Arrow Hedge Partners Inc. - s. 80 of the CFA

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to sub-advisers not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options, 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.

June 8, 2007

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

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

(the CFA)

AND

IN THE MATTER OF

ARROW HEDGE PARTNERS INC.

ORDER

(Section 80 of the CFA)

UPON the application (the Application) of Arrow Hedge Partners Inc. (Arrow) to the Ontario Securities Commission (the Commission) for an order:

(a) pursuant to section 80 of the CFA, that GPS Partners LLC (GPS) and its officers, partners, directors and representatives be exempt from the registration requirements of paragraph 22(1)(b) of the CFA respecting investment advisory services provided to Arrow with respect to commodity futures activities of the Arrow US Equity Income Fund (the Income Fund), subject to certain terms and conditions; and

(b) pursuant to section 80 of the CFA, renewing the exemption orders granted by the Commission on March 28, 2003, and June 10, 2003 (the Previous Orders) that Ward Ferry Management (BVI) Limited (Ward Ferry) and Clocktower Capital LLC (Clocktower), respectively, and their respective officers, partners, directors and representatives, be exempt from the registration requirements of paragraph 22(1)(b) of the CFA, with respect to commodity futures activities of the Arrow WF Asia Fund (the Asia Fund) and the Arrow Clocktower Global Fund (the Clocktower Fund), subject to certain terms and conditions;

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

AND UPON Arrow having represented to the Commission that:

1. Arrow is a corporation incorporated under the laws of Ontario with its head office located in Toronto, Ontario.

2. Arrow is registered under the Securities Act (Ontario) (the OSA) as an adviser in the categories of investment counsel and portfolio manager and as a dealer in the category of limited market dealer. Arrow is registered under the CFA as an adviser in the category of commodity trading manager.

3. Arrow is the manager and trustee of the Income Fund, the Asia Fund and the Clocktower Fund (collectively, the Funds). The Funds are unincorporated open-ended mutual funds created under the laws of Ontario and offered in all Canadian provinces and territories in accordance with private placement exemptions.

4. Arrow is responsible for providing investment advice to the Funds.

5. Arrow retains the services of GPS in connection with the management of the investment portfolio of the Income Fund, Ward Ferry in connection with the management of the investment portfolio of the Asia Fund and Clocktower in connection with the management of the investment portfolio of the Clocktower Fund. In retaining GPS, Ward Ferry and Clocktower (collectively, the Sub-Advisers), Arrow complies with the requirements of Section 7.3 of OSC Rule 35-502 Non Resident Advisers (Rule 35-502).

6. QGPS is a corporation incorporated under the Laws of Delaware, U.S. It is registered with the United States Securities and Exchange Commission as an investment adviser.

7. Ward Ferry is a corporation incorporated in the British Virgin Islands. It is registered as an investment adviser with the Hong Kong Securities Commission.

8. Clocktower is a limited liability company located in California.

9. Arrow is proposing to engage the Sub-Advisers to advise Arrow in respect of investments in commodity futures by the Funds (the Proposed Advisory Services).

10. Arrow has entered into a written agreement with Sub-Advisers outlining the duties and obligations of the Sub-Advisers.

11. Arrow will contractually agree with the Funds to be responsible for any loss that arises out of the failures of the respective Sub-Advisers in connection with the Proposed Advisory Services:

(a) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of Arrow and the applicable Fund; or

(b) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances,

(collectively, the Assumed Obligations).

12. Arrow will not be relieved by the Funds from its responsibility for any loss described in paragraph 11.

13. The offering memorandum for the Funds, if any, will disclose that Arrow retains responsibility for any advice given by the Sub-Advisers and that there may be difficulty in enforcing any legal rights against the Sub-Advisers because the Sub-Advisers are resident outside of Canada and that all or a substantial portion of their assets are situated outside of Canada.

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest for the Commission to grant the requested relief;

IT IS ORDERED pursuant to section 80 of the CFA that the Sub-Advisers and their officers, partners, directors and representatives are exempt from the registration requirements of paragraph 22(1)(b) of the CFA with respect to the Proposed Advisory Services, provided that:

(a) the obligations and duties of the Sub-Advisers are set out in a written agreement with Arrow;

(b) Arrow contractually agrees with the Funds to be responsible for any loss that arises out of the failure of the respective Sub-Advisers to meet the Assumed Obligations;

(c) Arrow cannot be relieved by the Funds from its responsibility of loss under paragraph (b);

(d) the offering documents for the Funds, if any, disclose that Arrow has responsibility for any investment advice given by the Sub-Advisers and that, to the extent applicable, there may be difficulty in enforcing any legal rights against the Sub-Advisers because the Sub-Advisers are resident outside of Canada and all or a substantial portion of their assets are situated outside of Canada;

(e) Arrow maintains its status as a registered adviser in the category of commodity trading manager under the CFA; and

(f) this Order shall terminate five years from the date hereof.