7. (1) In this Part, “active assets” means money and the market value of assets readily convertible into money; “adjusted liabilities” means total liabilities minus, without duplication, the sum of, (a) cash, (b) debit balances with deposit institutions, (c) the cash surrender value of life insurance where the registrant is the beneficiary, (d) the market value of securities that the registrant owns or has contracted to purchase, other than by way of commodity futures contract, and that have a margin rate of 5 per cent or less, (e) interest accrued to the registrant with respect to the securities referred to in clause (d), and (f) the market value of securities that have a margin rate of 5 per cent or less, (i) included in non-segregated accounts of customers, partners, shareholders or dealers, or (ii) held as collateral for secured loans receivable, not exceeding the debit balance of the account or the secured loan receivable; “anniversary date” means the day and month on which the current registration or renewal of registration was granted, but where any doubt exists, such date shall be determined by the Director; “associate”, where used to indicate a relationship with any person or company, means, (a) any company of which such person or company beneficially owns, directly or indirectly, voting securities carrying more than 10 per cent of the voting rights attached to all voting securities of the company for the time being outstanding, (b) any partner of that person or company, (c) any trust or estate in which such person or company has a substantial beneficial interest or as to which such person or company serves as trustee or in a similar capacity, (d) any relative of that person who resides in the same home as that person, (e) any person who resides in the same home as that person and to whom that person is married or with whom that person is living in a conjugal relationship outside marriage, or (f) any relative of a person mentioned in clause (e) who has the same home as that person; “Canadian Commodity Futures Examination” means an examination relating to the Canadian Commodity futures industry that has been prepared and is administered by the Canadian Securities Institute and is so designated by that Institute; “Commodity Supervisors’ Examination” means an examination relating to the supervision of a dealer’s business that has been prepared by and is administered by the Canadian Securities Institute and is so designated by that Institute; “dealer’s covering transaction” means a trade by a registered dealer in a commodity under a commodity futures contract or the acquisition by a registered dealer of a commodity futures option to enter into a commodity futures contract for the purpose of offsetting a price risk incidental to the dealer’s ownership or cash or spot purchases or sales of a commodity, where the dealer, in relation to the commodity under the commodity futures contract, (a) assumes or acquires the right to assume, (i) a short position that offsets the dealer’s ownership or purchase at a fixed price of, (A) a like quantity of the same commodity that the dealer is obliged to deliver under the commodity futures contract, or (B) an equivalent quantity of any other commodity, if the fluctuations in value of that commodity are substantially related to the fluctuations in value of the commodity that the dealer is obliged to deliver under the commodity futures contract, or (ii) a long position that offsets the dealer’s forward sale at a fixed price of, (A) a like quantity of the same commodity that the dealer is obliged to take delivery of under the commodity futures contract, or (B) an equivalent quantity of any other commodity, if the fluctuations in value of that commodity are substantially related to the fluctuations in value of the commodity that the dealer is obliged to take delivery of under the commodity futures contract, and (b) effects liquidating trades in relation to positions assumed in the circumstances set out in clause (a); “deposit institution” means, (a) a bank to which the Bank Act (Canada) applies, (b) a loan corporation or trust corporation registered under the Loan and Trust Corporations Act, (c) a credit union or central within the meaning of the Credit Unions and Caisses Populaires Act, 2020; and (d) a member commercial bank of the Federal Reserve System of the United States of America; “director”, where used in relation to a person, includes a person acting in a capacity similar to that of a director of a company; “financial institution” means, (a) the Government of Canada, the government of any province or territory of Canada, any municipal corporation, crown corporation or public board or commission in Canada, (b) the Bank of Canada, a bank to which the Bank Act (Canada) applies, any Quebec savings bank, and the pension funds of such banks, (c) a trust corporation or insurance company that is licensed to do business in Canada and has a minimum paid up capital and surplus of $5,000,000, and the pension funds of such companies, (d) a credit union or central with a minimum paid up capital and surplus of $5,000,000, (e) a mutual fund with net assets of $5,000,000, and (f) a company, other than a dealer, having a minimum net worth of $25,000,000 on the last audited statement of financial position of the company, if the statement of financial position is available for inspection by the Commission, and any trusteed pension plan of such a company; “futures commission merchant” means a dealer; “liquid capital” means the amount by which active assets exceed the sum of total liabilities, but liquid capital may be increased by adding, (a) the loan value of any securities delivered pursuant to a subordinated loan agreement in the form prescribed by the Commission that are not included in the accounts, and (b) non-current liabilities fully secured by mortgages on real estate owned by the registrant; “loan value” means the market value of such securities less the applicable margin requirements; “margin”, “margin rate” and “margin requirements”, where used with respect to, (a) contracts, other than contracts entered into to effect a dealer’s covering transaction, means the minimum dollar amount per contract required under the rules and regulations of the commodity futures exchange on which the contract was entered into or required by the Commission that must be deposited with a member of the commodity futures exchange for the purpose of ensuring performance of obligations under the contract, and includes “original margin” or “initial margin”, being the amount that must be deposited on entering the contract, and “variation margin”, being the amount that must be deposited by a party to the contract to restore margin on deposit to original margin or initial margin when the margin on deposit falls to or under the required maintenance level because of adverse movement in the price of the commodity, (b) cash commodities, including securities and not including the currencies of Canada and the United States of America, means, (i) the margin, margin rate or margin requirements established for the commodity by the Toronto Stock Exchange under by-laws of the Exchange, or (ii) where by-laws referred to in subclause (i) are not applicable, 5 per cent of the market value of the commodity, if the owner of the commodity is a party to a contract representing a short hedge for a like quantity of the commodity, or 20 per cent of the market value of the commodity if the owner is not a party to such a contract; “margin deficiency”, where used in relation to a customer’s account, including a customer’s account in a group of two or more customers’ accounts for which trades are effected through an omnibus account, means, for the purpose of calculating net free capital, the amount by which deposits in a customer’s account are, at any time, below, (a) the maintenance level of deposits established by a commodity futures exchange or clearing house for the account, or (b) where a maintenance level is not established for the account, the original margin or initial margin established by a commodity futures exchange for the account; “market value”, where used with respect to, (a) a commodity futures contract, means the settlement price on the relevant date or last trading day prior to the relevant date, (b) a security, means, (i) where a security is listed and posted for trading on a stock exchange, (A) the bid price, or (B) if the security is sold short, the ask price, as shown on the exchange quotation sheets as of the close of business on the relevant date or last trading day prior to the relevant date, as the case may be, subject to an appropriate adjustment where an unusually large or unusually small quantity of securities is being valued, and (ii) where a security is not listed and posted for trading on a stock exchange, a value determined in accordance with subsection (3); “minimum free capital” means the applicable amount determined in accordance with section 14; “National Commodity Futures Examination” means an examination relating to the commodity futures industry that has been prepared by the Chicago Board of Trade and is administered in the United States of America by the National Association of Securities Dealers, Inc. and is administered in Canada by the Canadian Securities Institute; “net free capital” means liquid capital after deducting, (a) the amount required to provide full margin for, (i) cash commodities, other than securities, owned by the registrant, (ii) securities owned by the registrant and securities sold short by the registrant, (iii) firm trading accounts, and (b) the amount sufficient to provide for any margin deficiencies on, (i) secured loans receivable, (ii) customers’ accounts, (iii) partners’ or shareholders’ accounts, other than trading, (iv) secured loans payable by the registrant if the collateral is held by other than the registrant or a financial institution, and (v) any other liquid capital items; “omnibus account” means an account carried by a dealer for another dealer in which the transactions of two or more persons or companies are combined and effected in the name of the second mentioned dealer without disclosure of the identity of such persons or companies; “total liabilities” means all liabilities including, (a) adequate provision for income taxes, and (b) other accruals, but excluding, (c) debts, the payment of which is postponed in favour of other creditors of the registrant pursuant to a subordination agreement in form approved by the Commission, and (d) deferred income taxes relating to non-active assets; “working capital” means the excess of current assets over current liabilities determined in accordance with generally accepted accounting principles.  R.R.O. 1990, Reg. 90, s. 7 (1); O. Reg. 321/98, s. 1; O. Reg. 109/00, s. 1; O. Reg. 344/05, s. 1; O. Reg. 490/10, s. 2; O. Reg. 117/22, s. 1. (2) For the purposes of this Regulation, where a recommendation has been made in the Handbook of the Canadian Institute of Chartered Accountants which is applicable in the circumstances, the terms “generally accepted accounting principles”, “auditor’s report” and “generally accepted auditing standards” mean the principles, report and standards, respectively, recommended in the Handbook.  R.R.O. 1990, Reg. 90, s. 7 (2). (3) The market value of a security not listed and posted for trading on a stock exchange shall be determined as follows: 1. Subject to paragraphs 2, 3 and 4, the registrant shall assign a reasonable value on the basis of values shown on published market reports or inter-dealer quotation sheets on the relevant date or the last trading day prior to the relevant date. 2. The registrant may vary a value from that shown on published market reports or inter-dealer quotation sheets where, in light of all the circumstances, some other value would be more appropriate. 3. The Director may require that a different value from that determined under paragraph 1 or 2 be assigned, where in light of all the circumstances, some other value would be more appropriate. 4. Where no published market report or inter-dealer quotation sheet exists with respect to the security, the security shall be assigned a market value of zero unless the Director agrees otherwise.  R.R.O. 1990, Reg. 90, s. 7 (3). (4) A company shall be deemed to be an affiliate of another company if one of them is the subsidiary of the other or if both are subsidiaries of the same company or if each of them is controlled by the same person or company.  R.R.O. 1990, Reg. 90, s. 7 (4). (5) A company shall be deemed to be controlled by another person or company or by two or more companies if, (a) voting securities of the first-mentioned company carrying more than 50 per cent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of the other person or company or by or for the benefit of the other companies; and (b) the votes carried by such securities are entitled, if exercised, to elect a majority of the board of directors of the first-mentioned company.  R.R.O. 1990, Reg. 90, s. 7 (5). (6) A company shall be deemed to be a subsidiary of another company if, (a) it is controlled by, (i) that other, or (ii) that other and one or more companies each of which is controlled by that other, or (iii) two or more companies each of which is controlled by that other; or (b) it is a subsidiary of a company that is that other’s subsidiary.  R.R.O. 1990, Reg. 90, s. 7 (6). Categories of Registration