PilotRock Investment Partners GP, LLC -- s. 80 of the CFA

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirements of paragraph 22(1)(b) of the CFA granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C.20, AS AMENDED

(the CFA)

AND

IN THE MATTER OF

PILOTROCK INVESTMENT PARTNERS GP, LLC

ORDER

(Section 80 of the CFA)

UPON the application (the Application) of PilotRock Investment Partners GP, LLC (the Sub-Adviser) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that the Sub-Adviser (including its directors, officers and employees) be exempt, for a period of five years, from the requirements of paragraph 22(1)(b) of the CFA in acting as an adviser for Sigma Analysis & Management Ltd. (the Principal Adviser) and an investment account of Downsview Managed Account Platform Inc. (the Investment Account) in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Sub-Adviser having represented to the Commission that:

1. The Sub-Adviser is a limited liability company formed under the laws of the State of Delaware.

2. The Sub-Adviser is currently registered as an investment advisor under the Investment Advisers Act of 1940 (U.S.), as amended, and is exempted from registration as a commodity trading adviser or commodity pool operator with the U.S. Commodities Futures Trading Commission.

3. The Principal Adviser is a corporation incorporated under the laws of the Province of Ontario, and is registered under the Securities Act (Ontario) (the OSA) as investment counsel and portfolio manager and as a commodity trading counsel and commodity trading manager under the CFA.

4. Pursuant to the terms of a managed account agreement (the Agreement), Downsview, a corporation incorporated under the laws of the Province of Ontario, has appointed the Sub-Adviser to provide discretionary investment management services in relation to securities for the Investment Account, and has appointed the Principal Adviser to provide discretionary investment management services with respect to commodity futures contracts or commodity futures options (as defined under the CFA) for the Investment Account.

5. In providing investment advice concerning securities to the Investment Account, the Sub-Adviser will rely on the exemption from the requirement to be registered as an adviser under the OSA pursuant to section 7.1 of OSC Rule 35-502 Non-Resident Advisers (Rule 35-502).

6. Pursuant to the Agreement, the Principal Adviser has delegated to the Sub-Adviser by way of a sub-advisory agreement (the Sub-Advisory Agreement), all responsibilities under the Agreement regarding discretionary investment management services in relation to commodity futures contracts or commodity futures options (the Proposed Advisory Services). As sub-adviser to the Principal Adviser, the Sub-Adviser will provide investment advice to the Investment Account with respect to Futures.

7. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a partner or an officer of a registered adviser and is acting on behalf of a registered adviser. Under the CFA, "adviser" means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to trading in "contracts", and "contracts" means commodity futures contracts and commodity futures options.

8. By providing the Proposed Advisory Services, the Sub-Adviser will be acting as an adviser with respect to commodity futures contracts and commodity futures options and, in the absence of being granted the requested relief, would be required to register as an adviser under the CFA.

9. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures contracts and commodity futures options that is similar to the exemption from the adviser registration requirement in section 25(1)(c) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.3 of Rule 35-502.

10. As would be required under section 7.3 of Rule 35-502:

(a) the obligations and duties of the Sub-Adviser in connection with the Proposed Advisory Services will be set out in a written agreement with the Principal Adviser;

(b) the Principal Adviser will contractually agree with the Investment Account to be responsible for any loss that arises out of the failure of the Sub-Adviser:

(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Principal Adviser and the Investment Account; or

(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (together with (i), the Assumed Obligations); and

(c) the Principal Adviser cannot be relieved by the Investment Account from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations.

11. The Sub-Adviser is not resident of any province or territory of Canada.

12. The Sub-Adviser is appropriately registered or exempt from registration to provide advice to the Principal Adviser and Investment Account pursuant to the applicable legislation of its principal jurisdiction.

13. Prior to purchasing any securities in one or more of the Investment Accounts, all investors in the Investment Account who are Ontario residents will receive written disclosure that includes:

(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(b) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser (or the individual representatives of the Sub-Adviser) advising the Investment Account because it is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;

IT IS ORDERED pursuant to section 80 of the CFA that the Sub-Adviser (including its directors, officers or employees) is exempted from the requirements of paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided to the Principal Adviser and the Investment Account, for a period of five years, provided that at the relevant time that such activities are engaged in:

(a) the Principal Adviser is registered under the CFA as an adviser in the category of commodity trading manager;

(b) the Sub-Adviser is appropriately registered or exempt from registration to provide advice to the Principal Adviser and Investment Account pursuant to the applicable legislation of its principal jurisdiction;

(c) the obligations and duties of the Sub-Adviser are set out in a written agreement with the Principal Adviser;

(d) the Principal Adviser has contractually agreed with the Investment Account to be responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(e) the Principal Adviser cannot be relieved by the Investment Account from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations; and

(f) prior to purchasing any securities in the Investment Account, all investors who are Ontario residents received written disclosure that includes:

(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(ii) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser (or the individual representatives of the Sub-Adviser) advising the Investment Account because it is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

December 19, 2008