Passport System -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 33-109 Registration Information (NI 33-109) -- relief from certain filing requirements of NI 33-109 in connection with a bulk transfer of registered and non-registered individuals pursuant to a joint venture contribution and formation agreement.
Multilateral Instruments Cited
Multilateral Instrument 11-102 Passport System.
National Instruments Cited
National Instrument 33-109 Registration Information.
May 29, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
MORGAN STANLEY SMITH BARNEY LLC (MSSB),
MORGAN STANLEY & CO. INCORPORATED
(MS&CO) AND CITIGROUP GLOBAL MARKETS INC.
(CGMI) (the Filers)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of Ontario (the Legislation), for relief pursuant to section 7.1 of National Instrument 33-109 Registration Information (NI 33-109) to allow the bulk transfer of certain of the registered individuals of MS&Co and CGMI to a new joint venture, Morgan Stanley Smith Barney LLC (as described below) (the Bulk Transfer), effective June 1, 2009 in accordance with section 3.1 of the companion policy to NI 33-109 (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(i) the Ontario Securities Commission is the principal regulator for this application; and
(ii) 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 by each of the Filers on the same basis in British Columbia and Alberta (together with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. MS&Co is an indirect wholly-owned subsidiary of Morgan Stanley. Its head office is located in Purchase, New York, United States of America.
2. MS&Co is registered as an adviser in the category of international adviser and as a dealer in the categories of international dealer and limited market dealer under the Securities Act (Ontario). MS&Co is also registered as an adviser in the category of portfolio manager and investment counsel (securities and exchange contracts) in British Columbia, and in the category of portfolio manager and investment counsel (foreign) in Alberta.
3. MS&Co is not in default of the securities legislation in any of the Jurisdictions.
4. CGMI is an indirect wholly-owned subsidiary of Citigroup Inc. Its head office is located in New York, New York.
5. CGMI is registered as an adviser in the category of international adviser and as a dealer in the category of international dealer under the Securities Act (Ontario).
6. CGMI is not in default of the securities legislation in any of the Jurisdictions.
7. On January 13, 2009, Morgan Stanley and Citigroup Inc. (Citi) entered into a joint venture contribution and formation agreement (the JV Agreement), pursuant to which they agreed to combine Morgan Stanley's Global Wealth Management Group and Citi's Smith Barney, Quilter (in the United Kingdom) and Smith Barney Australia into a new joint venture called Morgan Stanley Smith Barney.
8. Pursuant to the JV Agreement, each of MS&Co and CGMI will contribute assets, including certain registered and non-registered employees, to MSSB, following which MSSB will operate as one fully-integrated organization.
9. MSSB has assumed all of the existing registrations and approvals for all of the registered individuals that will be transferred to MSSB. It is not anticipated that there will be any disruption in the ability of the Filers to advise and trade (where applicable) on behalf of their respective clients, and MSSB should be able to advise and trade (where applicable) on behalf of such clients immediately after obtaining registration in all appropriate categories in the Jurisdictions.
10. MSSB continues, and will continue to be, registered in the same categories of registration as CGMI was registered as in Ontario and as MS&Co was registered as in Ontario, Alberta and British Columbia, and will be subject to, and will comply with, all applicable securities laws.
11. MS&Co proposes to transfer 62 employees registered in one or more of the Jurisdictions to MSSB.
12. CGMI proposes to transfer 47 employees registered in Ontario to MSSB.
13. The Exemption Sought will not be contrary to public interest and will have no negative consequences on the ability of MSSB to comply with all applicable regulatory requirements or the ability to satisfy any obligations in respect of the clients of the Filers.
14. Given the significant number of registered individuals of the Filers, it would be extremely difficult to transfer each individual to MSSB in accordance with the requirements of NI 33-109 if the Exemption Sought is not granted.
15. A press release was previously issued on or about January 13, 2009 advising the public of the creation of MSSB. The clients of MS&Co and CGMI have also been contacted and advised of the creation of MSSB.
16. The head office of MSSB will be located in Purchase, New York.
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 the Filers make acceptable arrangements with CDS Inc. for the payment of the costs associated with the Bulk Transfer, and make such payment in advance of the Bulk Transfer.