Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from registration and prospectus requirements -- Foreign bank wants to offer certificates of deposit to Canadian residents -- The applicant is a foreign bank subject to a comprehensive scheme of regulation and supervision in its home jurisdiction comparable to Canadian regulatory requirements governing Schedule I and II banks, including its proposed deposit taking activities with Canadian residents; the applicant's Canadian deposit holders will be covered by the deposit insurance scheme in its home jurisdiction.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 74(1), 25, 53.

October 24, 2017

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CANADIAN IMPERIAL BANK OF COMMERCE AND THE PRIVATEBANK AND TRUST COMPANY (the Filers)

DECISION

Background

1 The securities regulatory authority or regulator in each of British Columbia and Ontario (each a Dual Exemption Decision Maker) has received an application from The PrivateBank and Trust Company (PrivateBank) for a decision under the securities legislation of those jurisdictions (the Dual Legislation) for an exemption for PrivateBank from the registration requirement and prospectus requirement in respect of deposit-taking activities of PrivateBank with Canadian residents (the Dual Exemption);

In addition, the securities regulatory authority or regulator in British Columbia (the Passport Decision Maker) has received an application from Canadian Imperial Bank of Commerce (CIBC) for a decision under the securities legislation of British Columbia (the Passport Legislation) for an exemption for CIBC from the registration requirement in respect of the marketing and administrative activities of CIBC in furtherance of the deposit-taking activities of PrivateBank with Canadian residents (the Passport Exemption).

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

(a) the British Columbia Securities Commission is the principal regulator for this application;

(b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

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

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

(b) the Filers have provided notice that subsection 4.7(1) of MI 11-102 is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.

Interpretation

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

In this decision, the following additional terms have the following meanings:

Bancorp Holdco means PrivateBancorp, Inc., a Delaware corporation, which was a bank holding company registered under the Bank Holding Company Act of 1956, as amended;

Bank Act means the Bank Act (Canada);

CFPB means the United States Consumer Financial Protection Bureau;

CIBC Holdco means CIBC Holdco Inc., a wholly-owned subsidiary of CIBC, established to facilitate the Transaction;

FDIC means the United States Federal Deposit Insurance Corporation;

FRB means the United States Federal Reserve Board;

IDFPR means the Illinois Department of Financial and Professional Regulation, Division of Banking;

OSFI means the Office of the Superintendent of Financial Institutions;

Transaction means the acquisition by CIBC of all of the issued and outstanding shares of Bancorp Holdco on June 23, 2017 pursuant to an Agreement and Plan of Merger among CIBC, Bancorp Holdco and CIBC Holdco; and

US Deposit means the United States dollar deposit-taking chequing and savings accounts issued by PrivateBank.

Representations

3 This decision is based on the following facts represented by the Filers:

1. CIBC is a Schedule I Bank under the Bank Act and is subject to extensive governance expectations and regulatory oversight by, in particular, OSFI; the head office of CIBC is located in Toronto, Ontario;

2. PrivateBank is an Illinois state-chartered bank; the head office of PrivateBank is located in Chicago, Illinois, U.S.A.;

3. PrivateBank carries on the business of banking in the United States; PrivateBank provides customized business and personal financial services to middle market companies, as well as business owners, executives, entrepreneurs and families; PrivateBank operates out of 36 offices located primarily in the Midwest of the United States, and its specialty banking businesses serve clients throughout the United States;

4. PrivateBank's business includes the offering and/or maintenance of US Deposits to a small number (approximately 47 as of July 2017) of Canadian residents;

5. prior to June 23, 2017, PrivateBank was wholly-owned by Bancorp Holdco;

6. on June 23, 2017, Bancorp Holdco merged with CIBC Holdco and PrivateBank became an indirect wholly-owned subsidiary of CIBC; the Transaction received the approval of the shareholders of Bancorp Holdco, the approval of OSFI, and approvals from the FRB and the IDFPR;

7. PrivateBank is an Illinois state-chartered bank and subject to regulation, examination and supervision by the FDIC, CFPB and IDFPR; the primary federal regulator of PrivateBank is the FDIC; as a depository institution with more than US$10 billion in assets, PrivateBank is also subject to the jurisdiction of the CFPB relative to consumer protection laws; CIBC Holdco, as PrivateBank's holding company, is subject to regulation, examination, and supervision by the FRB; the IDFPR is a regulatory authority created under the state laws of Illinois; each of the FDIC, the FRB and the CFPB is a regulatory authority created under the federal laws of the United States;

8. the FDIC, FRB, and IDFPR has each been granted extensive discretionary authority to assist it with the fulfillment of its supervisory and enforcement obligations; the FDIC, CFPB and IDFPR exercise such authority for the purpose of conducting periodic examinations of PrivateBank's compliance with various regulatory requirements, including capital requirements and consumer disclosure requirements, and to establish policies respecting the classification of assets and the establishment of loan loss reserves for regulatory purposes; the FRB also exercises its authority for the purpose of conducting periodic examinations of CIBC Holdco's compliance with various regulatory requirements, including capital requirements;

9. PrivateBank is subject to continual, ongoing bank supervision, examination and audits by the IDFPR and FDIC; PrivateBank is required to file reports with the FDIC and the IDFPR concerning its activities and financial condition and it must obtain the approval of such agencies before entering into certain transactions, such as mergers with other depository institutions; CIBC Holdco is required to file reports with the FRB concerning its activities and financial condition and must obtain the FRB's approval before entering into certain transactions, such as mergers with other bank holding companies or the acquisition of additional bank or non-bank subsidiaries;

10. as a result, PrivateBank is subject to a comprehensive scheme of regulation and supervision in the United States which the Filers believe is comparable to the regulatory framework governing Schedule I and II banks pursuant to the Bank Act and the supervisory responsibilities of OSFI;

11. in addition, the US Deposits are insured by the FDIC under the United States Federal Deposit Insurance Act, as amended, and the regulations promulgated thereunder, for up to U.S.$250,000 at this time for each depositor (deposits owned by the same depositor may be combined for purposes of calculating this limit); PrivateBank and other United States federally insured depository institutions are required to pay premiums for this deposit insurance; the FDIC deposit insurance is guaranteed by the United States Treasury Department;

12. PrivateBank will market the US Deposits in the United States; CIBC intends that PrivateBank will also solicit US Deposits from residents of Canada, including individuals, corporations and other entities; the US Deposits may also be marketed in Canada by CIBC to Canadian residents, including through CIBC's Canadian bank branches and through CIBC's internet sites;

13. in addition, CIBC employees may, to the extent permitted by the Bank Act, engage from time to time in certain clerical steps to facilitate the opening of the US Deposits in the United States by Canadian residents; it is currently anticipated that these clerical steps would be operational and administrative in nature and would include, for example, providing Canadian residents who wish to open a US Deposit with the applicable account document, which may be made available via an online or mobile application, or referring them to the PrivateBank sales team; Canadian residents may also be able to open accounts directly through CIBC's internet sites;

14. the offering of the US Deposits by PrivateBank to Canadian residents will constitute a distribution of securities as a result of the meaning attributable to the terms "security" and "dealer" under the Dual Legislation; as a result, PrivateBank is subject to the registration requirement and prospectus requirement;

15. although PrivateBank is an indirect wholly-owned subsidiary of CIBC and is engaged in the business of banking in the United States, it is not a Schedule I, II or III bank for purposes of the Bank Act; as a result, the Canadian bank exemptions under the Dual Legislation are not available to PrivateBank in these circumstances;

16. the US Deposits are, and will be, issued in compliance with applicable U.S. law, including applicable anti-money laundering and consumer protection legislation;

17. the US Deposits are, and will be, insured by the FDIC for up to the maximum applicable FDIC deposit coverage amount;

18. the US Deposits offered by PrivateBank to Canadian residents will not contravene any federal or provincial deposit-taking legislation or any provision of the Bank Act;

19. the US Deposits that are offered to residents of Canada will be subject to the same regulation and oversight by the FDIC, IDFPR and CFPB as US Deposits that are offered to residents of the United States;

20. other than in compliance with Canadian securities laws, PrivateBank will not trade in any securities other than US Deposits with or on behalf of persons or companies who are resident in Canada;

21. except for the inadvertent activities described in paragraph 4, the Filers are not in default of securities legislation in any jurisdiction; and

22. CIBC has not applied for the Passport Exemption in Ontario because it is exempt from the registration requirement pursuant to subsection 35.1(1) of the Securities Act (Ontario); as a result, CIBC will not be receiving a decision about the Passport Exemption from the securities regulatory authority or regulator in Ontario.

Decision

4 Each of the Dual Exemption Decision Makers is satisfied that the exemptive relief application meets the test set out in the Dual Legislation for the Dual Exemption Decision Makers to make the decision and the Passport Decision Maker is satisfied that the Passport Decision meets the test set out in the Passport Legislation for the Passport Decision Maker to make the decision.

The decision of the Dual Exemption Decision Makers under the Dual Legislation is that the Dual Exemption is granted, provided that at the relevant time activities are engaged in:

(a) CIBC continues to be subject to regulation, examination and supervision by OSFI;

(b) PrivateBank continues to be subject to regulation, examination and supervision by the IDFPR and/or the FDIC;

(c) the US Deposits are insured by the FDIC up to the applicable coverage limits under the FDIC rules, regardless of the residence or citizenship of the holder of a US Deposit; and

(d) the details of the FDIC insurance coverage in respect of the US Deposits are disclosed to each prospective holder of a US Deposit prior to the opening of the US Deposit.

The decision of the Passport Decision Maker under the Passport Legislation is that the Passport Exemption is granted, provided that at the relevant time activities are engaged in:

(a) CIBC continues to be subject to regulation, examination and supervision by OSFI;

(b) PrivateBank continues to be subject to regulation, examination and supervision by the IDFPR and/or the FDIC;

(c) the US Deposits are insured by the FDIC up to the applicable coverage limits under the FDIC rules, regardless of the residence or citizenship of the holder of a US Deposit; and

(d) the details of the FDIC insurance coverage in respect of the US Deposits are disclosed to each prospective holder of a US Deposit prior to the opening of the US Deposit.

"Andrew S. Richardson, CPA, CA"
Acting Director, Corporate Finance
British Columbia Securities Commission