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Canada's Investment Landscape - Exempt Market Products

Canada's Investment Landscape - Exempt Market Products

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Published by Stoneset
It has been a very interesting time for not only Stoneset but for all other companies that sell products in the Exempt Market category. These products include, but are not limited to: PPN’s (Principle Protected Notes), Hedge Funds, REIT’s (Real Estate Investment Trusts), Limited Partnerhips and Flow-through shares. Stoneset is a producer of Exempt Market products and as such is bound by the rules and regulations as described in NI 31-103.
It has been a very interesting time for not only Stoneset but for all other companies that sell products in the Exempt Market category. These products include, but are not limited to: PPN’s (Principle Protected Notes), Hedge Funds, REIT’s (Real Estate Investment Trusts), Limited Partnerhips and Flow-through shares. Stoneset is a producer of Exempt Market products and as such is bound by the rules and regulations as described in NI 31-103.

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categoriesBusiness/Law, Finance
Published by: Stoneset on Oct 18, 2010
Copyright:Attribution Non-commercial

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10/18/2010

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Canada¶s new investment landscape - Exempt Market Products sold by ExemptMarket Dealers
 
It has been a very interesting time for not only Stoneset but for all other companies thatsell products in the Exempt Market category. These products include, but are not limitedto: PPN¶s (Principle Protected Notes), Hedge Funds, REIT¶s (Real Estate InvestmentTrusts), Limited Partnerhips and Flow-through shares. Stoneset is a producer of ExemptMarket products and as such is bound by the rules and regulations as described in NI31-103.With a now passed deadline of September 28, 2010, sellers and manufacturers shouldnow be fully compliant. This new landscape affects the various involved parties indiffering ways.
 
I
nvestors:
Prior to the new regulations, those investors interested in purchasing Exempt MarketProducts dealt with organizations or individuals with varying levels of expertise andtraining. While it was possible to connect with a skilled advisor, it was also possible toconnect with someone with little to no training with respect to Exempt Market Products. As of the 28th of September, 2010 anyone selling an Exempt Market product must belicensed. The licensing process is onerous, difficult and embraced by companies likeStoneset who welcome any change that will improve the quality of the consumer experience. Ultimately we believe these changes will improve consumer confidence,increasing our sales volumes and overall market exposure.
 
For Stoneset specifically it allows us to partner with an Exempt Market Dealer (EMD)likeGlobal Exempt Market Solutions. As an Exempt Market Dealer, Global specializesin selling Exempt Market Products. Not only do they handle the sales of our investmentproducts, but they also ensure that those who represent our products are fully licensed,trained and qualified to provide timely and accurate investment information to currentand potential investors.
 
I
nvestment Advisors:
 
For the first time in the history of the Exempt Market in Canada, advisors now require alicense. Obviously this process is not easy and does put a significant amount of pressure on advisors - especially those who are new to the marketplace or who onlyoperate part-time. With that said consumers should take comfort that the ExemptMarket is a safe market place in which to engage, as all the professionals operatingwithin its borders are licensed individuals whose backgrounds have been through athorough vetting process.
 
Not only will sellers of Exempt Market Products be required to have a license but theywill have to operate under the umbrella of a licensed Exempt Market Dealer. Thesedealers have Branch Managers as well as Chief Compliance Officers that have specificduties they must perform in accordance with the new regulations. Both the Branch
 
Manager and the Chief Compliance Officer need to be licensed, although their respective licensing process is significantly more onerous than that of an Advisor. Whatthis means for the consumer is that they will be dealing with a licensed individual and alicensed organization whose purpose is to qualify customers and match those who doqualify to appropriate products.
 
This has brought forth a significant amount of competition in the industry as ExemptMarket Dealers attempt to secure licensed advisors, a product shelf with a variety of reliable and attractive products and the best possible staff for a significant amount of administration that has come as a result of the new laws. Consumers always win whenthis type of competition is present in any marketplace. As a manufacturer of Exempt Market products Stoneset is ideally placed. With the newlaws that recently went into effect the items listed above are all givens. Where we havea distinct advantage, due to our strategic partnership with Global Exempt MarketSolutions, is in training, development and support. Global¶s Chief Compliance Officer isRod Burylo who was not only Advisor of the Year (2004) but is also a published author on the subject. Further to that Global is one of two IFSE licensed organizations that isable to offer a training course for advisors who would like assistance getting their Exempt Market license. This equates to Stoneset having licensed advisors with industryleading training, service and support from an organization whose own leadership has aproven track record.
 
Manufacturers:
 
Typically manufacturers of Exempt Market products, like Stoneset, would allythemselves with advisors that were selling a variety of products. These advisors mightbe independent and they might also be part of a larger group. Some would be licensed(CSC, CFA, etc) and others would not be. The biggest change for Stoneset is that thecompany will no longer be approaching individual advisors. Instead we would approacha licensed Exempt Market Dealer who is responsible for their own advisors, advisor licensing and advisor training.By aligning ourselves with Exempt Market Dealers likeGlobal, it allows Stoneset to concentrate on what we do best; build communities.
 
T
oday
 
The new legislation has changed the Exempt Market landscape and begun the processof nationalizing certain aspects of the securities act. In summary the new regulationshave achieved the following:
 
1. Reformed the way the investment products are distributed to the investor for exempt products.2. Increased the standards of the industry to protect investors and increased theresponsibility of the investment dealers.3. Driven out those who cannot get licensed due to securities violations.

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