Matco Financial Inc.

Headnote

National Instrument 31-103 Registration Requirements and Exemptions -- relief from the requirement for a mutual fund dealer to become a member of the Mutual Fund Dealers Association of Canada -- applicant subject to certain terms and conditions on its registration as a mutual fund dealer.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss. 9.2, 15.1.

February 13, 2011
[OSC Web Editor's Correction Note dated 2012-08-07: An incorrect date was published on February 17, 2012 for Matco Financial Inc. (2012), 35 OSCB 1703. The date read “February 13, 2011” and should have read “February 13, 2012”.]

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

MATCO FINANCIAL INC.

DECISION

Background

The regulator in Ontario (the "Jurisdiction") has received an application from Matco Financial Inc. ("Matco") for a decision under the securities legislation of the Jurisdiction (the "Legislation") exempting Matco from the requirement imposed on mutual fund dealers to be a member of the Mutual Fund Dealers' Association under Section 9.2 of National Instrument 31-103 Registration Requirements and Exemptions (the "MFDA") (the "Requested Relief").

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision, including the attached Appendix (the "Appendix") to this decision, unless they are otherwise defined in this decision or the Appendix.

Representations

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

1. Matco is a corporation subsisting under the laws of the Province of Alberta and is extra-provincially registered in the Provinces of British Columbia and Ontario;

2. Matco is currently registered under the securities legislation of Alberta in the categories of investment fund manager, portfolio manager and mutual fund dealer; under the securities legislation of British Columbia as portfolio manager and mutual fund dealer; and under the securities legislation of the Jurisdiction as mutual fund dealer and portfolio manager;

3. Matco's principal business activity is the provision of investment management and wealth management services;

4. Matco is the manager of various mutual funds that are qualified for distribution under a simplified prospectus in each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario (the "Matco Funds"). Matco's principal business in Ontario is managing the Matco Funds."

5. Securities of the Matco Funds are primarily distributed to the public through registered dealers.

6. Matco is not a reporting issuer in any jurisdiction of Canada and is not, to its knowledge, in default of any securities regulation of any jurisdiction of Canada.

7. Matco intends to engage in certain activities as a mutual fund dealer in the Jurisdiction that is incidental to its principal business activity and has agreed to the imposition of terms and conditions on its registration as a mutual fund dealer set out in the Appendix, which outlines the activities Matco has agreed to restrict itself to in connection with its application for this decision;

8. Membership of the Filer in the MFDA is not appropriate due to the limited nature of the Filer's mutual fund dealer activities;

9. The Filer will mainitain its registration as a mutual fund dealer in Ontario and will comply with applicable securities legislation and rules; and

10. Before Matco accepts any person or company as a mutual fund client pursuant to its registration in the Jurisdiction as a mutual fund dealer, Matco shall provide to such person or company prominent written notice using the following words:

Matco Financial Inc. (Matco) is not currently a member, and does not intend to become a member of the Mutual Fund Dealers Association (MFDA); consequently, clients of Matco will not have available to them investor protection benefits that would otherwise derive from membership of Matco in the MFDA, including coverage under any investor protection plan for clients of members of the MFDA.

Decision

The Director is satisfied that the decision meets the test set out in the Legislation to make the decision.

The decision of the Director under the Legislation is that the Requested Relief is granted, provided that Matco's registration as a mutual fund dealer in Ontario is subject to the terms and conditions set out in the attached Appendix.

APPENDIX

TERMS AND CONDITIONS OF REGISTRATION

OF

MATCO FINANCIAL INC.

AS A MUTUAL FUND DEALER

UNDER THE LEGISLATION

Definitions

1. For the purposes hereof, unless the context otherwise requires, defined terms contained in National Instrument 14-101 Definitions have the same meaning in this Appendix A:

(a) "Act" means the Securities Act, R.S.O. 1990, as amended;

(b) "Adviser" means an adviser as defined in section 1 of the Act;

(c) "Client Name Trade" means, for the Registrant, a trade to, or on behalf of, a person or company, in securities of a mutual fund that is managed by the Registrant or an affiliate of the Registrant, where the person or company is shown on the records of the mutual fund or of another mutual fund managed by the Registrant or an affiliate of the Registrant as the holder of securities of such mutual fund, and the trade consists of:

(A) a purchase, by the person or company, through the Registrant, of securities of the mutual fund; or

(B) a redemption, by the person or company, through the Registrant, of securities of the mutual fund;

and where, the person or company is either a client of the Registrant that was not solicited by the Registrant or an affiliated entity of the Registrant in respect of the purchase of the mutual funds or was an existing client of the Registrant or an affiliated entity of the Registrant on the Effective Date;

(d) "Commission" means the Ontario Securities Commission;

(e) "Effective Date" means May 9, 2011;

(f) "Employee", for the Registrant, means:

(A) an employee of the Registrant;

(B) an employee of an affiliated entity of the Registrant; or

(C) an individual that is engaged to provide, on a bona fide basis, consulting, technical, management or other services to the Registrant or to an affiliated entity of the Registrant, under a written contract between the Registrant or the affiliated entity and the individual or a consultant company or consultant partnership of the individual, and, in the reasonable opinion of the Registrant, the individual spends or will spend a significant amount of time and attention on the affairs and business of the Registrant or an affiliated entity of the Registrant;

(g) "Employee", for a Service Provider, means an employee of the Service Provider or an affiliated entity of the Service Provider, provided that, at the relevant time, in the reasonable opinion of the Registrant, the employee spends or will spend, a significant amount of time and attention on the affairs and business of:

(A) the Registrant or an affiliated entity of the Registrant; or

(B) a mutual fund managed by the Registrant or an affiliated entity of the Registrant;

(h) "Executive", for the Registrant, means a director, officer or partner of the Registrant or of an affiliated entity of the Registrant;

(i) "Executive", for a Service Provider, means a director, officer or partner of the Service Provider or of an affiliated entity of the Service Provider;

(j) "Exempt Trade", for the Registrant, means a trade in securities of a mutual fund that the Registrant would be authorized to make if it were registered under the Legislation as an exempt market dealer;

(k) "Fund-on Fund Trade", for the Registrant, means a trade that consists of :

(i) a purchase, through the Registrant, of securities of a mutual fund that is made by another mutual fund;

(ii) a purchase, through the Registrant, of securities of a mutual fund that is made by a person or company where the person or company, an affiliated entity of the person or company, or another person or company is, or will become, the counterparty in a specified derivative or swap with another mutual fund; or

(iii) a sale, through the Registrant, of securities of a mutual fund that is made by another mutual fund where the party purchasing the securities is:

(A) a mutual fund managed by the Registrant or an affiliated entity of the Registrant; or

(B) a person or company that acquired the securities where the person or company, an affiliated entity of the person or company, or another person or company is, or was, the counterparty in a specified derivative or swap with another mutual fund; and

where, in each case, at least one of the referenced mutual funds is a mutual fund that is managed by either the Registrant or an affiliated entity of the Registrant;

(l) "In Furtherance Trade" means, for the Registrant, a trade by the Registrant that consists of any act, advertisement, or solicitation, directly or indirectly in furtherance of another trade in securities of a mutual fund, where the other trade consists of:

(i) a purchase or sale of securities of a mutual fund that is managed by the Registrant or an affiliated entity of the Registrant; or

(ii) a purchase or sale of securities of a mutual fund where the Registrant acts as the principal distributor of the mutual fund; and

where, in each case, the purchase or sale is made by or through another registered dealer if the Registrant is not otherwise permitted to make the purchase or sale pursuant to these terms and conditions;

(m) "Managed Account" means, for the Registrant or an affiliated entity of the Registrant, an investment portfolio account of a client under which the Registrant or an affiliated entity of the Registrant, pursuant to a written agreement made between the Registrant or the Registrant's affiliated entity and the client, makes investment decisions for the account and has full discretionary authority to trade in securities for the account without obtaining the client's specific consent to the trade;

(n) "Managed Account Trade" means, for the Registrant, a trade to, or on behalf of, a Managed Account of the Registrant or an affiliated entity of the Registrant, where the trade consists of a purchase or redemption, through the Registrant of securities of a mutual fund, that is made on behalf of the Managed Account, where, in each case:

(i) the Registrant or an affiliate entity of the Registrant is the portfolio adviser to the mutual fund;

(ii) the mutual fund is managed by the Registrant or an affiliate of the Registrant; and

(iii) either of:

(A) the mutual fund is prospectus-qualified in the Jurisdiction; or

(B) the trade is not subject to the prospectus requirement under the Legislation of the Jurisdiction;

(o) "Mutual Fund Instrument" means National Instrument 81-102 Mutual Funds, as amended;

(p) "Permitted Client", for the Registrant, means a person or company that is a client of the Registrant, or an affiliated entity of the Registrant, and that is or was at the time the person or company became a client of the Registrant or an affiliated entity of the Registrant:

(i) an Executive or Employee of the Registrant or an affiliated entity of the Registrant;

(ii) a Related Party of an Executive or Employee of the Registrant or an affiliated entity of the Registrant;

(iii) a Service Provider of the Registrant or an affiliated entity of a Service Provider of the Registrant or an affiliated entity of the Registrant;

(iv) an Executive or Employee of a Service Provider of the Registrant or an affiliated entity of the Registrant; or

(v) a Related Party of an Executive or Employee of a Service Provider of the Registrant or an affiliated entity of the Registrant;

(q) "Permitted Client Trade" means, for the Registrant, a trade to a person, who is a Permitted Client or who represents to the Registrant that he or she is a person included in the definition of Permitted Client, in securities of a mutual fund that is managed by the Registrant or an affiliated entity of the Registrant, and the trade consists of a purchase or redemption, by the person, through the Registrant, of securities of the mutual fund;

(r) "Registered Plan" means a registered pension plan, deferred profit sharing plan, registered retirement savings plan, registered retirement income fund, registered education savings plan or other deferred income plan registered under the Income Tax Act (Canada);

(s) "Registrant" means Matco Financial Inc.;

(t) "Related Party", for a person, means another person who is:

(i) the spouse of the person;

(ii) the issue of:

(A) the person,

(B) the spouse of the person; or

(C) the spouse of any person that is the issue of a person referred to in subparagraphs (A) or (B) above;

(iii) the parent, grandparent or sibling of the person, or the spouse of any of them;

(iv) the issue of any person referred to in paragraph (iii) above;

(v) a Registered Plan established by, or for the exclusive benefit of, one, some or all of the foregoing;

(vi) a trust if one or more of the trustees is a person referred to above and the beneficiaries of the trust are restricted to one, some, or all of the foregoing; or

(vii) a corporation if all the issued and outstanding shares of the corporation are owned by one, some, or all of the foregoing;

(u) "securities", for a mutual fund, means shares or units of the mutual fund;

(v) "Seed Capital Trade" means a trade in securities of a mutual fund made to a persons or company referred to in any of subparagraphs 3.1(1)(a)(i) to 3.1(1)(a)(iii) of the Mutual Fund Instrument; and

(w) "Service Provider", for the Registrant, means:

(i) a person or company that provides or has provided professional, consulting, technical, management or other services to the Registrant or an affiliated entity of the Registrant;

(ii) an Adviser to a mutual fund that is managed by the Registrant or an affiliated entity of the Registrant; or

(iii) a person or company that provides or has provided professional, consulting, technical, management or other services to a mutual fund that is managed by the Registrant or an affiliated entity of the Registrant.

2. For the purposes hereof:

(a) a person or company is considered to be an affiliated entity of another person or company if one is a subsidiary entity of the other or if both are subsidiary entities of the same person or company, or if each of them is controlled by the same person or company; and

(b) a person or company is considered to be controlled by a person or company if:

(i) in the case of a person or company:

(A) voting securities of the first-mentioned person or company carrying more than 50 percent 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, and

(B) the votes carried by the securities are entitled, if exercised, to elect a majority of the directors of the first-mentioned person or company;

(ii) in the case of a partnership that does not have directors, other than a limited partnership, the second-mentioned person or company holds more than 50 percent of the interests in the partnership; or

(iii) in the case of a limited partnership, the general partner is the second-mentioned person or company.

(c) a person or company is considered to be a subsidiary entity of another person or company if:

(i) it is controlled by:

(A) that other; or

(B) that other and one or more persons or companies, each of which is controlled by that other; or

(C) two or more persons or companies, each of which is controlled by that other; or

(ii) it is a subsidiary entity of a person or company that is that other's subsidiary entity;

3. For the purposes hereof,

(a) "issue" and "sibling" includes any person having such relationship through adoption, whether legally or in fact;

(b) "parent" and "grandparent" includes a parent or grandparent through adoption, whether legally or in fact;

(c) "registered dealer" means a person or company that is registered under the Act as a dealer in a category that permits the person or company to act as dealer for the subject trade; and

(d) "spouse", for an Employee or Executive, means a person who, at the relevant time, is the spouse of the Employee or Executive.

4. For purposes hereof, any terms that are not otherwise defined in National Instrument 14-101 Definitions or specifically defined above shall, unless the context otherwise requires, have the meaning:

(a) specifically ascribed to such term in the Mutual Fund Instrument; or

(b) if no meaning is specifically ascribed to such term in the Mutual Fund Instrument, the same meaning the term would have for the purposes of the Act.

Restricted Registration Permitted Activities

5. The registration of the Registrant as a mutual fund dealer under the Act shall be for the purposes only of trading by the Registrant and its registered representatives in securities of a mutual fund where the trade consists of:

(a) a Client Name Trade;

(b) an Exempt Trade;

(c) a Fund-on-Fund Trade;

(d) an In Furtherance Trade;

(e) a Managed Account Trade, provided, at the time of the trade, the Registrant or an affiliated entity of the Registrant who is a portfolio manager to the Managed Account, is registered under the Legislation of the Jurisdiction as an adviser in the category of portfolio manager;

(f) a Permitted Client Trade; or

(g) a Seed Capital Trade;

provided that, in the case of all trades that are only referred to in clauses (a) or (f), the trades are limited and incidental to the principal business of the Registrant.