Scheduled outage for OSC Electronic Filing Portal on Thursday, April 25, 2024 from 6:00 to 11:00 pm (EST)
Kalenjin Advisory Ltd. – s. 74(1)
Headnote
Investment advice by an investment adviser registered with the United States Securities and Exchange Commission exempted from the requirements of paragraph 25(3) of the Act, subject to certain conditions -- investment advice is with respect to foreign securities -- advice only provided to high net worth individuals resident in the United States -- supervisory memorandum of understanding between the Ontario Securities Commission and the filer's principal regulator -- relief subject to five year sunset clause.
Applicable Legislative Provisions
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am., s. 25(3).
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, AS AMENDED (The Act) AND IN THE MATTER OF KALENJIN ADVISORY LTD.
ORDER (Subsection 74(1) of the Act)
UPON the application (the Application) of Kalenjin Advisory Ltd. (the Applicant) to the Ontario Securities Commission (the Commission or OSC) for an order, pursuant to subsection 74(1) of the Act, that the Applicant and any individuals engaging in, or holding themselves out as engaging in, the business of advising others on the Applicants' behalf (the Representatives) be exempt, for a period of five years, from the adviser registration requirements in subsection 25(3) of the Act, subject to certain terms and conditions (the Exemption Sought);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicants having represented to the Commission that:
1. The Applicant is a corporation formed pursuant to the laws of Belize with a head office located in Belize City and an office located in Toronto, Ontario.
2. The Applicant is registered with the United States Securities and Exchange Commission (SEC) as an investment adviser and is subject to all of the provisions of the United States Investment Advisers Act of 1940 and the rules thereunder.
3. Martin Walsh McGuire, the principal and the sole advising representative of the Applicant, is resident in Toronto, Ontario (the Representative).
4. The Commission has a supervisory memorandum of understanding (MOU) in place with the SEC for mutual cooperation and information sharing. The MOU would include oversight of the Applicant.
5. The Applicant is not registered in any capacity under the Act. Neither the Applicant, nor any individual acting on its behalf, will act as an adviser to persons or companies resident in Ontario unless the Applicant or any individual acting on its behalf is appropriately registered, or relying on an exemption from registration, under Ontario securities law.
6. The Applicant and its Representatives provide advice (Securities Advice) to high net worth individuals resident in the United States (U.S. Clients) on securities that are traded on organized exchanges located outside of Canada (hereinafter referred to as Foreign Securities).
7. The Applicant and the Representative are currently in compliance with all registration and other requirements of applicable securities laws of the United States in respect of providing Securities Advice to U.S. Clients. The Applicant and its Representatives will continue to comply with all registration and other requirements of applicable securities laws of the United States in respect of providing Securities Advice to U.S. Clients.
8. The Applicant will not provide any Securities Advice to residents of Canada.
9. The Applicant is in default of securities laws in Ontario in respect of the following activities carried out from Ontario that did not comply with the registration requirements under applicable Ontario securities laws. The Applicant understands that the Exemption Sought is only in effect from the date of this decision:
a. Since December 28, 2011, the Applicant and the Representative have provided discretionary advice to U.S. Clients. The Applicant currently has approximately five accounts for U.S. Clients.
b. Although the above activities of the Applicant and the Representative were conducted in compliance with applicable licensing and registration requirements under applicable securities laws of the United States, the activities did not comply with the registration requirements under applicable Ontario securities laws because the Representative, as a resident of Ontario, conducted the activitites from Ontario and neither the Applicant or the Representative were registered in Ontario to conduct such activities on behalf of the Applicant and had not obtained exemptive relief in such jurisdiction to conduct such activities.
10. The execution and clearance of the Foreign Securities is done by a registered broker/dealer in the US.
11. The Applicant does not have any affiliated companies registered with any securities regulatory authorities in Canada and therefore there is no potential for client confusion as to which entities provide the Securities Advice.
12. Before advising a U.S. Client, the Applicant and its Representatives will notify the U.S. Client of the location of the Applicant's head office or principal place of business and that there may be difficulty enforcing legal rights against the Applicant because of this.
13. U.S. Clients will be advised at the time they enter into an investment management agreement or similar documentation with the Applicant, and periodically thereafter, that if they relocate to a Canadian jurisdiction, their accounts will have to be transferred to another adviser that is appropriately registered or relying on an exemption from registration in the Canadian jurisdiction.
14. The Act requires that a person or company in the business of advising in Ontario on securities be registered in Ontario as an adviser under the Act. Even though the Applicant is incorporated in Belize and none of the clients of the Applicant is resident in Ontario, the fact that one or more of its Representatives are resident in Ontario triggers the requirement to be registered as an adviser in the category of Portfolio Manager under the Act.
15. The Applicant submits that it would not be prejudicial to the public interest for the Commission to grant the Exemption Sought because:
(a) the Applicant will only advise U.S. Clients as to trading in Foreign Securities; and
(b) the Applicant and each of its Representatives are appropriately registered to act as an adviser to the U.S. Clients under applicable securities laws of the United States.
16. The Applicant will become a "market participant" as defined under subsection 1(1) of the Act as a consequence of this decision. As a market participant, among other requirements, the Applicant is required to comply with the record keeping and provision of information provisions under section 19 of the Act, which includes the requirement to keep such books, records and other documents as are necessary for the proper recording of its business transactions and financial affairs and to deliver such records to the Commission if required.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the Exemption Sought on the basis of the terms and conditions proposed,
IT IS ORDERED pursuant to subsection 74(1) of the Act that the Applicant and its Representatives are exempt from the adviser registration requirements of subsection 25(3) of the Act in respect of the provision of advice to U.S. Clients as to the trading of Foreign Securities, provided that:
(a) the Applicant provides advice to U.S. Clients only as to trading in Foreign Securities;
(b) the Applicant and each of its Representatives are appropriately registered under applicable securities laws of the United States to act as an adviser to the U.S. Clients;
(c) the Applicant and each of its Representatives notifies the Commission of any regulatory action initiated with respect to the Applicant or its Representatives by completing and filing Appendix "A" or Appendix "B", as applicable, within 10 days of the commencement of such action; and
(d) the Applicant and its Representatives comply with the requirements under OSC Rule 31-505 Conditions of Registration, as amended from time to time, namely, to deal fairly, honestly and in good faith with its, his, or her clients.
IT IS FURTHER ORDERED THAT, this order shall expire on the date that is the earlier of:
(a) any change in the recognition, supervision or oversight of the Applicant by the SEC; or
(b) five years from the date of this order.
DATED August 27, 2014, 2014
"Edward P. Kerwin"
Commissioner
Ontario Securities Commission
"Christopher Portner"
Commissioner
Ontario Securities Commission
APPENDIX A
NOTICE OF REGULATORY ACTION -- FIRM
1. Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ No _____
If yes, provide the following information for each settlement agreement:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Regulator/organization
Date of settlement (yyyy/mm/dd)
Details of settlement
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
2. Has any financial services regulator ,securities or derivatives exchange, SRO or similar organization:
Yes
No
(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?
_____
_____
(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?
_____
_____
(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?
_____
_____
(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(g) Issued an order (other than en exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?
_____
_____
If yes, provide the following information for each action:
- - - - - - - - - - - - - - - - - - - -
Name of Entity
Type of Action
- - - - - - - - - - - - - - - - - - - -
|
Regulator/organization |
|
|
|
|
|
Date of action (yyyy/mm/dd) |
Reason for action |
|
|
|
|
Jurisdiction |
|
3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?
Yes _____ No _____
If yes, provide the following information for each investigation:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Reason or purpose of investigation
Regulator/organization
Date investigation commenced (yyyy/mm/dd)
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
- - - - - - - - - - - - - - - - - - - -
Name of witness
Title of witness
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
This form is to be submitted to the following address:
Ontario Securities CommissionSuite 1903, Box 5520 Queen Street WestToronto, ON M5H 3S8Attention: Registration Supervisor, Portfolio Manager TeamTelephone: (416) 593-8164email: [email protected]
{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 -- Registration Information.
APPENDIX B
NOTICE OF REGULATORY ACTION -- INDIVIDUAL
Name of Individual
|
Last name |
First name |
Second name (N/A [ ]) |
Third name (N/A [ ]) |
1. Securities and derivatives regulation
Are you now, or have you ever been subject to any disciplinary proceedings or any order resulting from disciplinary proceedings under any securities legislation or derivatives legislation or both in any province, territory, state or country?
Yes [ ] No [ ]
If "Yes", complete the following:
For each order or disciplinary proceeding, state below (1) the name of the firm, (2) the securities or derivatives regulator that issued the order or is conducting or conducted the proceeding, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding, and (7) any other relevant details.
2. SRO regulation
Are you now, or have you ever been, subject to any disciplinary proceedings conducted by any SRO or similar organization in any province, territory, state or country?
Yes [ ] No [ ]
If "Yes", complete the following:
For each order or disciplinary proceeding, state below (1) the name of the firm, (2) the SRO that issued the order or that is, or was, conducting the proceeding, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding, and (7) any other information that you think is relevant or that the regulator or, in Québec, the securities regulatory authority may request.
3. Non-securities regulation
Are you now, or have you ever been, a subject of any disciplinary actions conducted under any legislation relating to your professional activities unrelated to securities or derivatives in any province, territory, state or country?
Yes [ ] No [ ]
If "Yes", complete the following:
For each order or disciplinary proceeding, indicate below (1) the party against whom the order was made or the proceeding taken (if insurance licensed, indicate the name of the insurance agency), (2) the regulatory authority that made the order or that is, or was, conducting the proceeding, or under what legislation the order was made or the proceeding is being, or was conducted, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding and (7) any other information that you think is relevant or that the regulatory authority may request.
- - - - - - - - - - - - - - - - - - - -
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
This form is to be submitted to the following address:
Ontario Securities CommissionSuite 1903, Box 5520 Queen Street WestToronto, ON M5H 3S8Attention: Registration Supervisor, Portfolio Manager TeamTelephone: (416) 593-8164email: [email protected]