This bulletin is to inform you of changes that have been made to the Limited Trade Authorization (“LTA”) Form, as well as changes in HUB Capital Inc. (“HCI”) procedures for approving LTAs. We will also provide you with clarification on when and how LTAs can be used, and provide information and examples on the type and quality of notes that must be kept to detail conversations with the client when using an LTA.
(Please note that LTAs are also referred to as Limited Authorization Forms (“LAFs”) by some regulators and fund companies; however we prefer to use the term LTA.)
Revised LTA Form – Includes Changes to PACs, SWIPs and AWDs
Effective immediately, HCI representatives must now use the revised LTA form, which allows for the set-up and modification of Pre-Authorized Cheque (PAC) plans, Systematic Withdrawal Plans (SWIPs) and Automatic Withdrawals (AWD) plans, for all new clients – and for existing clients who have not previously signed an LTA form.
Existing clients who have previously signed an LTA form are not required to sign the new form, unless the representative/client would like to be able to make changes to PACs, SWIPs or AWDs using an LTA. If you do not wish to be able to make these changes, you will not be required to have the client sign a revised version of the LTA form, and the previous version will remain valid.
LTAs that were sent to clients to sign, or signed by clients but not yet approved by HCI, prior to the release of this bulletin, will not be rejected and the client will not be required to sign the revised version of the LTA – unless the representative/client would like to be able to make changes to PACs, SWIPs, etc.
A copy of the revised LTA with the HUB Capital name/logo is attached to this bulletin. It will also be made available in the Forms section of HUB Capital on HUBlink.
Changes to LTA Approval Procedures with HCI
We are also making changes to the procedure in which LTAs are approved by HCI. Effective immediately, LTAs will be signed and uploaded to Wealthserv at our Head Office in Woodbridge.
Representatives have the option of sending original LTAs either directly to Head Office for approval, or to their regional office – who will then forward the LTAs to Head Office. Please be aware that sending the original LTA to your regional office will result in a delay in the approval of the LTA by HCI.
Once the LTA is signed by HCI it will be scanned and uploaded to the documents tab in RepVision, and the LTA information will be added to the system. The original LTA will then be returned directly to the representative, and must be kept in the representative’s paper client file.
Please note that only LTAs with the original client and representative signatures can be approved by HCI. We cannot accept LTAs that have been faxed or scanned and emailed by the client and/or representative.
Original LTAs should be sent to the following address:
HUB Capital Inc.
3700 Steeles Ave W, Suite 1001
Woodbridge, ON L4L 8M9
Attn: LTA Processing - Elaine Woodyard, Compliance Analyst
Please ensure that you mark on the envelope that it contains LTAs for approval (as indicated above).
Distinguishing Between Old and New Versions of LTAs on Wealthserv
To help in distinguishing what version of the LTA a client has signed, changes have been made in Wealthserv to update the options available when entering the LTA on the system.
Where a client has signed the older version of the LTA (April 2005), and this information is currently entered in Wealthserv, the system will now show the LTA as ‘LTA 04/2005’.
Where a client has signed the revised version of the LTA, which includes PACs, SWIPs and AWDs (December 2013), the LTA will be entered to show that the revised version of the LTA was signed, and the information will appear as ‘LTA 12/2013 (PAC/SWP incl.)
A screen shot of these new descriptions is provided below:
How and When LTAs Can Be Used
LTAs can only be used for client name mutual fund accounts – for both individual and joint accounts. They cannot be used for intermediary accounts (i.e. B2B Bank), nominee accounts, corporate held accounts, “in trust for” account or any other type of accounts.
LTAs cover all existing and future accounts conducted by a client(s). Separate LTAs must be signed for individual and joint accounts. Individual LTAs cannot be used for joint accounts. All joint plan holders must sign one LTA form that can be used for that joint plan only.
An LTA can only be used once it has been signed by HCI. For example, if a client wishes to make a purchase or switch in their account – or start or make a change to a PAC if they have signed the revised LTA - on the same date that they sign an LTA, the client must sign the order ticket/account change form to authorize the trade/change. An LTA cannot be used to affect any trades or changes on an account until it has been signed by an authorized individual with HCI.
The revised LTA form (December 2013) can be used for purchases, redemptions, and switches, as well as to set up and modify PACs, SWPs and AWDs. Where a client has signed the previous version of the LTA (April 2005), only purchases, redemptions and switches can be done without client signature.
An LTA can also be used to make a correction on a trade document that has been signed by the client (e.g. correct a fund code or load type under investment instructions). In this case the representative must call the client to inform them of the correction that is being made and then make the correction on the trade document. The change must be initialed by the rep with a note ‘as per LTA and phone discussion with client on xx/xx/xxxx) and a copy of the amended document must be sent to the client for their records.
LTAs cannot be used for non-financial account changes – i.e. address changes, Dealer/Rep changes – or for one-time PAD forms. LTAs also cannot be used to open new accounts. These applications/forms/instructions, as well as KYCs must always be signed by the client.
LTAs can only be used by the representative indicated on the trading authorization form. They cannot be used by the Branch Manager or another representative who may be covering for the representative while they are on vacation, or when the account is reassigned to another HCI advisor for service. In these cases the client will have to sign the trade form.
Since an LTA is viewed as a legal contract between a specific representative and the client, a new LTA must be completed: i) whenever there is a change in the client’s name; ii) whenever there is a change in representative within the dealer (i.e. a client is reassigned to a new representative or transfers their accounts to a new representative); or whenever there is a change in the representative’s dealer (i.e. the representative transfers his registration to a new dealer and then transfers over his client accounts).
As mentioned above, LTAs cannot be used for B2B (or other intermediary) accounts. However, due to the way in which these accounts are structured, a client signature is not required by the intermediary in order to affect some trades – i.e. purchases, switches or conversions. For these accounts, the representative should indicate ‘Intermediary Account’ on the client signature line and then provide notes indicating the time, date and means by which the client authorization for the trade, as well as confirmation of disclosure of any applicable fees, etc. This can be done either on the trade ticket or on a Client Transaction Notes Form or Limited Trading Authorization (“LTA”) Client Instruction Log, which should be scanned along with the trade ticket. Clients must always sign where a redemption/withdrawal or deregistration is being effected on an account.
For additional policies and procedures regarding LTAs please refer to Section 2.3.2 Limited Trading Authorization (“LTA”) of HCI’s Compliance Policy and Procedure Manual on HUBlink, and IFIC Guidelines for Use of Limited Authorization Form, a copy of which is attached.
Notes and Trades Executed by LTAs
It is important to note that an LTA does not allow for discretionary trading by a representative. The discovery that a representative has traded without express instructions and authorization from the client will result in disciplinary action against the representative, which may include termination by HCI.
To this end, it is vital that representatives maintain proper records (LTA notes) of client trade instructions and authorization, which must include the following information:
- the date, time and manner under which the instructions were given;
- the account number(s) of the client;
- the particulars of the fund(s) to be purchased, redeemed or switched;
- confirmation as to any agreement reached on fees to be paid by the client on the transaction(s) – i.e. FEL commissions, or fees that will be charged to the client on the transaction(s) – i.e. DSC fees and withholding tax;
- confirmation of discussion and review of DSC or LL schedule (if applicable) and trailing fees;
- confirmation of delivery of fund fact document prior to the trade (if applicable); and
- in the case of redemptions, a notation of the instructions as to where the proceeds of the redemption are to be sent, or reinvested.
These LTA notes must be provided along with the trade instructions – either on the order ticket itself, or on a HCI Client Transaction Notes Form or Limited Trading Authorization (“LTA”) Client Instruction Log, which must then be attached to the order ticket and scanned to the client documents.
Attached to this bulletin is a copy of the HCI Client Transaction Notes Form with a sample of notes that we would expect to see provided for a trade involving an LTA. A blank copy of the Limited Trading Authorization (“LTA”) Client Instruction Log is also attached (notes on this form would be similar to the Client Transaction Notes Form). Both forms are available in the Forms section of HUB Capital on HUBlink. (Please note: the information provided on the sample HCI Client Transaction Notes Form can instead be provided on the Order Ticket, under ‘Additional Information’ – in which case a Client Transaction Notes Form/Client Instruction Log is not required to be completed/attached to the order ticket.)
Compliance has an obligation to review a sample of trades completed using a LTA. During our review, if we find that no notes have been provided, or the notes provided are inadequate, a query will be sent to the representative and they will be asked to provide additional information in order to confirm client authorization for the trade(s).
Important note regarding correspondence with clients via email – we understand that many clients, and representatives, prefer to communicate via email for convenience. However, a representative must never rely only on an email from a client as authorization to complete a trade. Whenever you receive instructions from a client via email you must call the client to confirm before proceeding with the trade. We are aware of instances where client emails have been hacked, and representatives have received emails from clients requesting that a redemption be made in their account, with the proceeds sent to a different bank account. When the representatives have contacted the client to confirm their instructions, they have been informed that the client did not send the email and did not want to redeem any of their investments.
Processing Note: A copy of the complete LTA must be provided along with the first trade where a LTA is used. For additional trades, a copy of the last page (‘Instruction Confirmation Notice’ or “ICN”) must be attached to the trade for processing.
For all trades where an LTA is used, we also suggest that representatives confirm back to the client in writing what was discussed and the transaction that occurred, either by email or in a letter to the client. You may also wish to include a copy of the order ticket that was submitted for the client’s files.
HCI encourages representatives to use LTAs where possible. However, we remind you that complete, accurate and detailed notes must be kept regarding your discussions with the client and their authorization to go forward with a trade.
If you have any questions regarding this Bulletin please contact your Regional Compliance Officer or Branch Manager.