“Qualified investors” means (i) for the purposes of persons who
are located or resident in the European Economic Area (“EEA”),
persons or entities described in (1) to (4) of Annex II of Directive 2014/65/EU
(as amended, “MiFID II”) (being
categories of client who are considered to be professionals), and persons or
entities who are, on request, treated as professional clients in accordance with
Section II of that Annex, or recognized as eligible counterparties in accordance
with Article 30 of MiFID II unless they have entered into an agreement to be
treated as non-professional clients in accordance with the fourth paragraph of
Section I of that Annex and (ii) for the purposes of persons who are located or
resident in the United Kingdom (the “UK”),
persons or entities described in Article 2(e) of Regulation (EU) No. 2017/1129
as it forms part of UK domestic law by virtue of the European Union (Withdrawal)
Act 2018 (the “EUWA”);
“Retail client” means (i) for the purposes of persons who are
located or resident in the EEA, a client who is not a professional client or as
defined in point (8) of Article 2 of Regulation (EU) No. 2017/565, and (ii) for
the purposes of persons who are located or resident in the UK, a client who is
not a professional client or as defined in point (8) of Article 2 of Regulation
(EU) No. 2017/565 as it forms part of UK domestic law by virtue of the EUWA;
“Retail investor” means (a) for the purposes of persons who are
located or resident in the EEA, a person who is one (or more) of: (i) a retail
client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer
within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance
Distribution Directive”), where that customer would not qualify as a
professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as
amended, the “Prospectus Regulation”)
and (b), for the purposes of persons who are located or resident in the UK: (i)
a retail client, as defined in point (8) of Article 2 of Regulation (EU) No.
2017/565 as it forms part of UK domestic law by virtue of the EUWA; (ii) a
customer within the meaning of the provisions of the Financial Services and
Markets Act 2000 (the “FSMA”) and
any rules or regulations made under the FSMA to implement Directive (EU)
2016/97, where that customer would not qualify as a professional client, as
defined in point (8) of Article 2(1) of Regulation (EU) No. 600/2014 as it forms
part of UK domestic law by virtue of the EUWA; or (iii) not a qualified investor
as defined in Article 2 of the Prospectus Regulation as it forms part of UK
domestic law by virtue of the EUWA; and
“Professional client” means (a) for the purposes of persons who
are located or resident in the EEA, a client meeting the criteria laid down in
Annex II of MiFID II, as set forth below and (b) for the purposes of persons who
are located or resident in the UK, a professional client as defined in point (8)
of Article 2(1) of Regulation (EU) No. 600/2014 as it forms part of UK domestic
law by virtue of the EUWA.
ANNEX II TO MiFID II
PROFESSIONAL CLIENTS FOR THE PURPOSE OF THIS DIRECTIVE
Professional client is a client who possesses the experience, knowledge and
expertise to make its own investment decisions and properly assess the risks
that it incurs. In order to be considered a professional client, the client must
comply with the following criteria:
I.
CATEGORIES OF CLIENTS WHO ARE CONSIDERED TO BE PROFESSIONALS
The following shall all be regarded as professionals in all investment services
and activities and financial instruments for the purposes of the Directive.
(1)
Entities which are required to be authorized or regulated to operate in
the financial markets. The list below shall be understood as including all
authorized entities carrying out the characteristic activities of the entities
mentioned: entities authorized by a Member State under a Directive, entities
authorized or regulated by a Member State without reference to a Directive, and
entities authorized or regulated by a third country:
(a)
Credit institutions;
(b)
Investment firms;
(c)
Other authorized or regulated financial institutions;
(d)
Insurance companies;
(e)
Collective investment schemes and management companies of such schemes;
(f)
Pension funds and management companies of such funds;
(g)
Commodity and commodity derivatives dealers;
(h)
Locals;
(i)
Other institutional investors;
(2)
Large undertakings meeting two of the following size requirements on a
company basis:
balance sheet total: EUR 20 000 000
net turnover: EUR 40 000 000
own funds: EUR 2 000 000
(3)
National and regional governments, including public bodies that manage
public debt at national or regional level, Central Banks, international and
supranational institutions such as the World Bank, the IMF, the ECB, the EIB and
other similar international organizations.
(4)
Other institutional investors whose main activity is to invest in
financial instruments, including entities dedicated to the securitization of
assets or other financing transactions.
The entities referred to above are considered to be professionals. They must
however be allowed to request non-professional treatment and investment firms
may agree to provide a higher level of protection. Where the client of an
investment firm is an undertaking referred to above, the investment firm must
inform it prior to any provision of services that, on the basis of the
information available to the investment firm, the client is deemed to be a
professional client, and will be treated as such unless the investment firm and
the client agree otherwise. The investment firm must also inform the customer
that he can request a variation of the terms of the agreement in order to secure
a higher degree of protection.
It is the responsibility of the client, considered to be a professional client,
to ask for a higher level of protection when it deems it is unable to properly
assess or manage the risks involved.
This higher level of protection will be provided when a client who is considered
to be a professional enters into a written agreement with the investment firm to
the effect that it shall not be treated as a professional for the purposes of
the applicable conduct of business regime. Such agreement shall specify whether
this applies to one or more particular services or transactions, or to one or
more types of product or transaction.
II.
CLIENTS WHO MAY BE TREATED AS PROFESSIONALS ON REQUEST
II.1.
Identification criteria
Clients other than those mentioned in Section I, including public sector bodies,
local public authorities, municipalities and private individual investors, may
also be allowed to waive some of the protections afforded by the conduct of
business rules.
Investment firms shall therefore be allowed to treat any of those clients as
professionals provided the relevant criteria and procedure mentioned below are
fulfilled. Those clients shall not, however, be presumed to possess market
knowledge and experience comparable to that of the categories listed in Section
I.
Any such waiver of the protection afforded by the standard conduct of business
regime shall be considered to be valid only if an adequate assessment of the
expertise, experience and knowledge of the client, undertaken by the investment
firm, gives reasonable assurance, in light of the nature of the transactions or
services envisaged, that the client is capable of making investment decisions
and understanding the risks involved.
The fitness test applied to managers and directors of entities licensed under
Directives in the financial field could be regarded as an example of the
assessment of expertise and knowledge. In the case of small entities, the person
subject to that assessment shall be the person authorized to carry out
transactions on behalf of the entity.
In the course of that assessment, as a minimum, two of the
following criteria shall be satisfied:
·
the client has carried out
transactions, in significant size, on the relevant market at an average
frequency of 10 per quarter over the previous four quarters,
·
the size of the client’s
financial instrument portfolio, defined as including cash deposits and financial
instruments exceeds EUR 500 000,
·
the client works or has
worked in the financial sector for at least one year in a professional position,
which requires knowledge of the transactions or services envisaged.
Member States may adopt specific criteria for the assessment of the expertise
and knowledge of municipalities and local public authorities requesting to be
treated as professional clients. Those criteria can be alternative or additional
to those listed in the fifth paragraph.
II.2.
Procedure
Those clients may waive the benefit of the detailed rules of conduct only where
the following procedure is followed:
·
they must state in writing to the investment firm that they wish to be
treated as a professional client, either generally or in respect of a particular
investment service or transaction, or type of transaction or product,
·
the investment firm must
give them a clear written warning of the protections and investor compensation
rights they may lose,
·
they must state in writing,
in a separate document from the contract, that they are aware of the
consequences of losing such protections.
Before deciding to accept any request for waiver, investment firms must be
required to take all reasonable steps to ensure that the client requesting to be
treated as a professional client meets the relevant requirements stated in
Section II.1.
However, if clients have already been categorized as professionals under
parameters and procedures similar to those referred to above, it is not intended
that their relationships with investment firms shall be affected by any new
rules adopted pursuant to this Annex C.
Firms must implement appropriate written internal policies and procedures to
categorize clients. Professional clients are responsible for keeping the
investment firm informed about any change, which could affect their current
categorization. Should the investment firm become aware however that the client
no longer fulfils the initial conditions, which made him eligible for a
professional treatment, the investment firm shall take appropriate action.
ANNEX D
Under NI 45-106, “accredited investor” means:
(a)
except in Ontario, a Canadian financial institution, or a Schedule III
bank,
(b)
except in Ontario, the Business Development Bank of Canada incorporated
under the Business Development Bank of Canada Act (Canada),
(c)
except in Ontario, a subsidiary of any person referred to in paragraphs
(a) or (b), if the person owns all of the voting securities of the subsidiary,
except the voting securities required by law to be owned by directors of that
subsidiary,
(d)
except in Ontario, a person registered under the securities legislation
of a jurisdiction of Canada as an adviser or dealer,
(e)
an individual registered under the securities legislation of a
jurisdiction of Canada as a representative of a person referred to in paragraph
(d),
(e.1)
an individual formerly registered under the securities legislation of a
jurisdiction of Canada, other than an individual formerly registered solely as a
representative of a limited market dealer under one or both of the Securities
Act (Ontario) or the Securities Act (Newfoundland and Labrador),
(f)
except in Ontario, the Government of Canada or a jurisdiction of Canada,
or any crown corporation, agency or wholly-owned entity of the Government of
Canada or a jurisdiction of Canada,
(g)
except in Ontario, a municipality, public board or commission in Canada
and a metropolitan community, school board, the Comité de gestion de la taxe
scolaire de l’île de Montréal or an intermunicipal management board in Québec,
(h)
except in Ontario, any national, federal, state, provincial, territorial
or municipal government of or in any foreign jurisdiction, or any agency of that
government,
(i)
except in Ontario, a pension fund that is regulated by the Office of the
Superintendent of Financial Institutions (Canada), a pension commission or
similar regulatory authority of a jurisdiction of Canada,
(j)
an individual who, either alone or with a spouse, beneficially owns
financial assets having an aggregate realizable value that, before taxes, but
net of any related liabilities, exceeds CAD$1,000,000,
(j.1)
an individual who beneficially owns financial assets having an aggregate
realizable value that, before taxes but net of any related liabilities, exceeds
CAD$5,000,000,
(k)
an individual whose net income before taxes exceeded CAD$200,000 in each
of the 2 most recent calendar years or whose net income before taxes combined
with that of a spouse exceeded CAD$300,000 in each of the 2 most recent calendar
years and who, in either case, reasonably expects to exceed that net income
level in the current calendar year,
(l)
an individual who, either alone or with a spouse, has net assets of at
least CAD$5,000,000,
(m)
a person, other than an individual or investment fund, that has net
assets of at least CAD$5,000,000 as shown on its most recently prepared
financial statements,
(n)
an investment fund that distributes or has distributed its securities
only to
(i)
a person that is or was an accredited investor at the time of the
distribution,
(ii)
a person that acquires or acquired securities in the circumstances
referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional
investment in investment funds] [of NI 45-106], or
(iii)
a person described in paragraph (i) or (ii) that acquires or acquired
securities under section 2.18 [Investment fund reinvestment] [of NI 45-106],
(o)
an investment fund that distributes or has distributed securities under a
prospectus in a jurisdiction of Canada for which the regulator or, in Québec,
the securities regulatory authority, has issued a receipt,
(p)
a trust company or trust corporation registered or authorized to carry on
business under the Trust and Loan Companies Act (Canada) or under comparable
legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on
behalf of a fully managed account managed by the trust company or trust
corporation, as the case may be,
(q)
a person acting on behalf of a fully managed account managed by that
person, if that person is registered or authorized to carry on business as an
adviser or the equivalent under the securities legislation of a jurisdiction of
Canada or a foreign jurisdiction,
(r)
a registered charity under the Income Tax Act (Canada) that, in regard to
the trade, has obtained advice from an eligibility adviser or an adviser
registered under the securities legislation of the jurisdiction of the
registered charity to give advice on the securities being traded,
(s)
an entity organized in a foreign jurisdiction that is analogous to any of
the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and
function,
(t)
a person in respect of which all of the owners of interests, direct,
indirect or beneficial, except the voting securities required by law to be owned
by directors, are persons that are accredited investors,
(u)
an investment fund that is advised by a person registered as an adviser
or a person that is exempt from registration as an adviser,
(v)
a person that is recognized or designated by the securities regulatory
authority or, except in Ontario and Québec, the regulator as an accredited
investor; or
(w)
a trust established by an accredited investor for the benefit of the
accredited investor’s family members of which a majority of the trustees are
accredited investors and all of the beneficiaries are the accredited investor’s
spouse, a former spouse of the accredited investor or a parent, grandparent,
brother, sister, child or grandchild of that accredited investor, of that
accredited investor’s spouse or of that accredited investor’s former spouse;
Under Section 73.3 of the Securities Act (Ontario), “accredited investor” means:
(a)
a financial institution described in paragraph 1, 2 or 3 of subsection
73.1(1) of the Securities Act (Ontario),
(b)
the Business Development Bank of Canada,
(c)
a subsidiary of any person or company referred to in clause (a) or (b),
if the person or company owns all of the voting securities of the subsidiary,
except the voting securities required by law to be owned by directors of that
subsidiary,
(d)
a person or company registered under the securities legislation of a
province or territory of Canada as an adviser or dealer, except as otherwise
prescribed by the regulations,
(e)
the Government of Canada, the government of a province or territory of
Canada, or any Crown corporation, agency or wholly-owned entity of the
Government of Canada or of the government of a province or territory of Canada,
(f)
a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de l’île de
Montréal or an intermunicipal management board in Québec,
(g)
any national, federal, state, provincial, territorial or municipal
government of or in any foreign jurisdiction, or any agency of that government,
(h)
a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a pension commission or
similar regulatory authority of a province or territory of Canada,
(i)
a person or company that is recognized or designated by the Commission as
an accredited investor,
(j)
such other persons or companies as may be prescribed by the regulations.
Under NI 31-103, “permitted client” means
any of:
(a)
a Canadian financial institution or a Schedule III bank;
(b)
the Business Development Bank of Canada incorporated under the Business
Development Bank of Canada Act (Canada);
(c)
a subsidiary of any person or company referred to in paragraph (a) or
(b), if the person or company owns all of the voting securities of the
subsidiary, except the voting securities required by law to be owned by
directors of the subsidiary;
(d)
a person or company registered under the securities legislation of a
jurisdiction of Canada as an adviser, investment dealer, mutual fund dealer or
exempt market dealer;
(e)
a pension fund that is regulated by either the federal Office of the
Superintendent of Financial Institutions or a pension commission or similar
regulatory authority of a jurisdiction of Canada or a wholly-owned subsidiary of
such a pension fund;
(f)
an entity organized in a foreign jurisdiction that is analogous to any of
the entities referred to in paragraphs (a) to (e);
(g)
the Government of Canada or a jurisdiction of Canada, or any Crown
corporation, agency or wholly-owned entity of the Government of Canada or a
jurisdiction of Canada;
(h)
any national, federal, state, provincial, territorial or municipal
government of or in any foreign jurisdiction, or any agency of that government;
(i)
a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de l’île de
Montréal or an intermunicipal management board in Québec;
(j)
a trust company or trust corporation registered or authorized to carry on
business under the Trust and Loan Companies Act (Canada) or under comparable
legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on
behalf of a managed account managed by the trust company or trust corporation,
as the case may be;
(k)
a person or company acting on behalf of a managed account managed by the
person or company, if the person or company is registered or authorized to carry
on business as an adviser or the equivalent under the securities legislation of
a jurisdiction of Canada or a foreign jurisdiction;
(l)
an investment fund if one or both of the following apply:
(i)
the fund is managed by a person or company registered as an investment
fund manager under the securities legislation of a jurisdiction of Canada;
(ii)
the fund is advised by a person or company authorized to act as an
adviser under the securities legislation of a jurisdiction of Canada;
(m)
in respect of a dealer, a registered charity under the Income Tax Act
(Canada) that obtains advice on the securities to be traded from an eligibility
adviser, as defined in section 1.1 of National Instrument 45-106— Prospectus
Exemptions, or an adviser registered under the securities legislation of the
jurisdiction of the registered charity;
(n)
in respect of an adviser, a registered charity under the Income Tax Act
(Canada) that is advised by an eligibility adviser, as defined in section 1.1 of
National Instrument 45-106—Prospectus Exemptions or an adviser registered under
the securities legislation of the jurisdiction of the registered charity;
(o)
an individual who beneficially owns financial assets, as defined in
section 1.1 of National Instrument 45-106—Prospectus Exemptions, having an
aggregate realizable value that, before taxes but net of any related
liabilities, exceeds CAD$5 million;
(p)
a person or company that is entirely owned by an individual or
individuals referred to in paragraph (o), who holds the beneficial ownership
interest in the person or company directly or through a trust, the trustee of
which is a trust company or trust corporation registered or authorized to carry
on business under the Trust and Loan Companies Act (Canada) or under comparable
legislation in a jurisdiction of Canada or a foreign jurisdiction;
(q)
a person or company, other than an individual or an investment fund, that
has net assets of at least CAD$25 million as shown on its most recently prepared
financial statements;
(r)
a person or company that distributes securities of its own issue in
Canada only to persons or companies referred to in paragraphs (a) to (q);
Where:
“bank” means a
bank named in Schedule I or II of the Bank
Act (Canada);
“Canadian financial institution” means:
(a)
an association governed by the Cooperative Credit Associations Act
(Canada) or a central cooperative credit society for which an order has been
made under section 473(1) of that Act; or
(b)
a bank, loan corporation, trust company, trust corporation, insurance
company, treasury branch, credit union, caisse populaire, financial services
cooperative, or league that, in each case, is authorized by an enactment of
Canada or a jurisdiction of Canada to carry on business in Canada or a
jurisdiction of Canada;
“director” means:
(a)
a member of the board of directors of a company or an individual who
performs similar functions for a company, and
(b)
with respect to a person that is not a company, an individual who
performs functions similar to those of a director of a company;
“eligibility adviser” means:
(a)
a person that is registered as an investment dealer and authorized to
give advice with respect to the type of security being distributed, and
(b)
in Manitoba, also means a lawyer who is a practicing member in good
standing with a law society of a jurisdiction of Canada or a public accountant
who is a member in good standing of an institute or association of chartered
accountants, certified general accountants or certified management accountants
in a jurisdiction of Canada provided that the lawyer or public accountant must
not:
(i)
have a professional, business or personal relationship with the issuer,
or any of its directors, executive officers, founders, or control persons; and
(ii)
have acted for or been retained personally or otherwise as an employee,
executive officer, director, associate or partner of a person that has acted for
or been retained by the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
“financial assets” means:
(a)
cash,
(b)
securities, or
(c)
a contract of insurance, a deposit or an evidence of a deposit that is
not a security for the purposes of securities legislation;
“foreign
jurisdiction” means a country other than Canada or a political subdivision
of a country other than Canada;
“fully managed
account” means an account of a client for which a person makes the
investment decisions if that person has full discretion to trade in securities
for the account without requiring the client’s express consent to a transaction;
“investment fund”
has the same meaning as in National Instrument 81-106—Investment Fund Continuous Disclosure;
“jurisdiction”
means a province or territory of Canada except when used in the term “foreign
jurisdiction”;
“local jurisdiction”
means, in a national instrument or multilateral instrument adopted or made by a
Canadian securities regulatory authority, the jurisdiction in which the Canadian
securities regulatory authority is situated;
“person” includes
(a)
an individual,
(b)
a corporation,
(c)
a partnership, trust, fund and an association, syndicate, organization or
other organized group of persons, whether incorporated or not, and
(d)
an individual or other person in that person’s capacity as a trustee,
executor, administrator or personal or other legal representative;
“regulator”
means, for the local jurisdiction, the person referred to in Appendix D of
National Instrument 14-101—Definitions;
“related liabilities” means:
(a)
liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets; or
(b)
liabilities that are secured by financial assets;
“Schedule III bank”
means an authorized foreign bank named in Schedule III of the
Bank Act (Canada);
“securities
legislation” means, for the local jurisdiction, the statute and other
instruments listed in Appendix B of National Instrument 14-101—Definitions;
“securities
regulatory authority” means, for the local jurisdiction, the securities
commission or similar regulatory authority listed in Appendix C of National
Instrument 14-101—Definitions;
“spouse” means,
an individual who:
(a)
is married to another individual and is not living separate and apart
within the meaning of the Divorce Act
(Canada), from the other individual,
(b)
is living with another individual in a marriage-like relationship,
including a marriage-like relationship between individuals of the same gender,
or
(c)
in Alberta, is an individual referred to in paragraph (a) or (b), or is
an adult interdependent partner within the meaning of the
Adult Interdependent Relationships Act (Alberta);
“subsidiary”
means an issuer that is controlled directly or indirectly by another issuer and
includes a subsidiary of that subsidiary; and
“voting security”
means any security other than a debt security of an issuer carrying a voting
right either under all circumstances or under some circumstances that have
occurred and are continuing.
An issuer is considered to be affiliated with another issuer
if:
(a)
one of them is the subsidiary of the other; or
(b)
each of them is controlled by the same person.
A person is considered to beneficially own securities that:
(a)
for the purposes of Saskatchewan, British Columbia, Nova Scotia,
Newfoundland and Labrador, and Prince Edward Island securities law, are
beneficially owned by:
(i)
an entity controlled by that person; or
(ii)
an affiliate of that person or an affiliate of an entity controlled by
that person.
(b) for the purposes of
Alberta securities law, are beneficially owned:
(i)
by an issuer controlled by that person,
(ii)
by an affiliate of an issuer described in subsection (i),
(iii)
by an affiliate of that person, or
(iv)
through a trustee, legal representative, agent or other intermediary of
that person.
(c) for the purposes of
Ontario, Manitoba and New Brunswick securities law, are beneficially owned by
(i)
an entity controlled by the person or by an affiliate of such entity; or
(ii)
an affiliate of that person;
A person (first person) is considered to control another
person (second person) if:
(a)
the first person, directly or indirectly, beneficially owns or exercises
control or direction over securities of the second person carrying votes which,
if exercised, would entitle the first person to elect a majority of the
directors of the second person, unless that first person holds the voting
securities only to secure an obligation;
(b)
the second person is a partnership, other than a limited partnership, and
the first person holds more than 50% of the interests of the partnership; or
(c)
the second person is a limited partnership and the general partner of the
limited partnership is the first person.