Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted exemptions from the prospectus requirement, dealer registration requirements and underwriter registration requirement in connection with trades of commercial paper/short term debt instruments of the Filer that may not meet the "approved credit rating" requirement contained in the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions -- Sufficient for commercial paper/short-term debt instruments to obtain one credit rating at or above a prescribed standard from an approved credit rating agency -- Relief granted subject to conditions.

Applicable Legislative Provisions

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

National Instrument 45-106 Prospectus and Registration Exemptions.

June 16, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BELL CANADA

(the Filer)

 

DECISION

 

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that trades of negotiable promissory notes or commercial paper, maturing not more than one year from the date of issue, of the Filer (Commercial Paper) be exempt from the dealer registration requirement, the underwriter registration requirement and the prospectus requirement of the Legislation (respectively, the Dealer Registration Exemption Sought, the Underwriter Registration Exemption Sought, the Prospectus Exemption Sought and, together, the Exemptions Sought).

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

(a) the Autorité des marchés financiers is the principal regulator for this application,

(b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon 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.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions and Regulation 11-102 have the same meanings if used in this decision, unless otherwise defined.

In this decision:

"Commercial Paper Exemption" means the exemption from the dealer registration, underwriter registration and prospectus requirements of the Legislation for short-term debt set out in subsection 1.4(2) and section 2.35 of Regulation 45-106;

"financial intermediary" has the meaning ascribed to that term in Ontario Securities Commission Rule 14-501 Definitions;

"financial intermediary short-term debt registration exemption" means the exemption from the registration requirement, for a trade by a financial intermediary or a Schedule III bank set out in clause 4.1(1)(a) of OSC Rule 45-501, or in a successor provision of OSC Rule 45-501, insofar as that clause or provision provides an exemption from the dealer registration requirement and the underwriter registration requirement for a trade of a type described in the short-term debt dealer registration exemption;

"market intermediary" has the meaning ascribed to that term in Ontario Securities Commission Rule 14-501 Definitions;

"OSC Rule 45-501" means Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions;

"Regulation 45-106" means Regulation 45-106 respecting Prospectus and Registration Exemptions;

"Regulation 81-102" means Regulation 81-102 respecting Mutual Funds;

"Schedule III bank" means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

"short-term debt dealer registration exemption" means the exemption from the dealer registration requirement set out in subsection 2.35(1) of Regulation 45-106, or in a successor provision in Regulation 45-106; and

"short-term debt underwriter registration exemption" means the deemed exemption from the underwriter registration requirement set out in subsection 1.4(2) of Regulation 45-106, or in a successor provision in Regulation 45-106, insofar as the deemed exemption relates to the short-term debt dealer registration exemption.

Representations

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

1. The Filer is a corporation governed by the Canada Business Corporations Act with its head office and principal business office located in Verdun, Québec. The Filer is a reporting issuer in all of the provinces of Canada and is not in default of the securities legislation of any jurisdiction of Canada.

2. Subsection 1.4(2) and section 2.35 of Regulation 45-106 provide that the Commercial Paper Exemption is available only where the short-term debt "has an approved credit rating from an approved credit rating organization". Regulation 45-106 incorporates by reference the definitions of "approved credit rating" and "approved credit rating organization" that are used in Regulation 81-102.

3. The definition of an "approved credit rating" in Regulation 81-102 requires, among other things, that (a) the rating assigned to such debt must be "at or above" certain prescribed short-term ratings, and (b) such debt must not have been assigned a rating by any "approved credit rating organization" that is not an "approved credit rating".

4. The Commercial Paper of the Filer has an "R-1 (low)" rating from DBRS Limited which meets the prescribed threshold in Regulation 81-102.

5. The Commercial Paper of the Filer does not meet the "approved credit rating" definition in Regulation 81-102 because it has an "A-2" rating from Standard & Poor's and a "P-2" rating from Moody's Investor Service, which are lower ratings than those required by the Commercial Paper Exemption.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptions Sought are granted provided that:

1. the Filer's Commercial Paper:

(a) matures not more than one year from the date of issue;

(b) is not convertible or exchangeable into or accompanied by a right to purchase another security other than Commercial Paper; and

(c) has a rating issued by one of the following rating organizations, or any of their successors, at or above one of the following rating categories or a rating that replaces a category listed below:

Rating Organization
Rating
 
DBRS Limited
R-1 (low)
 
Fitch Ratings Ltd.
F2
 
Moody's Investors Service
P-2
 
Standard & Poor's
A-2

2. In Ontario, the Dealer Registration Exemption Sought and the Underwriter Registration Exemption Sought are not available in respect of a trade in Commercial Paper by a market intermediary (except for a trade in Commercial Paper with a registered dealer that is an affiliate of the market intermediary or a trade in Commercial Paper by a lawyer or accountant if the trade is incidental to the principal business of that lawyer or accountant) unless the market intermediary is:

(a) a financial intermediary or Schedule III bank; or

(b) a dealer registered under the securities legislation of Ontario, as a "limited market dealer", provided that:

i) under its registration, the dealer would be authorized to make the trade if the trade were a trade in a negotiable promissory note or commercial paper referred to in the short-term debt dealer registration exemption; and

ii) the trade is made on behalf of the dealer by an individual who is registered under the securities legislation of Ontario to trade on behalf of the dealer and, under that registration, would be authorized to make the trade if the trade were a trade in a negotiable promissory note or commercial paper referred to in the short-term debt dealer registration exemption.

3. In Newfoundland and Labrador, the Dealer Registration Exemption Sought and the Underwriter Registration Exemption Sought are not available in respect of a trade in Commercial Paper by a market intermediary (except for a trade in Commercial Paper with a registered dealer that is an affiliate of the market intermediary or a trade in Commercial Paper by a lawyer or accountant if the trade is incidental to the principal business of that lawyer or accountant) unless the market intermediary is a dealer registered under the securities legislation of Newfoundland and Labrador as a "limited market dealer", provided that:

a. under its registration, the dealer would be authorized to make the trade if the trade were a trade in a negotiable promissory note or commercial paper referred to in the short-term debt dealer registration exemption; and

b. the trade is made on behalf of the dealer by an individual who is registered under the securities legislation of Newfoundland and Labrador to trade on behalf of the dealer and, under that registration, would be authorized to make the trade if the trade were a trade in a negotiable promissory note or commercial paper referred to in the short-term debt dealer registration exemption.

4. For each jurisdiction of Canada, the Prospectus Exemption Sought will terminate on the earlier of:

(a) 90 days after the coming into force of any rule, other regulation or blanket order or ruling under the securities legislation of that jurisdiction of Canada that amends the conditions of the prospectus exemption contained in section 2.35 of Regulation 45-106 or provides an alternate exemption; and

(b) June 30, 2012.

5. Except as provided in paragraph 6 below, for each jurisdiction of Canada, the Dealer Registration Exemption Sought and the Underwriter Registration Exemption Sought will terminate on the earlier of:

(a) in the case of the Dealer Registration Exemption Sought, the date when the short-term debt dealer registration exemption does not apply in that jurisdiction of Canada;

(b) in the case of the Underwriter Registration Exemption Sought, the date when the short-term debt underwriter registration exemption does not apply in that jurisdiction of Canada; and

(c) June 30, 2012.

6. In Ontario, for a financial intermediary or Schedule III bank, the Dealer Registration Exemption Sought and the Underwriter Registration Exemption Sought will terminate on the earlier of:

(a) the date when the financial intermediary short-term debt registration exemption does not apply in Ontario; and

(b) June 30, 2012.

"Jean Daigle"
Director, Corporate Finance
Autorité des marchés financiers