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  • BC-2.6 BC-2.6 Disclosure of Information

    • Applicability

      • BC-2.6.1

        This section applies to investment firm licensees in relation to their dealings with all categories of clients, except when stated otherwise.

    • Initial Disclosure Requirement

      • BC-2.6.2

        Investment firm licensees must provide (with respect to regulated investment services), comprehensible information to clients or potential clients on:

        a) Itself and the types of services that it can provide;
        b) Whether it is acting as agent or principal;
        c) Fees, costs and associated charges such as:
        i. The basis or amount of its charges, remuneration and commission for conducting regulated investment services and
        ii. The nature or amount of any other income receivable by it or, to its knowledge, by its associate and attributable to that regulated investment service;
        d) Financial instruments and proposed strategies and appropriate guidance on and warnings of the risks associated with those financial instruments and strategies; and
        e) Information about methods of redress.
        Amended: January 2007

      • BC-2.6.3

        The purpose of BC-2.6.2 is to ensure that clients are reasonably able to understand the nature and risks of the investment service and type of financial instrument that is being offered and, consequently, to take investment decisions on an informed basis. This information may be provided in standard format.

    • Risks

      • BC-2.6.4

        Investment firm licensees must disclose adequate information to all classes of clients about risks underlying the financial instrument that are not readily apparent and which relate to the regulated investment service being provided.

      • BC-2.6.5

        Without prejudice to the scope of the requirement under Rule BC-2.6.2(c), investment firm licensees must provide retail clients with appropriate guidance on, and warnings of, relevant risks when providing regulated investment services, in relation to:

        a) Transactions in illiquid financial instruments;
        b) Leveraged transactions, including asset portfolios or collective investment schemes that have embedded leverage;
        c) Financial instruments subject to high volatility in normal market conditions;
        d) Securities repurchase agreements or securities lending agreements;
        e) Transactions which involve credit, margin payments, or deposit of collateral;
        f) Transactions involving material foreign exchange risk
        g) Interests in real estate; and/or
        h) Islamic financial instruments.
        Amended: January 2007

      • BC-2.6.6

        In relation to transactions involving warrants or derivatives, investment firm licensees must provide retail clients with a written statement that includes explanations of their characteristics, in particular their leverage effect, liquidity and price volatility.

      • BC-2.6.7

        To satisfy Rule BC-2.6.6, with respect to warrants, investment firm licensees should provide retail clients with a statement that includes, at a minimum, the information contained in Paragraph BC-2.12.3.

      • BC-2.6.8

        To satisfy Rule BC-2.6.6, with respect to futures contracts, investment firm licensees should provide retail clients with a statement that includes, at a minimum, the information contained in Paragraph BC-2.12.4.

      • BC-2.6.9

        To satisfy Rule BC-2.6.6, with respect to option transactions, investment firm licensees should provide retail clients with a statement that includes, at a minimum, the information contained in Paragraphs BC-2.12.5 and BC-2.12.6.

      • BC-2.6.10

        In relation to a transaction in a financial instrument that is not readily realisable, investment firm licensees must:

        (a) Warn the retail client that there is a restricted market for such financial instruments, and that it may therefore be difficult to deal in the financial instrument or to obtain reliable information about its value; and
        (b) Disclose any position knowingly held by the investment firm licensee or any of its associates in the financial instrument or in a related financial instrument.
        Amended: January 2007

      • BC-2.6.11

        The risk warning given to a retail client or potential retail client must be given due prominence in all related materials and must not be concealed or masked in any way by the wording, design or format of the information provided.

      • BC-2.6.12

        Risk warnings provided to a retail client or potential retail client about warrants or derivatives must make clear that the instrument can be subject to sudden and sharp falls in value. Where the retail client may not only lose his entire investment but may also be required to pay more later, he must also be warned about this fact and the possible obligation to provide extra funding.

    • Cancellation and Withdrawals

      • BC-2.6.13

        Investment firm licensees must disclose in their terms of business the existence or absence of a right to cancel as per the provisions of Paragraph BC-2.4.2.

      • BC-2.6.14

        Investment firm licensees must pay due regard to the interests of their clients and treat them fairly.

    • Records

      • BC-2.6.15

        Investment firm licensees must keep a record of statements issued in compliance with Rule BC-2.6.6, and of other information or recommendations provided to their clients, and be able to demonstrate to the CBB compliance with this Section.

        Amended: January 2007