The Securities Commission granted an exemption to Fidelity Clearing Canada ULC (FCC) and related investment funds from certain requirements of National Instrument 81-102 Investment Funds (NI 81-102). The relief allows FCC to act as custodian or sub-custodian for crypto assets and related cash of investment funds primarily investing in crypto assets, despite not being an affiliate of a bank or trust company as required by section 6.2 of NI 81-102. Additionally, Fidelity Digital Asset Services, LLC (FDAS), a New York-based trust company, is permitted to act as a sub-custodian for the funds’ crypto assets outside Canada, even though it does not meet the equity requirement of section 6.3 of NI 81-102.
The decision also allows funds to appoint more than one custodian, enabling them to engage FCC for crypto assets and another qualified custodian for other portfolio assets. The relief is subject to conditions, including FCC providing an annual list of funds relying on the decision to the principal regulator and maintaining a minimum equity of $100 million if FDAS’s equity falls below CAD$100 million. FCC must also ensure FDAS has appropriate insurance, risk management policies, and a SOC 2 Type 2 report. The decision expires in two years.
The exemption was granted based on the belief that FDAS’s experience, regulatory oversight, and affiliation with the global Fidelity group make it a suitable sub-custodian for crypto assets, and that the arrangement minimizes risk and is operationally efficient. The decision was made under section 19.1 of NI 81-102, with the Ontario Securities Commission as the principal regulator.