HSBC Securities (Canada) Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Firm registered in the category of investment dealer and a member of the Investment Industry Regulatory Organization of Canada, with separate private client and institutional operating divisions exempted from the requirement to register an individual as an ultimate designated person (UDP) and a chief compliance officer (CCO) -- permitted to register two UDPs and two CCOs, one for each operating division.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss.11.2, 11.3.

June 24, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

HSBC SECURITIES (CANADA) INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the requirement contained in section 11.2 of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) to designate an individual to be the ultimate designated person (UDP) and the requirement contained in section 11.3 of NI 31-103 to designate an individual to be the chief compliance officer (CCO) and instead be permitted to designate and register two individuals as UDP and two individuals as CCO in respect of two distinct lines of securities business of the Filer (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories in Canada outside of the Jurisdiction (the Non-Principal Jurisdictions, and together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is registered under the Legislation in the category of investment dealer, is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and has its head office in the Jurisdiction.

2. The Filer is also registered as an investment dealer in each of the Non-principal Jurisdictions.

3. The Filer is not, to the best of its knowledge, in default of any requirements of securities legislation in any of the Jurisdictions.

4. The Filer has adequate resources to ensure compliance with Ontario securities laws.

5. The Filer's business structure is organized as follows:

(a) The Filer has two distinct lines of securities business based on the nature of the Filer's client (each, a Line of Business).

(b) One business line within the Filer's operations is referred to as the Global Banking and Markets Line of Business (the GMB Line), which provides a broad range of services to institutional clients, including fixed income sales and trading, equity capital markets, investment banking, and mergers and acquisitions.

(c) The other business line within the Filer's operations is referred to as the Retail Banking and Wealth Management Line of Business (the RBWM Line), which provides a broad range of services to retail clients, including discretionary managed and non-discretionary advisory and other wealth management related services, and order execution only brokerage services.

(d) Each of the GBM Line and the RBWM Line functions independently, as stand-alone operations within the Filer's operations and each reports through separate and distinct senior management structures within the HSBC Group.

(e) Currently, there is one UDP responsible for both the GBM Line and the RBWM Line. The Filer proposes to appoint a UDP for each Line of Business.

6. The UDP of each of the GBM Line and the RBWM Line (each a, Business Head) will hold the title of chief executive officer in respect of his or her Line of Business and is the most senior and final decision maker for their respective Line of Business. This means that each Business Head fulfills the following role for his or her respective Division:

(a) runs the Line of Business,

(b) has accountability for the operations and financial performance of the Line of Business,

(c) provides clear leadership and sets the tone at the top for the Line of Business,

(d) is the person that the executive management within the Line of Business reports to,

(e) is responsible for the objectives, strategy and plans, and the implementation of these, for the Line of Business,

(f) has accountability for reporting to the Board of Directors with respect to the Line of Business, and

(g) is responsible for the organizational structure and succession planning for the respective Line of Business.

7. There is no line of reporting between the UDP of the GBM Line and the UDP of the RBWM Line. Each UDP reports independently to the Board of Directors of the Filer and the senior management team of HSBC Bank Canada.

8. The UDP of the GBM Line and the UDP of the RBWM Line are each officers and directors of the Filer.

9. Currently, there is one CCO responsible for both the GBM Line and the RBWM Line. The Filer proposes that each Line of Business will have its own CCO.

10. The CCO for each Line of Business has, or will have, access to their Business Head and direct access to the Filer's Board of Directors, and reports, or will report, independently to the Filer's Board of Directors.

UDP Requirement

11. NI 31-103 was implemented on September 28, 2009 (the Implementation Date).

12. Under section 11.2 of NI 31-103, a registered firm is required to designate an individual to be the UDP (the UDP Requirement) and the UDP must be the chief executive officer or equivalent of the registered firm.

13. Prior to the implementation of NI 31-103, there was no requirement under the securities legislation of any Filing Jurisdiction for an investment dealer to designate an individual, and have him or her registered, as the UDP.

14. Prior to the implementation of NI 31-103, the Filer was permitted by IIROC to have two individuals in the position of UDP.

15. In conjunction with the implementation of NI 31-103, IIROC has amended its rules with respect to its requirements for a UDP to be more consistent with the requirements in NI 31-103. IIROC Rule 38.5(a) now reads:

"A Dealer Member must designate an individual who is approved under the Corporation's rules in the category of Ultimate Designated Person and who shall be responsible to the Corporation for the conduct of the firm and the supervision of its employees and to perform the functions described in paragraph (c)."

CCO Requirement

16. Under section 11.3 of NI 31-103, a registered firm is required to designate an individual to be the CCO (the CCO Requirement).

17. Prior to the implementation of NI 31-103, there was a requirement under the securities legislation of many of the Jurisdictions to designate a registered partner or officer as the "compliance officer" who was responsible for discharging the obligations of the registered dealer under the applicable securities legislation.

18. Prior to the Implementation Date, the Filer was permitted under the IIROC rules to have two individuals fulfil the role of CCO which is equivalent to the role of CCO under NI 31-103.

19. Section 5.2 of Companion Policy 31-103CP Registration Requirements and Exemptions states that:

"Firms must designate one CCO. However, in large firms, the scale and kind of activities carried out by different operating divisions may warrant the designation of more than one CCO. We will consider applications, on a case-by-case basis, for different individuals to act as the CCO of a firm's operating divisions."

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) each Line of Business shall have its own UDP, who shall be its Business Head;

(b) each UDP fulfils the responsibilities set out in section 5.1 of NI 31-103, or any successor provision, in respect of the Line of Business of the Filer for which he or she is appointed as UDP;

(c) the Filer permits each UDP to directly access the Filer's Board of Directors, or individuals acting in a similar capacity for the Filer, at such times as each UDP may consider necessary or advisable in view of his or her responsibilities; and

(d) each Line of Business shall have its own CCO.

"Erez Blumberger"
Deputy Director, Registrant Regulation
Compliance and Registrant Regulation