Compliance Memo

Compliance Memorandum 2012-08; Documenting Transaction Instructions

For more information, contact:

Compliance Team
compliance@gpwealth.ca

Date Issued:

November 2, 2012

Our most recent MFDA compliance exam identified some weakness with adhering to the
rules relating to the proper documenting of transaction instructions, particularly those
where we rely on a limited trading authority (“LTA”).

It may be a common misconception, that transactions placed under LTA have a lesser level
of required documentation. In fact, LTA transactions should be considered a premium
service level to clients. In return for added client convenience, a financial advisor has
additional requirements – not fewer.

MFDA MR Notice 0035 dated December 10, 2004 serves as a reminder of the
requirements to record with all transactions the following:

  • Orders recommended but not executed;
  • Account Number (Plan ID);
  • Time and Date the instructions were given;
  • For transactions under LTA we must also record the method of communication.

Another area where we have identified weakness stems from LTA transactions which may
be urgent or rushed.

For example, an email from a client requesting a redemption for a specified amount from
an account may not be sufficient on its own to authorize a transaction in an account.

Often, only the amount to be redeemed is specified in the email. You may have had a
phone conversation a few days earlier where investments were selected, but without
additional advisor notes, the email would appear to be evidence of discretionary trading as
the funds being selected for redemption aren’t specified in the email authorization itself.

As a reminder, ensure that you confirm accounts, fund selection and amounts with the
client and have documented these details on the transaction form to avoid any future
problems.

MFDA member regulation notice MR-0078 dated February 22, 2011, reminds us that it is
now mandatory to disclose (and evidence disclosure) fees, charges and taxes applicable to
a transaction. Our new financial account changes form (“FACF”) has a section to record
these amounts but you can also add notes to the Client Contact Record Form (“CCRF”).

Whether a trade is signed or under LTA, you must record the transaction every time and
you must be specific with amounts of DSC, withholding taxes and other fees to meet the
requirement.

It is also important to remember that, for LTA transactions, often the only record of the
conversation is advisor notes. Transactions authorized only by email should include an
email from the advisor to the client specifying any applicable fees or charges.

The requirement to maintain evidence of disclosures may be done most simply on the
FACF or the Order Receipt. Because disclosures provided to clients must be maintained in
the client file – you can reduce paper and keep better records by ensuring disclosures
relating to a transaction are kept on the Order Form for the transaction itself.

Finally, the form previously used to document Limited Trading Authority over Intermediary
Accounts is no longer required and has been removed from the GPWealth.ca website.

As always, if you have any questions or comments, contact the Compliance Department by email at compliance@gpwealth.ca.