Merrill Lynch Professional Clearing Corp.

Decision

Headnote

Multilateral Instrument 11-102, section 4.7(1) -- Exemption granted from requirement to file Form 31-103 F1 -- U.S. broker/dealer subject to U.S. reporting requirements registered as restricted dealer and thus required to file Form 31-103 F1 pursuant to section 12.1 of National Instrument 31-103 -- Conditions concerning filing of SEC Form X-17a-5 (FOCUS Report) in lieu of Form 31-103F1 and notification of any issues.

Applicable Legislative Provisions

Multilateral Instrument 11-102 Passport System, s. 4.7(1)

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 12.1, 15.1.

October 21, 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

MERRILL LYNCH

PROFESSIONAL CLEARING CORP.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer (the "Application") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") that, for the purposes of sections 12.1 -- Capital Requirements ("Section 12.1") of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103") the Filer be permitted to calculate its excess working capital using United States Securities and Exchange Commission ("SEC") Form X-17a-5 (FOCUS Report) (the "FOCUS Report") rather than Form 31-103F1 Calculation of Excess Working Capital ("Form 31-103F1") and for the purposes of section 12.12(1)(b) -- Delivering Financial Information -- Dealer ("Section 12.12(1)(b)") of NI 31-103, the Filer be permitted to deliver the FOCUS Report in lieu of Form 31-103F1 (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 section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in each of British Columbia, Alberta and Quebec (the "Applicable Provinces").

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. The Filer is a corporation incorporated under the laws of the State of Delaware. Its head office is located at 222 Broadway 6th Floor, New York, NY 10038, U.S.A.

2. The Filer is a subsidiary of Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a wholly-owned subsidiary of Merrill Lynch & Co., Inc., which in turn is a wholly-owned subsidiary of Bank of America Corporation.

3. The Filer is registered under Securities Legislation as a Restricted Dealer, with terms and conditions, in the Applicable Provinces.

4. The Filer is registered as a broker-dealer with the SEC and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Filer is also registered as a Futures Commission Merchant with the U.S. Commodity Futures Trading Commission, and is a member of the National Futures Association.

5. As a Restricted Dealer, the Filer is required to calculate its excess working capital using Form 31-103F1.

6. The Filer is subject to regulatory capital requirements under the Securities Exchange Act of 1934, specifically SEC Rule 15c3-1 Net Capital Requirements for Brokers or Dealers ("SEC Rule 15c3-1") and SEC Rule 17a-5 Reports to be Made by Certain Brokers and Dealers ("SEC Rule 17a-5"), that are designed to provide protections that are substantially similar to the protections provided by the regulations regarding excess working capital to which dealer members of the Investment Industry Regulatory Organization of Canada ("IIROC") are subject, and the Filer is in compliance in all material respects with SEC Rule 15c3-1. The SEC and FINRA have the responsibility to ensure that the Filer operates in compliance with SEC Rule 15c3-1.

7. The Filer is required to prepare and file a FOCUS Report monthly with United States regulators, which is the financial and operational report containing a net capital calculation.

8. The FOCUS Report provides a more comprehensive description of the business activities of the Filer, and more accurately reflects those activities including client lending activity, than would be provided by Form 31-103F1. The minimum capital requirements prescribed by SEC Rule 15c3-1 are generally more conservative than the calculations prescribed by Form 31-130F1.

9. SEC Rule 15c3-1 requires that the Filer account for any guarantee or debt of a third party in calculating its excess net capital. Accordingly, the Filer will, in the event that it provides a guarantee of any debt of a third party, deduct the total amount of the guarantee from its excess net capital on the FOCUS Report, consistent with the required treatment of such guarantee under Form 31-103F1.

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 so long as:

(a) the Filer is registered under the securities legislation of the United States in a category of registration that permits it to carry on the activities in the United States that registration as an investment dealer would permit it to carry on in the Jurisdiction;

(b) by virtue of the registration referred to in paragraph (a), including required membership in one or more self-regulatory organizations, the Filer is subject to SEC Rule 15c3-1 and SEC Rule 17a-5; and that the protections provided by SEC Rule 15c3-1 and SEC Rule 17a-5 in respect of maintaining excess net capital are substantially similar to the protections provided by the capital requirements of IIROC that would be applicable to the Filer if it were registered under the Legislation as an investment dealer and were a member of IIROC;

(c) the Filer submits the FOCUS Report in lieu of Form 31-103F1;

(d) the Filer prepares the FOCUS Report on an unconsolidated basis;

(e) the Filer gives prompt written notice to the principal regulator if the Filer has received written notice from the SEC or FINRA of any material non-compliance in the calculation of its excess net capital as reported in a FOCUS Report filed by the Filer pursuant to SEC and FINRA requirements;

(f) the Filer gives written notice to the principal regulator immediately if excess net capital as calculated on line 25, page 6 of the FOCUS Report is less than zero, and ensures that such capital is not less than zero for 2 consecutive days; and

(g) the Filer provides the principal regulator with at least five days written notice prior to any repayment of subordinated intercompany debt or termination of a subordination agreement with respect to intercompany debt.

"Erez Blumberger"
Deputy Director,
Compliance and Registrant Regulation
Ontario Securities Commission