Securities Law and Platforms: Staff Notice 21-327

Staff Notice 21-327 is a document from the Canadian Securities Administrators, the umbrella group of Canada's provincial and territorial securities regulators. According to the Canadian Securities Administrators, the notice is dated January 16, 2020. It was among the first official statements to explain when securities law may apply to a platform that trades crypto assets. For a reader, it helps to know what kind of document it is. It is guidance from regulator staff, not a statute passed by a legislature. It explains how existing securities legislation may apply to new activity. It does not create a new set of crypto rules, and it does not decide any single case. Readers who treat it as a final answer will often misread it.

The notice makes a central point about the contract between a user and a platform. According to the Canadian Securities Administrators, securities law may apply to a platform that trades crypto assets, because a user's contractual right to a crypto asset can itself be a derivative, a security or both. In plain words, the thing a user holds on the platform may be a promise from the platform, not the coin itself. The law looks at what the user actually receives. This is why two platforms that look alike on screen can fall on different sides of the line once their terms and arrangements are read. The notice asks readers to look past the interface to the arrangement behind it.

The notice also treats one question as key: does the buyer receive immediate delivery of the asset? According to the Ontario Securities Commission, which publishes the notice, whether delivery is immediate is an important factor in the analysis. Consider a made-up reader named Priya who opens an account on a platform. She places an order and sees a balance. She wonders whether the coin is now in a wallet she controls or whether the platform simply records a claim for her. The notice treats that difference as important. Priya cannot settle it from the screen alone, and she would look at the platform's terms and the regulator's pages. The same question applies to any platform that holds assets for its users.

People often draw the wrong conclusions from this topic. One mistake is to say that crypto is always a security, which the sources do not say. The opposite mistake is to say that crypto is always outside securities law, which they do not say either. The Alberta Securities Commission's investor site states that Alberta securities law applies to some crypto assets but not all, depending on whether the asset is itself a security or derivative. Another error is to treat staff guidance as if it were a statute, or to treat an old notice as the whole of the current rules. The notice is a snapshot of staff thinking on a date, and later documents may add to it or refine it.

A reader can check a few things alone. What is the date of the document being read, and has anything replaced it? Is the document guidance, a rule or a decision? Does the platform say whether the user holds the coin or a claim against the platform? Does the regulator in your province publish its own page on crypto assets? According to the Ontario Securities Commission, crypto is neither always a security nor always outside securities law, and the platform's facts decide. Reading the notice itself is better than reading a summary, because the wording carries the careful limits that summaries tend to drop. Official pages also show when a document was last updated.

The sources below are the notice and two regulator pages that discuss it. This article explains what the notice says. It does not apply the notice to any particular platform, and it cannot say whether a given product is a security. Rules in this area change, and regulators publish updates, so check the date on every page. The provincial securities regulator can explain which of its pages are current. This page is general education, not legal or financial advice, and it does not recommend any platform or product. For questions about a particular platform, the regulators named below are the right place to ask.

• Staff Notice 21-327 is regulator staff guidance dated January 16, 2020, not a statute
• Whether the buyer gets immediate delivery of the asset is treated as a key question
• Crypto is neither always a security nor always outside securities law; the platform's facts decide