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ARTICLE · 11 AUGUST 2006

CSA Propose Stiffer Rules on Soft Dollar Arrangements and Best Execution

Stikeman Elliott LLP
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The Canadian Securities Administrators have recently published for comment proposed National Instrument 23-102 – Use of Client Brokerage Commissions as Payment for Order Execution Services or Research (the Instrument) and its Companion Policy 23-102 CP (the Policy).

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Article by Jennifer Northcote, Simon Romano & Kathleen Ward

The Canadian Securities Administrators have recently published for comment proposed National Instrument 23-102 – Use of Client Brokerage Commissions as Payment for Order Execution Services or Research (the Instrument) and its Companion Policy 23-102 CP (the Policy).

Under soft dollar arrangements, advisers receive equity research or other brokerage services in exchange for executing trades through a particular broker. Ontario and Quebec currently both have policies regulating soft dollar transactions: pursuant to OSC Policy 1.9 – Use by Dealers of Brokerage Commissions as Payment for Goods or Services other than Order Execution Services – ("Soft Dollar Deals") and Quebec’s Local Policy Statement Q-20, soft dollar commissions earned on brokerage transactions may not be used as payment for goods or services provided to a portfolio manager other than "order execution services" or "investment decision-making services".

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