The PRU enhances investor protection measures in several ways, including as follows:

The PRU includes additional commitments from a CTP to hold client assets (including cash, securities, and crypto assets that are not securities): separate and apart from its own property; in trust for the benefit of clients; in the case of cash, in a designated trust account or an account designated for the benefit of clients with a Canadian custodian or a Canadian financial institution; and in the case of crypto assets, in a designated account in trust or in an account designated for the benefit of clients with a custodian within the definition of “Acceptable Third-party Custodian” (as defined in the PRU).
Under the PRU, a CTP is expected to provide CSA staff with evidence of meaningful compliance systems and corporate governance controls with respect to the prohibition from pledging, re-hypothecating, or otherwise using crypto assets held on behalf of clients.
While CTPs were previously permitted to offer margin, credit, or other forms of leverage to “permitted clients” (as defined in National Instrument 31-103), the PRU prohibits CTPs from offering margin, credit, or other forms of leverage to any client in connection with the trading on a CTP of crypto contracts or crypto assets.
As part of the account opening process, CTPs are required to conduct an assessment as to whether an account to trade in crypto assets is appropriate or not, and CTPs have to assess whether investors have an adequate level of knowledge in investing in and understanding of the risks associated with the trading of crypto assets and volatility of the market, as well as their ability to tolerate such risks. This assessment helps prevent inexperienced or uninformed investors from engaging in high-risk trades that may not align with their investment objectives or risk tolerance.
The PRU mandates CTPs to maintain clear and accurate communication with clients and provide clients with adequate information and disclosures. By providing timely information and disclosures about the relationship between the CTP and clients, information about the crypto assets offered on the platform, and on regulatory changes, platform updates, and potential risks, investors can make well-informed decisions and stay updated on significant developments.
The PRU requires CTPs to comply with other specific regulatory standards, which include measures to prevent fraud, safeguard user funds, and maintain operational transparency, such as the retention of a chief compliance officer during the pre-registration process.
The list above does not reflect all of the measures under the provisions of a PRU. For more information about PRUs, see a list of the CTPs that have entered into a PRU with their principal regulator to continue operations while their application for registration is reviewed here.

By adhering to these enhanced measures, CTPs offer investors a safer, transparent, and more secure trading environment, with which the CSA aims to prevent or limit future fraudulent activities, unethical practices, and potential security breaches.

Regulatory & Compliance

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