The Securities Commission granted Virgo CX Inc. (the Filer) time-limited exemptive relief from certain regulatory requirements, subject to conditions, to facilitate the operation of its crypto asset trading platform (CTP) and distribution of Crypto Contracts. The relief includes exemptions from the prospectus requirement, suitability requirement, and trade reporting requirements under the Securities Act and related instruments.
Key points of the decision:
1. The Filer is allowed to distribute Crypto Contracts without a prospectus and without conducting trade-by-trade suitability assessments for clients.
2. The relief is conditional on the Filer adhering to investment limits, providing detailed risk disclosures, and fulfilling reporting obligations.
3. The Filer must register as a restricted dealer and seek membership with the Investment Industry Regulatory Organization of Canada (IIROC).
4. The relief is time-limited, expiring two years from the date of the decision.
5. The Filer must comply with all terms, conditions, restrictions, and requirements applicable to registered dealers.
6. The Filer must hold at least 80% of client crypto assets with a qualified custodian and ensure appropriate insurance and risk management practices.
7. The Filer must provide clients with a Risk Statement and obtain electronic acknowledgment of understanding from clients.
8. The Filer must perform an account appropriateness assessment for each client and establish trading limits based on the assessment.
9. The Filer must monitor client activity and provide educational materials on crypto asset trading.
10. The Filer must report aggregate and anonymized account-level data to the Principal Regulator and other securities regulatory authorities regularly.
11. The Filer is not allowed to operate as a marketplace or clearing agency.
The decision is based on the Securities Act, R.S.O. 1990, c. S.5, as amended, and related instruments including Multilateral Instrument 11-102 Passport System, National Instrument 21-101 Marketplace Operation, National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, OSC Rule 91-506 Derivatives: Product Determination, and OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting.
The decision emphasizes that it is tailored to the Filer’s specific circumstances and should not be viewed as a precedent for other applicants. The objective is to foster innovation while ensuring investor protection and the integrity of the capital markets.