A firm that engages in an activity other than the ones for which it is registered must follow certain rules. This page will help you understand what is considered “another activity” and the related rules.
The AMF considers “another activity” to be any activity that a firm engages in with the public, other than those related to its registration as a firm under the Act respecting the distribution of financial products and services
This link will open in a new window (Distribution Act) and its regulations. This activity may or may not be remunerated and may be carried on for a specified or unspecified period.
Activities carried on in the securities sector, when they are regulated by the AMF, do not constitute another activity. In such cases, the firm must comply with the rules set out in the Distribution Act and Securities ActThis link will open in a new window and their regulations.
An independent representative who engages in another activity (referred to as an outside activity) must comply with the rules set out in sections 5.1 to 5.5 of the Regulation respecting the pursuit of activities as a representative This link will open in a new window.
A firm may engage in another activity only if it:
- adheres to the compliance rules for the activities it pursues under the Distribution Act and ensures that clients are treated fairly
- ensures that its representatives comply with the Distribution Act and its regulations by, among other things, avoiding conflicts of interest and remaining available to their clients
Firms and their executive officers are required to always act with honesty and loyalty in their dealings with clients.
For firms, this means upholding a high standard of conduct and placing the interests of their clients ahead of their own.
Avoiding confusion
Firms must be transparent, including providing clients with the necessary information enabling them to differentiate their activities as a firm from their other activity.
In cases where a firm can engage in another activity, there must be no risk of confusion with its activities as a firm; it needs to be clear to clients that the products or services offered in the context of the other activity are not regulated by the AMF.
It matters to clients that a firm makes this distinction because they need to know, for example, that:
- they will not be able to use the AMF’s conciliation or mediation services to settle a dispute arising from a complaint related to services provided in the context of another activity
- they may not be protected by the Fonds d’indemnisation des services financiers (financial services compensation fund)
Firms must ensure that their activities as a firm are carried on independently and separately from the other activity.
If there is any risk of confusion, the firm may need to discontinue the other activity that is the potential source of confusion. The firm may also need to transfer the other activity to a separate business with a different visual identity.
A firm’s professional liability insurer must be informed that the firm is engaged in another activity.
End of the insightExamples
Insurance of persons and start-up services
Mr. Leclerc would like to go into business. He notes that AssurenBloc, a firm in insurance of persons, also offers assistance for start-ups. Because he has already built a relationship of trust with the firm, Mr. Leclerc retains its services for his plans to start a business. However, this type of service is not among the services for which the firm is registered and is therefore not regulated by the AMF. This needs to be made clear to Mr. Leclerc.
Mortgage brokerage and financial recovery services
Ms. Gagnon has financial problems. She sees an ad for PRÊTONCRÉDIT, which is offering financial recovery services. The employee she contacts informs her that the company also offers mortgage brokerage services and can help her get better mortgage rates. Ms. Gagnon tells the employee that she does not own a home and therefore does not need mortgage brokerage services.
Even though she does not require mortgage brokerage services, PRÊTONCRÉDIT needs to make sure Ms. Gagnon is informed that the financial recovery service is not an AMF-regulated activity.
Damage insurance and extended warranties
After purchasing automobile insurance from Assurauto, Ms. Champagne speaks with a damage insurance representative attached to the firm. The representative tells her that he can offer her various warranties for her vehicle (for example, an extended warranty for certain parts and a warranty covering mechanical failure).
It is not clear to Ms. Champagne that Assurauto is not acting as a damage insurance firm when it offers her the warranty products. As a result, similarities between the insurance products and the warranty products are creating confusion for Ms. Champagne.
Damage insurance and car wash services
Mr. Côté wants to purchase insurance for his car. He visits the Assurauto website and notes that the firm also offers car wash services. Mr. Côté understands that neither the insurance firm nor its representatives wash the cars.
After his car has been washed, an employee gives Mr. Côté a receipt bearing the Assurauto logo. This practice is inappropriate because it could create confusion for Mr. Côté.
Mortgage brokerage and mortgage loans
Mr. Potvin just bought a condo and wants to obtain a mortgage. He consults the website of PRÊTÀTOUT, which offers mortgage brokerage services and is also a mortgage lender.
In this case, Mr. Potvin needs to understand the nature of the services offered and differentiate between them.
If PRÊTÀTOUT acts as a lender with Mr. Potvin, it needs to make sure he understands that no brokerage activities will be performed and that the services offered to him will not include an employee “shopping around” for a loan for him as is required in the mortgage brokerage sector. In other words, the client needs to understand that he is dealing directly with a lender and that he will not receive any mortgage brokerage services.
PRÊTÀTOUT must ensure there is no confusion between its lender services and its mortgage brokerage services.
Advertising and representations
When firms or their representatives pursue activities governed by the Distribution Act, they must comply with the representation rules. For example:
- A representative must provide their name and title(s) and the name of the firm on whose behalf they are acting
- A firm must always use its name and the title under which it is pursuing its activities
- A firm may not use a trademark, slogan, symbol or anything else that is likely to cause confusion
No firm may present itself as a firm when engaged in another activity.
A firm’s representations (advertising, web page, etc.) may not be used to promote another activity.
End of the warningProtecting client information
A firm’s records relating to its activities as a firm must be kept separately from the records relating to its other activity.
This means establishing a firewall between not only the contents of such records but the individuals with access to them.
The firm may not use client information it collects in the course of its activities pursued under the Distribution Act for purposes of its other activity unless it has obtained the client’s prior consent. A firm seeking consent must receive it in writing after explaining its reasons to the client so that the client can make an informed decision.
The information collected may be subject to the provisions of the Act respecting the protection of personal information in the private sectorThis link will open in a new window. For more information, visit the website of the Commission d’accès à l’information du QuébecThis link will open in a new window.
Quick reference
If you conclude that your firm can engage in another activity while complying with regulations, remember to:
- Remind your representatives of the representation rules.
- Inform your representatives and all your firm’s staff of the measures to be met to avoid confusion between the AMF-regulated activities of the firm and its other, non-AMF-regulated activity.
- Provide clients with all the information they need to differentiate between your activities as a firm and your other activity.
- Indicate to clients that your firm’s other activity is not regulated by the AMF.
- Notify your professional liability insurer that your firm is engaged in another activity.
- Ensure that the investment in time and resources devoted to your firm’s other activity does not adversely affect the conduct of your business as a firm.
Ensure compliance with the rules regarding outside activities engaged in by representatives, if applicable.
Refer to the following pages for more details:
End of the insightImportant - Distribution without a representative
Remember: A firm cannot qualify as a distributor within the meaning of distribution without a representative (sections 408 et seq. of the Distribution Act), because the ordinary business of a distributor must not be in the field of insurance.