Unlike other dealer types they have less regulation and are not required be a member of a self-regulatory organization such as the Investment Industry Regulatory Organization of Canada (IIROC) but still need to be registered and still have the same know your customer (KYC) requirements as other brokers.
In 2010, the Canadian Securities Administrators (CSA) made the harmonization of the registration rules among the jurisdictions of Canada a key goal.
Pursuant to this goal new national securities regulations were drafted - NI 31-103 to provide uniform requirements and categories of registration for dealers in exempt market securities across Canada.
[2] The Blanket Order provided an exemption to a firm or person that trades in securities (subject to meeting all of the conditions of the Blanket Order) under one of the following capital-raising exemptions in National Instrument 45-106 – Prospectus and Registration Exemptions:[3] Regulation NI 31-103 introduces consistent rules for Exempt Market Dealers concerning proficiency, conduct, capital and compliance requirements and makes it clear that EMDs are subject to the same know-your-client (“KYC”) and suitability requirements as other dealer categories.
[6] The applicable provincial and territorial securities legislation, regulations and rules for any person or firm will generally depend on the jurisdiction of residence of the investor and dealer or adviser and the jurisdiction in which the registerable activity occurs.