfolio Management: whether the Registered Representative will engage in discretionary portfolio management under the provisions of Rule 1300.

(c) A person may not conduct on behalf of a Dealer Member and a Dealer Member may not permit a person to conduct on its behalf a type of business described in (a) unless the Dealer Member has notified the Corporation:

(i) that the person will conduct the type of business; and

(ii) that the person has completed the proficiencies required to conduct the type of business as specified in Rule 2900, Part I within the proficiency time limits specified in Rule 2900, Part II.

For the purposes of this subsection (c), an application to the Corporation for initial Approval is notice that the person will conduct the types of business identified in the application.

18.3.

(a) An applicant for approval as a Registered Representative or Investment Representative must complete or obtain an exemption from the applicable proficiency requirements in Rule 2900, Part I, section A.3(a) before the Corporation will grant approval.

(b) A Dealer Member must take reasonable steps to ensure that all of its Registered Representatives and Investment Representatives are proficient and understand the products they trade in or advise on to a sufficient degree to meet the requirements of the Rules of the Corporation. At a minimum, the Dealer Member must ensure that all Registered Representatives and Investment Representatives meet the applicable proficiency requirements of Rule 2900.

18.4. The Approval of a Registered Representative is suspended automatically if the person fails to satisfy the requirement in paragraph A.3(b) of Part I of Rule 2900 until the person has satisfied the requirement.

18.5. Repealed.

18.6.

(a) A Dealer Member must closely supervise a Registered Representative or Investment Representative who conducts retail business in accordance with the "Registered / Investment Representative Monthly Supervision Report" as specified by the Corporation for a period of six months after the Corporation is notified that the person will deal with retail customers. The Dealer Member must keep this report for inspection by the Corporation.

(b) Subsection (a) does not apply if:

(i) the Registered Representative was previously approved for six months or more to advise on trades for retail customers for a securities firm which is a member of a self-regulatory organization or a recognized foreign self-regulatory organization; or

(ii) the Investment Representative was previously approved for six months or more to advise on trades or to trade for retail customers for a securities firm which is a member of a self-regulatory organization or a recognized foreign self-regulatory organization;

18.7.

(a) A Registered Representative or Investment Representative qualified to conduct mutual funds business only must:

(i) within 270 days of initial approval, complete the proficiency requirements in Rule 2900, Part I, sections A.3(a)(i)(A) and (B); and

(ii) within 18 months of initial approval, complete the training programme required under Rule 2900, Part I, section A.3(a)(i)(C).

(b) A Dealer Member must notify the Corporation:

(i) when a Registered Representative or Investment Representative restricted to mutual funds business only has completed the requirements in each of subsections (a)(i) and a(ii); and

(ii) within 18 months of initial approval, that the Registered Representative or Investment Representative will conduct either retail or institutional business without restriction to mutual funds.

(c) Subsections (a) and (b) do not apply to a Registered Representative or Investment Representative who was restricted to mutual funds only on the date on which this section becomes effective and who is registered only in Provinces in which a restriction on an Investment Representative or Registered Representative with a Dealer Member to mutual funds business only complies with the securities legislation, rules and policies of the Province.

18.08. Repealed.

18.09. Repealed.

18.10. Repealed.

18.11.

(a) A Registered Representative or Investment Representative of a Dealer Member is subject to the jurisdiction of the Corporation, must comply with the Rules and Rulings of the Corporation as the same are from time to time amended or supplemented.

(b) If the approval of a Registered Representative or Investment Representative is revoked, the Registered Representative or Investment Representative must immediately cease acting as a Registered Representative or Investment Representative of his or her Dealer Member.

18.12. Repealed.

18.13. Repealed.

18.14. A Registered Representative or Investment Representative may have, and continue in, another gainful occupation if:

(a)

(i) Either the Registered Representative's or Investment Representative's other gainful occupation is in a remote area where there is no office of a broker or dealer in securities and the Registered Representative's or Investment Representative's activities as such are limited to such remote area in which he or she resides; or

(ii) The securities commission in the jurisdiction in which the Registered Representative or Investment Representative acts or proposes to act as a Registered Representative or Investment Representative, or the securities legislation or policies administered by such securities commission, specifically permit him or her to devote less than his or her full time to the securities business of the Dealer Member employing him or her; and

(b) Repealed.

(c) The Dealer Member establishes and maintains procedures acceptable to the Corporation to ensure continuous service to clients and to address potential problems of conflict of interest; and

(d) Any other occupation of the Registered Representative or Investment Representative is not

(i) One which would bring the securities industry into disrepute; or

(ii) With another Dealer Member of a recognized self-regulatory organization unless

(1) Such Dealer Member is a related company of the Dealer Member employing the registered representative or investment representative and the Dealer Member and related company provide cross-guarantees pursuant to Rule 6.6, and

(2) Such dual employment is not contrary to the provisions of the applicable securities legislation or any policy made pursuant thereto.

18.15. No Registered Representative or Investment Representative may accept or permit any associate to accept, directly or indirectly, any remuneration, gratuity, benefit or any other consideration from any person other than the Dealer Member or its affiliates or related companies, for the securities-related activities her or she conducts on behalf of the Dealer Member or its affiliates or its related companies.

18.16. No Dealer Member shall permit a Registered Representative or Investment Representative to use a designation when dealing with the public that wrongly indicates that he or she conducts or has been approved by the Corporation to conduct a type of business or fulfils or has been approved by the Corporation to fulfil a role.

18.17. Repealed.

18.18. Each Dealer Member is liable for and must pay to the Corporation fees in the amounts prescribed from time to time by the Board of Directors for the failure of the Dealer Member to file within ten business days of the end of each month a report with respect to the conditions imposed under Rule 20 on the approval or continued approval of a Registered Representative, or Investment Representative of the Dealer Member pursuant to Rule 20.

20.18 Powers of District Council

(1) The District Council shall have the power, which it may delegate to a Sub-Committee of the District Council comprised of three industry members or to Corporation Staff, to:

(a) approve an application for approval as a:

(i) Supervisor under Rule 4,

(ii) Director or Executive under Rule 7,

(iii) Registered Representative or Investment Representative, under Rule 18,

(iv) Ultimate Designated Person, Chief Financial Officer or Chief Compliance Officer under Rule 38, or

(v) trader under Rule 500.

(2) The District Council shall have the power, which it may delegate to a Sub-Committee of the District Council, pursuant to subsection (1), to:

(a) approve an application for approval referred to in Rule 20.18(1)(a) subject to such conditions as may be considered just and appropriate;

(b) refuse an application for approval referred to in Rule 20.18(1)(a), if in its opinion:

(i) the Applicant does not meet any requirements prescribed by the Rules or Rulings;

(ii) the Rules and Rulings of the Corporation will not be complied with by the Applicant;

(iii) the Applicant is not qualified for approval by reason of integrity, solvency, training or experience; or

(iv) such approval is otherwise not in the public interest.

(3) The District Council shall have the power, which it may delegate to a Sub-Committee of the District Council, pursuant to subsection (1), to impose such conditions on the continued approval of an Approved Person as the District Council considers appropriate and in the public interest.

6. Dealer Member Rule section 20.19 is repealed and replaced by:

20.19 Review Hearings

(1) Corporation Staff or the Applicant may request a review of a decision under Rule 20.18 by a Hearing Panel within ten business days after release of the decision.

(2) If a review is not requested within ten business days after release of the decision, the decision under Rule 20.18 becomes final.

(3) No member of a District Council who has participated in a decision under Rule 20.18 shall participate on the Hearing Panel.

(4) A review hearing held under this Part shall be held in accordance with the Corporation Practice and Procedure.

(5) The Hearing Panel may:

(a) affirm the decision;

(b) quash the decision;

(c) vary or remove any terms and conditions imposed on approval;

(d) limit the ability to re-apply for approval for such period of time as it determines just and appropriate; and

(e) make any decision that could have been made by the District Council pursuant to Rule 20.18.

(6) No appeal shall be available from the decision of the Hearing Panel.

7. Dealer Member Rule 29 is amended by:

(a) Repealing and replacing sections 29.5 and 29.6 with the following:

29.5. Every director of a corporation any of whose securities are held by the public has a fiduciary obligation not to reveal any privileged information to anyone not authorized to receive it. Except to the extent referred to in the third paragraph of this Rule 29.5, a director is not released from the necessity of keeping information of this character to himself or herself until there has been full public disclosure of such information, particularly when the information might affect the market price of the corporation's securities. Any director of such corporation who is also a Director, Executive or Employee of a Dealer Member should recognize that his or her first responsibility in this area is to the public corporation on whose board he or she serves and that he or she must, except to the extent referred to in the third paragraph of this Rule 29.5, meticulously avoid any disclosure of inside information to the Directors, Executives, employees, customers, or research or trading departments of the Dealer Member.

Where a representative of a Dealer Member is not a director of a corporation but is acting in an underwriting or advisory capacity to such corporation and is discussing confidential matters, his or her responsibilities regarding disclosure are the same as those that would apply if such representative were a director of such corporation.

With reference to the two preceding paragraphs of this Rule 29.5, a Director or a representative, as the case may be, of a Dealer Member may consult with other personnel of the Dealer Member if a matter requires such consultation but in this event adequate measures should be taken to guard the confidential nature of the information to prevent its misuse within or outside the organization of the Dealer Member and the responsibilities of any such other personnel regarding disclosure are the same as those that would apply if such personnel were directors of the relevant corporation.

29.6. No Dealer Member or any Director, Executive or employee or shareholder of a Dealer Member shall give, offer or agree to give or offer, directly or indirectly, to any partner, director, officer, employee, shareholder or agent of a customer, or any associate of such persons, a gratuity, advantage, benefit or any other consideration in relation to any business of the customer with the Dealer Member, unless the prior written consent of the customer has first been obtained.

(b) Repealing and replacing section 29.7 (3) with the following:

29.7 (3) The policies and procedures referred to in subsection (2) may provide that such review and supervision will be done by pre-use approval, post use review or post use sampling, as appropriate to the type of material. However, the following types of advertisements, sales literature or correspondence must be approved prior to publication or use by a one or more Supervisors specifically designated to approve each specified type of material:

(a) Research reports,

(b) Market letters,

(c) Telemarketing scripts,

(d) Promotional seminar texts (not including educational seminar texts),

(e) Original advertisements/original template advertisements; and

(f) Any material used to solicit clients that contain performance reports or summaries.

(c) Repealing section 29.27.

8. Dealer Member Rule 38 is repealed and replaced by:

RULE 38

COMPLIANCE AND SUPERVISION

38.1 a Dealer Member must establish and maintain a system to supervise the activities of each partner, director, officer, registered representative, employee and agent of the Dealer Member that is reasonably designed to achieve compliance with the Rules of the Corporation and all other laws, regulations and policies applicable to the Dealer Member's securities and commodity futures business. Such a supervisory system shall provide, at a minimum, the following:

(i) The establishment, maintenance and enforcement of written policies and procedures acceptable to the Corporation regarding the conduct of the types of business in which it engages and the supervision of each partner, director, officer, registered representative, employee and agent of the Dealer Member that are reasonably designed to achieve compliance with the applicable laws, rules, regulations and policies;

(ii) Procedures reasonably designed to ensure that each partner, director, officer, registered representative, employee and agent of the Dealer Member understands his or her responsibilities under the written policies and procedures in (i);

(iii) Procedures to ensure that the written policies and procedures of the Dealer Member are amended as appropriate within a reasonable time after changes in applicable laws, regulations, rules and policies and that such changes are communicated to all relevant personnel;

(iv) Sufficient personnel and other resources to fully and properly enforce the written policies and procedures in (i);

(v) The designation of Supervisors with the qualifications and authority to carry out the supervisory responsibilities assigned to them. Each Dealer Member shall maintain an internal record of the names of all Supervisors, the scope of their responsibility and the dates for which such responsibility and authority is or was in effect. The records must be preserved by the Dealer Member for seven years, and on-site for the first year;

(vi) Procedures for follow-up and review to ensure that supervisory personnel are properly executing their supervisory functions. Where the supervision is conducted and supervisory records are maintained at a branch office, the follow-up and review procedures shall include periodic on-site reviews of branch office supervision and record-keeping as necessary depending on the types of business and supervision conducted at the branch office;

(vii) The maintenance of adequate records of supervisory activity, including on-site reviews of branch offices as described in (vi), compliance issues identified and the resolution of those issues.

38.2

(a) A Dealer Member must appoint as many Supervisors as are necessary to properly supervise the officers, partners, employees and agents of the Dealer Member, taking into account the scope and complexity of its businesses to ensure that the businesses of the Dealer Member are carried out in compliance with the Rules and Rulings of the Corporation and any other laws or regulations governing the Dealer Member's business conduct.

(b) A Dealer Member must take reasonable steps to ensure that all of its Supervisors are proficient and understand the products that persons under their supervision trade in or advise on and the services that persons under their supervision provide to a sufficient degree to properly supervise those persons. At a minimum, the Dealer Member must ensure that all Supervisors meet the applicable proficiency requirements of Rule 2900.

38.3 No person may act and no Dealer Member may permit a person to act as a Supervisor without the approval of the Corporation.

38.4

(a) A Supervisor must fully and properly supervise each partner, director, officer, registered representative or agent in accordance with the supervisory responsibilities assigned to the Supervisor, the Rules of the Corporation and the written policies and procedures of the Dealer Member so as to ensure their compliance with the Rules of the Corporation and all other laws, regulations and policies applicable to the Dealer Member's securities and commodity futures business.

(b) A Supervisor may delegate specific supervisory functions or procedures, provided that:

(i) the delegation of such functions in not contrary to applicable laws, regulations, rules or policies;

(ii) the person to whom such functions are delegated is qualified by virtue of registration, training or experience to properly execute them;

(iii) the Supervisor conducts sufficient follow-up and review to ensure that the person to whom the functions have been delegated is properly executing them; and

(iv) the Dealer Member records the terms of the delegation and the follow up and review.

38.5 Ultimate Designated Person

(a) A Dealer Member must, subject to the Approval of the Corporation, its Chief Executive Officer or another Executive with the equivalent responsibility to act as the Ultimate Designated Person, who shall be responsible to the Corporation for the conduct of the firm and the supervision of its employees.

(b) Where a Dealer Member is organized into two or more separate business units or divisions, the Dealer Member may designate an Ultimate Designated Person for each separate business unit or division.

(c) The Ultimate Designated Person must ensure that policies and procedures are developed and implemented which adequately reflect the regulatory requirements of the Dealer Member.

38.6 Chief Financial Officer

(a) Each Dealer Member must, subject to the Approval of the Corporation, appoint one Executive as Chief Financial Officer who, in addition to the requirements under Rule 7.4(a), must have met the proficiency requirements of Rule 2900, Part I, section A.2A. The Chief Financial Officer need not be engaged full time in the business of the Dealer Member.

(b) Notwithstanding subsection (a), if the Chief Financial Officer of a Dealer Member terminates his/her employment with the Dealer Member and the Dealer Member is unable to immediately appoint another qualified person as Chief Financial Officer, the Dealer Member may, with the Corporation's approval, appoint an Executive as Acting Chief Financial Officer, provided that within 90 days of the termination:

(1) the Acting Chief Financial Officer meets the requirement of subsection (a) and is approved by the Corporation as Chief Financial Officer; or

(2) another qualified person is appointed Chief Financial Officer by the Dealer Member and approved by the Corporation.

(c) The Chief Financial Officer must monitor adherence to the Dealer Member's policies and procedures as necessary to provide reasonable assurance that the Dealer Member complies with the financial rules of the Corporation.

38.7 Chief Compliance Officer

(a) Every Dealer Member must, subject to the Approval of the Corporation, appoint an Executive to act as Chief Compliance Officer.

(b) A Dealer Member may appoint the Ultimate Designated Person to act as the Chief Compliance Officer.

(c) Where a Dealer Member is organized into two or more separate business units or divisions, a Dealer Member may, with the Approval of the Corporation, designate a Chief Compliance Officer for each separate business unit or division.

(d) The Chief Compliance Officer must have the qualification required under Rule 2900, Part I, section A.2B.

(e) Notwithstanding subsection (a), a Dealer Member may, with the Corporation's approval, appoint an officer as Acting Chief Compliance Officer if the Chief Compliance Officer terminates his or her employment with the Dealer Member and the Dealer Member is unable to immediately appoint another qualified person as Chief Compliance Officer provided that, within 90 days of the termination of the previous Chief Compliance Officer:

(i) the Acting Chief Compliance Officer meets the requirement of subsection (d) and is approved by the Corporation as Chief Compliance Officer; or

(ii) another qualified person is appointed Chief Compliance Officer by the Dealer Member and is approved by the Corporation.

(f) The Corporation may grant to a Dealer Member an exemption from subsection (d) where it is satisfied that the nature of the Dealer Member's business is such that the qualification is not relevant to the Dealer Member and that to do so would not be prejudicial to the interests of the Dealer Member, its clients, the public or the Corporation. In granting such an exemption, it may impose such terms and conditions as it considers necessary.

(g) The Chief Compliance Officer must monitor adherence to the Dealer Member's policies and procedures as necessary to provide reasonable assurance that in conducting its securities-related activities the Dealer Member meets the non-financial requirements to which the Dealer Member is subject.

(h) The Chief Compliance Officer must report to the Board of Directors (or equivalent) of the Dealer Member as necessary but at least annually on the status of compliance at the Dealer Member. The Chief Compliance Officer must have access to the Ultimate Designated Person and the board of directors (or equivalent) at other times to raise significant issues requiring their attention.

38.8 The Board of Directors (or equivalent) of the Dealer Member must review the report of the Chief Compliance Officer and determine what actions are necessary to rectify any compliance deficiencies noted in the report and ensure such actions are carried out. The Board of Directors (or equivalent) must maintain records of the actions it determines to be necessary and the monitoring to ensure that those actions are carried out.

38.9 A Dealer Member must file with the Corporation:

(a) A copy of a governance document setting out the organizational structure and reporting relationships, which support the compliance arrangement set out above; and

(b) Notice of any material changes to the organizational structure and reporting relationships as set out in subsection (a).

9. Dealer Member Rule 40 is amended by:

(a) Repealing paragraphs (17) and (18) of section 40.1

(b) Repealing and replacing section 40.3 with the following:

40.3 Approvals and Notifications

(1) Each Dealer Member making an application for approval of an individual in any capacity required under any Rule of the Corporation shall make such application to the Corporation through the NRD on Form 33-109F4.

(2) Each Dealer Member shall notify the Corporation of the appointment of an Ultimate Designated Person pursuant to Rule 38.5(a), a Chief Compliance Officer pursuant to Rule 38.7(a) or a Chief Financial Officer pursuant to Rule 38.6(a) through the NRD on Form 33-109F4.

(3) Each Dealer Member making an application under subsection (1) shall be liable for and pay such fees as are prescribed from time to time by the Board of Directors, including but not limited to application fees payable to the NRD Administrator for use of the NRD for the making of such an application.

(4) Any fees payable to the Corporation or to the NRD Administrator pursuant to subsection (3) above shall be submitted by electronic pre-authorized debit through NRD.

(c) Repealing and replacing section 40.4 with the following:

40.4 Change of Approval Category or Type of Business

(1) Each Dealer Member making an application for approval of any Approved Person in a different or additional capacity requiring approval under any Rule of the Corporation or to surrender an existing approval shall make such application to the Corporation through the NRD on Form 33-109F2.

(2) Each Dealer Member making an application under subsection (1) shall be liable for and pay such change of status fees as are prescribed from time to time by the Board of Directors, including but not limited to application fees payable to the NRD Administrator for use of the NRD for the making of such an application.

(3) Any fees payable to the Corporation or the NRD Administrator pursuant to subsection (2) above shall be submitted by electronic pre-authorized debit through NRD.

(4) Each Dealer Member must notify the Corporation through NRD on Form 33-109F2 when an Approved Person changes the type of business in which he or she engages as described in Rule 18.2(b).

(5) Prior to providing notice of a change in the type of business in which an Approved Person will engage, a Dealer Member must ensure that it has notified the Corporation through NRD of the completion of the proficiency requirements under Rule 2900 necessary to undertake the type of business or that the Approved Person has been granted an exemption from the proficiency requirements under Rule 2900 and Rule 20.

(d) Repealing and replacing section 40.8 with the following:

40.8 Notification of Opening or Closing of a Business Location

(1) Each Dealer Member required to notify the Corporation of the opening or closing of a Business Location pursuant to Rule 4.6 must do so through the NRD on Form 33-109F3 within the time period prescribed in NRD Multilateral Instrument 33-109 for a registered firm, as defined in NRD Multilateral Instrument 33-109, to notify the regulator of the opening or closing, as applicable, of a business location.

(2) Each Dealer Member must notify the Corporation through the NRD of any change in the address or supervision of any Business Location within the time period prescribed in NRD Multilateral Instrument 33-109 for a registered firm, as defined in Multilateral Instrument 33-109, to notify the regulator of a change in a business location.

(e) Repealing sections 40.10 and 40.13.

10. Dealer Member Rule 1300 is amended by:

(a) Repealing and replacing sections 1300.2 through 1300.8 with the following:

1300.2.

(a) A Dealer Member must designate a Supervisor to be responsible for the opening of new accounts establishing and maintaining procedures acceptable to the Corporation for account supervision to ensure that the handling of client business is within the bounds of ethical conduct, consistent with just and equitable principles of trade and not detrimental to the interests of the securities industry. As part of this supervision each new account must be opened pursuant to a new account form which meets the guidelines provided for in Rule 2500 for retail accounts, in Rule 2700 for institutional accounts and in Rule 3200 for accounts exempt from suitability reviews.

(b) Where a Dealer Member conducts more than one of retail business, institutional business and suitability-exempt business under Rules 1300.1(t) and 3200.B, the Dealer Member may designate separate Supervisors for each type of business.

(c) The Designated Supervisor or another Supervisor assigned the responsibility for doing so in the policies and procedures of the Dealer Member must approve and record the approval of the opening of an account prior to or promptly after the completion of any transaction.

Discretionary and Managed Accounts

1300.3. In this Rule 1300 unless the context otherwise requires, the expression:

"discretionary account" means an account of a customer other than a managed account in respect of which a Dealer Member or any person acting on behalf of the Dealer Member exercises any discretionary authority in trading by or for such account, provided that an account shall not be considered to be a discretionary account for the sole reason that discretion is exercised as to the price at which or time when an order given by a customer for the purchase or sale of a definite amount of a specified security, option, futures contract or futures contract option shall be executed;

"futures contracts managed account" means a managed account which includes only investments in commodity futures contracts or commodity futures contract options;

"investment" includes a commodity futures contract and a commodity futures contract option;

"managed account" means any account solicited by a Dealer Member in which the investment decisions are made on a continuing basis by the Dealer Member or by a third party hired by the Dealer Member;"

"portfolio manager" means a registered representative exercising discretionary authority over a managed account;

"responsible person" means a partner, director, officer, employee or agent of a Dealer Member who:

(a) exercises discretionary authority over the account of a client or approves discretionary orders for an account when exercising such discretion or giving such approval pursuant to Rule 1300.4, or

(b) participates in the formulation of, or has prior access information regarding investment decisions made on behalf of or advice given to a managed account

but does not include a sub-adviser under Rule 1300.7(a)(ii);

1300.4. A registered representative may not exercise discretionary authority over a customer account unless:

(a) the Dealer Member has designated a Supervisor or Supervisors to be responsible for discretionary accounts;

(b) the customer has given prior written authorization in compliance with in compliance with Rule 1300.5; and

(c) a Supervisor designated under subsection (a) has approved the account as a discretionary account and recorded that approval,

(d) the registered representative authorized to effect discretionary trades for the account has actively dealt in, advised on or performed analysis for a period of two year with respect to all types of products which are to be traded on a discretionary basis; and

(e) the account is maintained at the Dealer Member of the Registered Representative.

1300.5. The prior written authorization provided for by clause (a) of Rule 1300.4 must:

(a) define the extent of the discretionary authority which has been given to the Dealer Member;

(b) except for a managed account, have a term of no more than twelve months, unless the Dealer Member has satisfied the Corporation that a longer term is appropriate and the customer is aware of such longer term;

(c) except for a managed account, only be renewable in writing;

(d) only be terminated by the customer by notice in writing, effective on receipt of the notice by the Dealer Member except with respect to transactions entered into prior to the receipt; and

(e) only be terminated by the Dealer Member by notice in writing, effective not less than 30 days from the date of delivery to the customer.

1300.6. In addition to any other account supervision requirements under the Rules, the designated Supervisor must review at least monthly the financial performance of each discretionary account other than a managed account, including a review to determine whether any person permitted to effect discretionary trades for the account should continue to do so. The Designated Supervisor may not be delegate the conduct of the review to any other person.

1300.7. A Dealer Member may not exercise any discretionary authority with respect to a managed account unless:

(a) the individual who is responsible for the management of the account is:

(i) a portfolio manager; or

(ii) a sub-adviser with which the Dealer Member has entered into a written sub-adviser agreement, provided that

A. the sub-adviser is an individual or firm registered in the jurisdiction in which it resides, in a category of registration that permits the person or company to provide discretionary portfolio management services or as a broker or investment dealer active as a portfolio manager; and

B. the Dealer Member has determined that the sub-adviser is subject to legislation or regulations containing conflict of interest provisions at least equivalent to Rules 1300.18 and 1300.19 or has entered into an agreement with the sub-adviser that the sub-adviser will comply with Rules 1300.18 and 1300.19.

(b) the customer has given prior authorization to the Dealer Member in accordance with Rule 1300.8

(c) the Supervisor designed under Rule 1300.15(b) or in the Dealer Member's policies and procedures has specifically approved the account as a managed account and the approval has been recorded;

(d) the Dealer Member has provided to the accountholder a copy of its policy ensuring fair allocation of investment opportunities.

1300.8. The prior written authorization provided for by clause (b) of Rule 1300.7 must:

(a) describe the investment objectives and risk tolerance of the customer with respect to the managed account or accounts;

(b) where permitted by the Dealer Member, describe any constraints imposed by customer on investments to be made in the managed account or accounts;

(c) only be terminated by the customer by notice in writing, effective on receipt by the Dealer Member except with respect to transactions entered into prior to the receipt; and

(d) only be terminated by the Dealer Member by notice in writing, effective not less than 30 days from the date of delivery of the notice to the customer.

(b) Repealing sections 1300.9 through 1300.14

(c) Repealing and replacing sections 1300.15 through 1300.17 with the following:

1300.15.A Dealer Member that has managed accounts or futures contracts managed accounts must establish and maintain a system acceptable to the Corporation to supervise the activities of those responsible for the management of such accounts under Rule 1300.7. The system must be reasonably designed to achieve compliance with the Rules and Forms of the Corporation. A Dealer Member firm's supervisory system must provide, at a minimum, for the following:

(a) the establishment and maintenance of written procedures, including:

(i) procedures designed to disclose when a responsible person has contravened Rules 1300.18 or 1300.19;

(ii) procedures to ensure fairness in the allocation of investment opportunities among its managed accounts;

(b) the designation of one or more Supervisors specifically responsible for the supervision of managed accounts.

(c) direct supervision of any Registered Representative providing discretionary management to managed accounts who has less than two years experience providing such discretionary management, including at least one year managing on a discretionary basis more than $5 million in assets, by

(i) a Registered Representative at the Dealer Member or another Dealer Member who is authorized to provide discretionary management to managed accounts and who is not in the period of supervision, or

(ii) A person registered as an advisor under Canadian securities legislation who has entered into a contract with the Dealer Member to provide the supervision.

The period of experience includes any period spent providing discretionary management as a registered advisor under Canadian securities legislation or while employed by a government-regulated institution.

(d) in addition to any other account supervision requirements under the Rules, a review by the Designated Supervisor with respect to each managed account, to be conducted at least quarterly, to ensure that the investment objectives of the client are being diligently pursued and that the managed account or futures contracts managed account is being conducted in accordance with the Rules. The review may be conducted at an aggregate level for managed accounts for which key investment decisions are made centrally and applied across a number of managed accounts, subject to minor variations to allow for client-directed constraints and the timing of client cash flows into the managed account.

(e) the establishment of a committee, including at least the Designated Supervisor of managed accounts and the Chief Compliance Officer, that shall review at least annually the supervisory system and procedures for managed accounts and recommend to senior management any action necessary to achieve the Dealer Member's compliance with applicable securities legislation and with the Rules and Forms of the Corporation.

1300.16. A Dealer Member may charge a client directly for services rendered to a managed account but, except with the written agreement of the client, the charge may not be based on the volume or value of transactions initiated for the account or be contingent upon profits or performance.

1300.17. A Dealer Member may not pay remuneration to anyone managing a managed account that is computed on the basis of the value or volume of transactions in the account.

(d) Repealing and replacing sections 1300.20 and 1300.21 with the following:

1300.20. Where investment decisions are made centrally and applied across a number of managed accounts, Rule 29.3A does not apply to the managed accounts of partners, directors, officers, registered persons, employees or agents of the Dealer Member who participate on the same basis as client accounts in the implementation of those decisions.

1300.21. Except as specifically permitted in the Rules or Rulings, a Dealer Member may not charge a customer a fee that is contingent upon the profit or performance of the customer's account.

11. Dealer Member Rule 1800 is amended by:

(a) Repealing and replacing section 1800.2 with the following:

1800.2.

(a) A Dealer Member that trades in futures contracts or futures contract options on behalf of customers must designate a Supervisor qualified to supervise trading in futures contracts and futures contract options to be responsible for the opening of new accounts and establishing and maintaining procedures acceptable to the Corporation for account supervision to ensure that the handling of client business is within the bounds of ethical conduct, consistent with just and equitable principles of trade and not detrimental to the interests of the securities industry.

(b) A Dealer Member must enter into a futures contract trading agreement or futures contract options trading agreement in compliance with Rule 1800.9 with a customer before effecting the customer's initial trade in futures contracts or futures contract options;

(c) The Supervisor designated under Rule 1800.2(a) or another Supervisor qualified to supervise futures contracts or futures contract options trading must approve the opening of the account of each customer of the Dealer Member for trading in futures contracts or futures contract options before the customer's first trade in futures contracts or futures contract options.

(d) A Dealer Member must:

(i) provide to each customer the then current risk disclosure statement approved by the Corporation and obtain from the customer acknowledgement of its receipt before the customer's initial trade in futures contracts or futures contract options

(ii) distribute to each customer having a futures contract or futures contract options account any amendments to the risk disclosure statement approved by the Corporation; and

(iii) Maintain records showing the names and addresses of all persons to whom a current risk disclosure statement or an amendment thereto has been provided and the date or dates on which they were provided;

(e) A Dealer Member must have systems and procedures to ensure that in normal circumstances customers of the Dealer Member have access at any time during usual business hours to a registered representative or investment representative, as appropriate to the services provided to the client, qualified to advise on or trade in futures contracts or futures contract options and registered as necessary in the jurisdiction in which the client resides.

(f) A Dealer Member must obtain the approval of the Corporation of its accounting, settlement and credit control systems for trading in futures contracts or futures contract options for customer and firm accounts with respect to futures contracts or futures contract options before trading in futures contracts or futures contract options.

(b) Repealing sections 1800.3, 1800.5 and 1800.6

(c) Repealing and replacing sections 1800.7 through 1800.11 with the following:

1800.7. A Dealer Member that trades in futures contracts must file any reports on that are required by the Corporation. A Dealer Member must report to the Corporation on a form of monthly position report approved by the Corporation the greater of the market value of the total long or the total short futures contracts for each commodity, determined as at the close of business on the last day of each month or, where that day is not a trading day, on the next preceding trading day.

1800.8. A Registered Representative or Investment Representative must identify all non-customer orders entered for the purchase or sale of futures contracts or futures contract options. A "non-customer" order is an order for an account in which the Dealer Member or any Approved Person of the Dealer Member has a direct or indirect interest other than an interest in the commission charged.

1800.9. The account agreement required in Rule 1800.2(b) must define the rights and obligations between the Dealer Member and the customer on the subjects that the Corporation may from time to time determine, including the following:

(a) The rights of the Dealer Member to exercise discretion in accepting orders;

(b) The Dealer Member's obligation with respect to errors and/or omissions and qualification of the time periods during which orders will be accepted for execution;

(c) The customer's obligation in respect of the payment of his or her indebtedness to the Dealer Member and the maintenance of adequate margin and security, including the conditions under which the funds, securities or other property held in the account or any other accounts of the customer may be applied to such indebtedness or margin;

(d) The obligation of the customer in respect of commissions, if any, on futures contracts or futures contract options bought and sold for his or her account;

(e) The obligation of the customer in respect of the payment of interest, if any, on debit balances in his or her account;

(f) The extent of the right of the Dealer Member to make use of free credit balances in the customer's account either in its own business or to cover debit balances in the same or other accounts, and the consent, if given, of the customer to the Dealer Member taking the other side to the customer's transactions from time to time;

(g) The rights of the Dealer Member in respect of raising money on and pledging securities and other assets held in the customer's account;

(h) The extent of the right of the Dealer Member to otherwise deal with securities and other assets in the customer's account and to hold the same as collateral security for the customer's indebtedness;

(i) The customer's obligation to comply with the rules pertaining to futures contracts or futures contract options with respect to reporting, position limits and exercise limits, as applicable, as established by the commodity futures exchange on which such futures contracts or futures contract options are traded or its clearing house;

(j) The right of the Dealer Member, if so required, to provide regulatory authorities with information and/or reports related to reporting limits and position limits;

(k) The acknowledgement by the customer that he or she has received the current risk disclosure statement required by Rule 1800.2(d);

(l) The right of the Dealer Member to impose trading limits and to close out futures contracts or futures contract options under specified conditions;

(m) That minimum margin will be required from the customer in such amounts and at such times as the commodity futures exchange on which a contract is entered or its clearing house may prescribe and in such greater amounts at other times as prescribed by the Rules and as determined by the Dealer Member, and that such funds or property may be commingled and used by the Dealer Member in the conduct of its business;

(n) In the case of futures contract options accounts, the method of allocation of exercise assignment notices and the customer's obligation to instruct the Dealer Member to close out contracts prior to the expiry date; and

(o) Unless provided for in a separate agreement, the authority, if any, of the Dealer Member to effect trades for the customer on a discretionary basis, which authority shall be separately acknowledged in a part of the agreement prominently marked off from the remainder and shall not be inconsistent with any Rules relating to discretionary accounts.

1800.10. Rule 1800.9 does not apply to the opening of a futures contracts or futures contract options account where the customer is a dealer on its own behalf, a dealer on behalf of its customer if the dealer is required to maintain with its customer an account agreement substantially similar to that described in Rule 1800.9, an adviser registered under any applicable legislation relating to trading or advising in respect of futures contracts or futures contract options, an acceptable institution or an acceptable counter-party, provided the Dealer Member has obtained from the customer a letter of undertaking specifying:

(a) That the person opening the account will comply with the by-laws, rules and regulations of the exchange and clearing house upon or through which trades in contracts are to be effected including without limitation, the rules and regulations establishing position and reporting limits; and

(b) Where the customer also maintains with the same Dealer Member an account on which the customer is charged interest when there is a debit balance in the account, the conditions under which transfers of funds, securities or other property held in such other account will be made between accounts, unless provision is made elsewhere in a document signed by the person opening the account.

1800.11

(a) A Dealer Member must keep a record of any order or other instruction given or received with respect to a trade in a futures contract or futures contract option, whether executed or unexecuted, showing:

(i) The terms and conditions of the order or instruction and any modification or cancellation of the order or instruction;

(ii) The account to which the order or instruction relates;

(iii) Where the order relates to an omnibus account, the component accounts within the omnibus account on whose behalf the order is to be executed;

(iv) Where the order or instruction is placed by a person other than the customer in whose name the account is operated, the name, or designation, of the party placing the order or instruction;

(v) The time of the entry of the order or instruction, and, where the order is entered pursuant to the exercise of discretionary authority by the Dealer Member, identification to that effect;

(vi) To the extent feasible, the time of altering instructions or cancellation; and

(vii) The time of report of execution.

(b) A Dealer Member must keep in a form accessible to the Corporation the records of all unexecuted orders for two years and all executed orders for seven years from the date of the order.

12. Dealer Member Rule 1900 is amended by:

(a) Repealing and replacing sections 1900.1 and 1900.2 with the following:

1900.1. For the purposes of this Rule 1900, unless the subject matter or content otherwise requires:

"Option" means a call option or put option issued by the Canadian Derivatives Clearing Corporation, Intermarket Services Inc., The Options Clearing Corporation, Intermarket Clearing Corporation, International Options Clearing Corporation or any other corporation or organization recognized by the Board of Directors for the purposes of this Rule but does not include a futures contract or futures contract option as defined in Rule 1800.1.

1900.2.

(a) A Dealer Member that trades in options on behalf of customers must designate a Supervisor qualified to supervise options trading to be responsible for approving customer accounts to trade in options and for establishing and maintaining procedures acceptable to the Corporation for the supervision of account activity involving options, to ensure that the handling of customer business is within the bounds of ethical conduct, consistent with just and equitable principles of trade and not detrimental to the interests of the securities industry;

(b) A Dealer Member's must enter into an options trading agreement in compliance with Rule 1900.6 with a customer before effecting the customer's initial trade in options;

(c) The Supervisor designated under Rule 1900.2(a) or another Supervisor qualified to supervise options trading must approve each customer account of the Dealer Member for trading in options before the customer's first trade in options;

(d) A Dealer Member must:

(i) provide to each customer the then current disclosure approved by the Corporation and obtain from the customer acknowledgement of its receipt before the customer's first trade in options;

(ii) Provide to each customer having an account approved for options trading any amendments to the disclosure document in subsection (i); and

(iii) Maintain records showing the names and addresses of all persons to whom a current disclosure statement or an amendment thereto has been provided and the date or dates on which they were provided.

(e) A Dealer Member must comply with the applicable rules and rulings of any exchange, clearing corporation or other organization on or through which the option is traded or issued including, without limitation, those respecting position limits and exercise limits.

(b) Repealing sections 1900.3 and 1900.4

(c) Repealing and replacing sections 1900.5 and 1900.6 with the following:

1900.5. A Dealer Member that trades in options must file reports as required by the Corporation on the following matters:

(a) All transactions together with a summary of open positions showing those that are covered and those that are uncovered; and

(b) All holdings on the previous day in aggregate long or short positions of any single class of options of the minimum amount or over as specified by the rules, regulations or by-laws of the exchange or the clearing house on or through which the option is traded. For each class of option the report must include the number of options in each position and, in the case of short positions, whether they are covered.

1900.6.

(a) The options trading agreement required in Rule 1900.2(b) must define the rights and obligations between the Dealer Member and the customer on the subjects that the Corporation may from time to time determine, including the following:

(i) The rights of the Dealer Member to exercise discretion in accepting orders;

(ii) The Dealer Member's obligations with respect to errors and/or omissions and qualification of the time periods during which orders will be accepted for execution;

(iii) The method of allocation of exercise assignment notices;

(iv) The notice that maximum limits may be set on short positions and that during the last 10 days to expiry cash only terms may be applied and, in addition, that the Corporation may impose other rules affecting existing or subsequent transactions;

(v) The customer's obligation to instruct the Dealer Member to close out contracts prior to expiry date;

(vi) The customer's obligation to comply with applicable Rules and Rulings of the Corporation and any exchange, clearing corporation or other organization on or through which the option is traded or issued including, without limitation, those respecting position limits and exercise limits;

(vii) The acknowledgement by the customer that he or she has received the current disclosure statement referred to in Rule 1900.2(d);

(viii) A statement of the time limit set by the Dealer Member prior to which the client must submit an exercise notice; and

(ix) Any other matter required by the exchange, clearing corporation or other organization on or through which an option is traded or issued.

(b) Notwithstanding Rule 1900.6(a), if the client is an acceptable institution or acceptable counter-party the Dealer Member may, in lieu of maintaining an options trading agreement, accept a letter of undertaking from the acceptable institution or acceptable counter-party in which the institution or counter-party agrees to abide by the Rules, Rulings and requirements of the Corporation and of the exchange, clearing corporation or other organization on or through which an option is traded including those relating to exercise and position limits.

(d) Repealing section 1900.7

13. Dealer Member Rule 2500 is repealed and replaced by:

RULE 2500

MINIMUM STANDARDS FOR RETAIL ACCOUNT SUPERVISION

Introduction

This Rule establishes minimum industry standards for retail account supervision.

These standards represent the minimum requirements necessary to ensure that a Dealer Member has in place procedures to properly supervise retail account activity. The Rule does not:

(a) relieve Dealer Members from complying with specific SRO by-laws, rules, regulations and policies and securities legislation applicable to particular trades or accounts; or

(b) preclude Dealer Members from establishing a higher standard of supervision and in certain situations a higher standard may be necessary to ensure proper supervision.

Many of the standards in this Rule are taken from existing Rules of the Corporation and of other self-regulatory organizations. Securities legislation was generally not canvassed. To ensure that a Dealer Member has met all applicable standards, Dealer Members are required to know and comply with Corporation and other self-regulatory organization by-laws, rules, regulations and policies and applicable securities legislation which may apply in any given circumstance.

The following principles have been used to develop these minimum standards:

(a) The term "review" in this Rule has been used to mean a preliminary screening to detect items for further investigation or an examination of unusual trading activity or both. It does not mean that every trade meeting the selection process of this Rule must be investigated. The reviewer must use reasonable judgement in selecting the items for further investigation.

(b) While Dealer Members must provide the necessary resources and qualified supervisors to meet these standards, the standards do not specify what the resources must be. The Dealer Member must determine what resources and supervisors are necessary based on the nature of the Dealer Member's business.

(c) The compliance with the know-your-client rule and suitability of investment requirements is primarily the responsibility of the registered representative. The supervisory standards in this Rule relating to know-your-client and suitability are intended to provide supervisors with guidelines on how to monitor the handling of these responsibilities by the registered representative.

I. Establishing and Maintaining Procedures, Delegation and Education

Introduction

Effective self-regulation begins with the Dealer Member establishing and maintaining a supervisory environment which fosters the business objectives of the Dealer Member and enables the Dealer Member to meet regulatory requirements and its obligations to its customers. To that end a Dealer Member must establish and maintain procedures which are supervised by qualified individuals. A major aspect of self-regulation is the ongoing education of staff in all areas of business conduct.

A. Establishing Procedures

1. A Dealer Member must:

(a) appoint designated principals who have the necessary knowledge of industry regulations and Dealer Member policy to properly perform their duties;

(b) maintain written policies and procedures to document supervision requirements; and

(c) supply written instructions to all supervisors and alternates to advise them on what is expected of them.

2. A Dealer Member must have a procedure establishing the approval process for new policies and procedures. Those having a significant impact on the Dealer Member's compliance system should be approved by senior management approval.

B. Maintaining Procedures

1. A Dealer Member must have a reasonable process to review the efficacy of its business conduct procedures and practices and rectify any deficiencies identified.

C. Risk-based Procedures

1. A Dealer Member may select accounts for review on the basis of risk-based procedures, taking into account factors such as the size of account, nature of the trading, products traded, volume of activity, commissions generated or Approved Persons advising the customer.

2. A Dealer Member must document the basis used for selecting accounts for review in its policies and procedures.

3. The procedures for selecting accounts for review must be applied consistently across retail accounts.

4. At a minimum, a Dealer Member must conduct enhanced supervision of trading by Approved Persons who have had a history of questionable conduct. Evidence of such conduct can include trading activity that frequently raises questions in account reviews, frequent or serious client complaints, regulatory investigations, frequent account credit problems or failure to take appropriate remedial action on account problems identified.

D. Delegation

1. Supervisors may delegate tasks but not responsibility.

2. A Dealer Member must advise supervisors of those specific functions that cannot be delegated.

3. The supervisor delegating the task must ensure that these tasks are being performed adequately and that exceptions are brought to his or her attention.

4. Those to whom tasks are delegated must have the qualifications to perform them and should be advised in writing what is expected.

E. Education

1. A Dealer Member must provide all sales and supervisory personnel with the current sales practices and policies relevant to their functions. The provision can be done through access to electronic systems on which the policies and procedures are maintained, in which case personnel must be trained on use of the systems. A Dealer Member should obtain and record acknowledgements from all sales and supervisory personnel that they have read and understood the policies and procedures relevant to their responsibilities.

2. A Dealer Member must provide introductory and continuing education to all approved persons on the Dealer Member's policies and procedures and any relevant changes to them.

3. A Dealer Member must communicate information contained in compliance-related bulletins from the Corporation and other SROs and Regulatory Organizations to all sales and other approved persons to whom it is relevant. A Dealer Member must maintain procedures relating to the method and timing of distribution of compliance-related bulletins.

F. Records

1. A Dealer Member must maintain records of supervisory review for seven years.

2. A Dealer Member must maintain the records in a manner that permits them to be provided to the Corporation promptly for the first two years after its creation and within a reasonable time thereafter.

3. The evidence must record who conducted the review and when, inquiries made, replies received and actions taken.

II. Opening New Accounts

Introduction

To comply with the "Know-Your-Client" rule each Dealer Member must establish procedures to maintain accurate and complete information on each client. The first step towards compliance with this rule is completing proper documentation when opening new accounts. Accurate completion of the documentation when opening a new account allows both the registered representative and the supervisory staff to conduct the necessary review to ensure that recommendations made for any account are appropriate for the client and in keeping with his investment objectives. Maintaining accurate and current documentation will allow the registered representative and the supervisory staff to ensure that all recommendations made for any account are appropriate for the client and in keeping with the client's investment objectives.

"Know-Your-Client" procedures must also be directed at meeting a Dealer Member's gatekeeper obligations by identifying clients that present a high risk to the Dealer Member or a high risk of conducting improper activities in the securities markets. The procedures must also meet the requirements of anti-money laundering and terrorist financing legislation and regulations.

A. Documentation

1. A Dealer Member must complete an account application for each new customer that conforms to the account information requirements of this Policy.

2. A Supervisor authorized in the Dealer Member's policies and procedures to do so must approve a fully completed new account application no later than the business day after the initial trade. 'Fully completed' means that all information necessary to assess suitability, creditworthiness and risk has been obtained but does not mean that the client must have signed the application if the Dealer Member requires that the client do so. Alternate procedures for securing interim approval are acceptable to prevent undue delays provided the Supervisor applies prompt final approval following the initial trade. If an account application received after the initial trade is not fully completed, a Dealer Member must restrict the account to liquidating trades only until a fully completed application has been approved.

3. Where the customer is an employee or agent of another registered dealer, a Dealer Member must obtain written approval of the customer's employer or principal before opening the account. A Dealer Member must designate such accounts as non-client accounts.

4. A Dealer Member must maintain a complete set of documentation regarding each account. The Registered Representative(s) handling an account must maintain a copy of the account application. A Dealer Member can meet this requirement by maintaining the information on the application in an electronic application accessible to the Registered Representative.

5. The Registered Representative must update the information on the application where there is a material change in client information. The update must be approved in the manner provided in subsection A.2. A Dealer Member must restrict the access of Registered Representatives and other persons to its electronic systems for maintaining know-your-client information so that material information cannot be changed without the required approval. A Dealer Member must have procedures independent of the Registered Representative for verifying material changes to customer information, such as changes of address, financial situation, investment objectives or risk tolerance.

6. When there is a change of Registered Representative, the new Registered Representative must verify the account information to ensure it is current. A Dealer Member must have a procedure for recording that the new Registered Representative has reviewed the customer information and that the appropriate Supervisor is satisfied that it has been reviewed and has approved any material changes. It is acceptable for the Registered Representative to record and initial any changes on a photocopy of the existing application provided that it was previously approved within two years of the review.

7. A Dealer Member must not assign an account number for a new customer unless it has the proper name and address of the customer.

B. Pending Documents

1. A Dealer Member must have procedures in place to ensure supporting documents are received within a reasonable period of time of opening the account.

2. A Dealer Member must have systems or procedures to prevent:

• Trading on margin until the customer entered into a margin agreement with the customer as described in Rule 200.1(i)(2)

• Trading in futures contracts or futures contract options until the customer has entered into a futures contracts or futures contract options trading agreement with the customer as described in Rule 1800.2(b)

• Trading in options until the customer has entered into an options trading agreement with the customer as described in Rule 1900.2(b)

3. A Dealer Member must have a system for recording pending account documentation and following up where it is not received in a reasonable time.

4. A Dealer Member must take positive action specified in its policies and procedures to obtain required documentation not obtained within 25 business days of the opening of the account.

C. Other Requirements

1. All hold mail must be authorized by the client in writing and be controlled, reviewed on a regular basis and maintained by the responsible Supervisor.

2. Returned mail must be properly investigated and controlled by a person who is independent of the sales function but may be located within a branch.

3. For supervisory purposes, "non-client" accounts, RRSP accounts, managed accounts, discretionary accounts and restricted accounts must be readily identifiable.

III. Account Supervision Generally

Introduction

Rule 38.1 requires a Dealer Member to implement systems of supervision and control to ensure that is reasonably designed to achieve compliance with the Rules and Rulings of the Corporation and all other laws, regulations and policies applicable to the Dealer Member's securities and commodity futures business. This section provides guidance on the means used by Dealer Members to meet that requirement with respect to retail customer accounts.

A. Supervisory Structure

1. In maintaining a supervisory structure and appointing Supervisors, a Dealer Member must take into consideration all factors necessary to ensure the adequacy of the supervision, including the products traded, type of trading, location of business and other functions of Supervisors.

2. Where the Dealer Member conducts retail business in business locations outside its Head Office, it should consider the following:

• A resident supervisor is in the best position to know the Registered Representatives in the office, know or meet many of the clients, understand local conditions and needs, facilitate business through the timely approval of new accounts and respond immediately to questions or problems. However, a Dealer Member may determine to what extent a resident supervisor is necessary, considering factors such as:

• The number of Registered Representatives in the location

• The experience of Registered Representatives in the location

• The nature of the business conducting in the location

• The availability of a Supervisor or Supervisors in nearby locations

• Other systems and controls mitigating the risk of remote supervision

• Where a business location does not have a Supervisor working in the office, it must have an outside Supervisor assigned to it. A Dealer Member's policies and procedures and the instructions to the outside Supervisor must include provision for periodic visits to the location by the Supervisor as necessary to ensure that business is being conducted properly at the location.

3. While it is not always possible in a very small firm, a Dealer Member should ensure independent supervision of all retail accounts. A Supervisor's advice and trades for his or her own clients should be supervised by another Supervisor.

4. A Dealer Member must ensure that a Supervisor who advises and trades for his or her own clients devotes sufficient time and attention to his or her supervisory role.

5. A Dealer Member must ensure that Supervisors are qualified to supervise trading activity in all products traded by those under his or her supervision and any other services that they provide to retain customers. Where the Supervisor is not so qualified, the Dealer Member may divide the supervision between two or more Supervisors, but must ensure that there are appropriate mechanisms for them to communicate with one another, that the system ensures that the Dealer Member maintains an overall view of the client's situation and activity and that the assignment of responsibilities is clear and complete. One acceptable mechanism for doing so is the appointment of a primary Supervisor to whom the other Supervisor(s) provide advice with regard to the activity in the products or services the primary Supervisor is not qualified to supervise.

6. A Dealer Member's supervisory system must provide Supervisors with the information necessary to properly conduct their supervision. For account reviews this includes readily accessible client information and full information about account activity including relevant non-trade activity such as receipts, deliveries, deposits, withdrawals and journal entries.

7. A Dealer Member's supervisory system must provide for back-up during the absence of responsible Supervisors. For any prolonged absence of a Supervisor, the back-up Supervisor should be advised as necessary of any ongoing issues or concerns as necessary to provide proper supervision.

8. A Dealer Member must have systems of supervision and review to ensure that Supervisors are properly fulfilling their supervisory functions. This requirement can be met by a two-tiered system of first and second level reviews as described in this policy.

9. A Supervisor must have sufficient authority to take effective and timely remedial action where account activity or any other matter under his or her supervision falls or appears to fall outside the bounds of proper conduct, just and equitable principles of trade or good business practice. Escalation for a decision by a more senior Supervisor or Executive will be considered an acceptable form of action.

B. Supervision of Account Activity

A Dealer Member must have systems and procedures to supervise trading activity in retail accounts. The supervision must provide reasonable assurance that the Dealer Member is meeting its regulatory obligations, including those to clients such as suitability and gatekeeper obligations such as preventing market abuses. The following principles should be taken into consideration:

1. Reviews may be conducted on a pre-trade or post-trade basis. A properly crafted pre-trade review process may obviate or lessen the need for post-trade reviews.

2. Review procedures must cover all accounts. Where a Dealer Member offers both commission and fee-based accounts, it cannot select accounts for review solely on the basis of commission levels; it must also have a procedure for selecting fee-based accounts for review.

3. Reviews procedures must be able to identify patterns of activity that are not apparent by reviewing trades singly. For example, a review of trading over a longer period may raise questions about the overall level of activity even though each trade, looked at singly, appears to be suitable for the client.

4. Reviews must encompass non-trade issues such as late payment, margin problems, trade cancellations or transfers and flows of funds or securities that might be suspicious of money laundering.

5. The selection of activity for post-trade review may be done using a risk-based approach reasonably designed to detect improper activity. A risk-based approach can be used to determine the period of activity to be reviewed. For example, in some cases it may be appropriate to conduct longer-term reviews of monthly activity; in others they may consider shorter or longer periods.

6. Reviews must take into consideration, and reviewers must have access to, information about customers that may reasonably be assessed as presenting a higher risk of improper market activity such as those known by the Dealer Member to have access to material non-public information about issuers, holders of control blocks of public issuers and market professionals.

7. All account activity of employees and agents should be subject to review.

8. Reviews must be done on a timely basis, as established in the Dealer Member's policies and procedures. The timing should be reasonably designed to identify as early as possible matters requiring supervisory attention.

9. It is acceptable to use computer analysis to assist in selecting activity to be reviewed.

IV. Two-Tier Reviews

In a Dealer Member with multiple business locations conducting retail account activity, a two-tier system of post-trade activity reviews as described in this section is an acceptable structure.