What changes will users see as a result of the PRU and when will they be implemented?

As part of our commitment to regulatory compliance and ensuring a safe trading environment, we are implementing certain investor protection measures in connection with the Pre-registration Undertaking (PRU) dated March 23, 2023, that Ndax Canada Inc. (Ndax, we, us, or our) entered into in favor of the Alberta Securities Commission and the other members of the Canadian Securities Administrators. In this support article, we will go through some of the specific changes resulting from the PRU and provide you with an overview of when these changes will be implemented.

Implementation: June 21, 2023

As part of the PRU, we are introducing an appropriateness questionnaire. This questionnaire helps us determine if an Ndax account is appropriate for you based on your financial position, investment objectives, experience, risk tolerance, and other factors. By completing the appropriateness questionnaire, you will help us ensure that our services align with your specific needs and circumstances. However, please note that Ndax will not provide recommendations or advice to you with respect to your account or your investments in crypto assets.

To help our users stay informed on their investments and be able to take action to protect their portfolios from excessive losses, we will be implementing loss limits. The loss limit will vary based on your risk tolerance, trading experience, financial position, and other relevant factors. The unrealized loss limit will be calculated daily, and we will inform you when your portfolio depreciates by the loss limit percentage established at the time of account opening.

Ndax will not take any action on your account and will not liquidate your holdings. This measure is an early warning indicator for users to review any holdings in their accounts and to take appropriate action to prevent any further losses. Ndax does not provide any advice but would encourage users to review their portfolio when a loss limit notification is sent and take action if they see fit and necessary at that time.

To reduce a user’s risk exposure, some of the users may have investment limits applied to their accounts. The investment limit is set at a maximum of $30,000 in net acquisition cost. This means that the total value of crypto assets (with a few exceptions, please see below) acquired within the preceding 12 months should not exceed $30,000. It is important to note that the investment limit applies to users who are residents of specific provinces and territories, namely:

• Alberta
• New Brunswick
• Newfoundland and Labrador
• Nova Scotia
• Ontario
• Prince Edward Island
• Saskatchewan
• Northwest Territories
• Nunavut
• Yukon

However, the investment limit does not apply to users who are residents of British Columbia, Manitoba, and Québec. Users residing in these provinces do not have specific investment limits imposed on them.  

Once the investment limit is reached, you will be notified, and you will not be able to make any further investments. The limit is calculated based on your transactions in the rolling twelve-month period. Once the net acquisition cost in this period falls below the limit, you will be able to acquire additional crypto assets that at subject to the investment limit. This feature is designed to protect your funds and you from unnecessary risk exposure and to promote responsible trading practices.  

The investment limit does not apply to Bitcoin, Ethereum, and Litecoin. There are no specific limits for these three widely recognized crypto assets. Therefore, users can freely acquire and trade Bitcoin, Ethereum, and Litecoin without being subject to the investment limit.

The Canadian Securities Administrators have not yet indicated which value-referenced crypto assets (also referred to as stablecoins) will be able to be traded on platforms in Canada. If USDC is permitted, it is expected that the investment limit will not apply to it.

Transparency is a vital element of building a trusted crypto trading platform. As part of our commitment to transparency, we will provide users with detailed information on our relationship with users; how our users’ assets are custodied (including how crypto assets are held on Ndax’s self-custody solution); how the Ndax platform operates; the risks in trading in crypto contracts and crypto assets; and on the crypto assets and value-referenced crypto assets offered on the Ndax platform.

Other important information you need to know about our relationship with users, our service offering, and our commitment to users is contained in other documents and materials that are provided or made available to you. These include our User Agreement that you enter into on our website or mobile application and the other documentation that you complete and receive in connection with your account with us, our Privacy Policy, the Risk Statement, the Self-Custody Disclosure Statement, the Conflicts of Interest Statement, and the periodic reporting and updates about changes to the information that will be provided to you from time to time.

The implementation of the PRU brings significant changes aimed at enhancing user experience, strengthening security, and promoting responsible trading practices. The additions to the information we collect from users, the introduction of the appropriateness assessment, investment and loss limits, and enhanced transparency measures through disclosures are all designed with your best interests in mind. We are committed to providing you with a safe and transparent trading environment.

We will communicate with you about these changes every step of the way. If you have any questions or concerns about the PRU or any other aspect of the Ndax platform, our dedicated customer support team is available to assist you.

Please note that Ndax Canada Inc. has submitted an application for registration under securities legislation in Canada, but is not currently registered, and is operating under the provisions of a pre-registration undertaking (PRU) dated March 23, 2023, entered into favor of the Alberta Securities Commission and the other members of the Canadian Securities Administrators. There can be no assurance that Ndax will be registered and if it fails to become registered in any province or territory in Canada, it will promptly cease carrying on registrable activity in such province or territory.