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State Street Bank and Trust Company - s. 80 of CFA
Headnote
Section 80 of the Commodity Futures Act - relief for Schedule III bank from requirement to register as an adviser werethe performance of the service as an adviser is incidental to principal banking business.
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c.S.20, as am., sections 22(1)(b), 80.
IN THE MATTER OF
THE COMMODITIES FUTURES ACT
R.S.O. 1990, CHAPTER S.20, AS AMENDED (the "Act")
AND
IN THE MATTER OF
STATE STREET BANK AND TRUST COMPANY
ORDER
(Section 80)
UPON application (the "Application") by State Street Bank and Trust Company ("State Street") to the OntarioSecurities Commission (the "Commission") for an order pursuant to section 80 of the Act exempting State Street fromthe requirement to obtain registration as an adviser under clause 22(1)(b) of the Act;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON State Street having represented to the Commission that:
1. State Street was originally incorporated in the State of Massachusetts as the Union Bank in 1792. The charterunder which it now operates was authorized by a special act of the Massachusetts Legislature in 1891, and itspresent name was adopted in 1960. It is a member of both the Federal Reserve System and the U.S. FederalDeposit Insurance Corporation. State Street has maintained an active presence in Canada since 1988. StateStreet Trust Company Canada ("SSTCC") is a wholly owned subsidiary of State Street International Holdings,which in turn is a wholly owned subsidiary of State Street. SSTCC is currently registered as a trust companyin all provinces and territories (with the exception of Nunavut) under provincial trust or financial serviceslegislation.
2. SSTCC was originally incorporated (as State Street Canada Inc.) on May 19, 1988 and was continued as afederal trust company on May 3, 1995. SSTCC has offices in Toronto and Montreal as well as a sales officein Vancouver. As at July 31, 2000, SSTCC had 356 employees in the following five divisions:
(i) Pension and Institutional Custody which provides global custody services to collective investment fundsincluding manager-sponsored pooled funds and fund accounting to pension funds and manager-sponsoredpooled funds;
(ii) Mutual Fund and Insurance which provides global custody services to Canadian registered mutual fundsand insurance company segregated funds;
(iii) Securities Operations which provides safekeeping and settlement services in relation to the Canadiansecurities of State Street's clients;
(iv) Support Services which includes Finance, Human Resources, Sales and Marketing, InformationTechnology, and Legal divisions; and
(v) State Street Global Markets ("SSGM") which provides foreign exchange trading services, money marketservices, currency risk management services, e-finance and deposit taking services for the custody clientsof SSTCC and other third party funds.
3. SSTCC has other wholly owned subsidiaries. State Street Global Advisors, Ltd. ("SSgA"), provides investmentcounselling and portfolio management services to institutional clients and was incorporated under the CanadaBusiness Corporations Act in May of 1990. It is registered in Ontario as a limited market dealer (conditional),investment counsel, portfolio manager and commodity trading manager. SSgA is also registered in theprovinces of Quebec, Alberta, British Columbia, Manitoba, New Brunswick and Nova Scotia and is seekingregistration in the remaining provinces. State Street Brokerage Services Canada Inc. ("SSBSC") wasincorporated under the Canada Business Corporations Act in April of 1999 and provides brokerage servicesprimarily, but not limited to, Canadian institutional investors. It is a member of the Toronto Stock Exchange andthe Investment Dealers Association of Canada. SSBSC is registered as an investment dealer in Ontario, anon-resident investment dealer in Alberta and British Columbia and is in the process of obtaining registrationsin Quebec.
4. The treasury function within SSTCC also engages in proprietary risk taking activities through the SSGM divisionincluding interest rate and currency trading. The treasury function also manages the investment portfolio ofSSTCC holding Canadian government debt and the use of derivative products as asset/liability managementtools.
5. State Street will only accept deposits from the following;
(a) Her Majesty in right of Canada or in right of a province or territory, an agent of Her Majesty in either ofthose rights and includes a municipal or public body empowered to perform a function of government inCanada, or an entity controlled by Her Majesty in either of those rights;
(b) the government of a foreign country or any political subdivision thereof, an agency of the government ofa foreign country or any political subdivision thereof, or an entity that is controlled by the government ofa foreign country or any political subdivision thereof;
(c) an international agency of which Canada is a member, including an international agency that is a memberof the World Bank Group, the Inter American Development Bank, the Asian Development Bank, theCaribbean Development Bank and the European Bank for Reconstruction and Development and any otherinternational regional bank;
(d) a financial institution (i.e.: (a) a bank or an authorized foreign bank under the Bank Act; (b) a bodycorporate to which the Trust and Loan Companies Act (Canada) applies, (c) an association to which theCooperative Credit Association Act (Canada) applies, (d) an insurance company or a fraternal benefitsociety to which the Insurance Companies Act (Canada) applies, (e) a trust, loan or insurance corporationincorporated by or under an Act of the legislature of a province, (f) a cooperative credit society incorporatedand regulated by or under an Act of the legislature of a province or territory in Canada; (g) an entity thatis incorporated or formed by or under an Act of Parliament or of the legislature of a province or territory inCanada and that is primarily engaged in dealing in securities, including portfolio management andinvestment counselling, and is registered to act in such capacity under the applicable legislation, and (h)a foreign institution that is (i) engaged in the banking, trust, loan or insurance business, the business ofa cooperative credit society or the business of dealing in securities or is otherwise engaged primarily in thebusiness of providing financial services, and (ii) is incorporated or formed otherwise than by or under anAct of Parliament or of the legislature of a province or territory in Canada;
(e) a pension fund sponsored by an employer for the benefit of its employees or employees of an affiliate thatis registered and has total plan assets under administration of greater than $100 million;
(f) a mutual fund corporation that is regulated under an Act of the legislature of a province or territory inCanada or under the laws of any other jurisdiction and has total assets under administration of greater than$10 million;
(g) an entity (other than an individual) that has for the fiscal year immediately preceding the initial deposit,gross revenues on its own books and records of greater than $5 million; or
(h) any other person if the deposit is, in the aggregate, greater than $150,000;
collectively referred to for purposes of this Decision Document as "Authorized Purchasers").
6. In June of 1999 amendments to the Bank Act were proclaimed that permit foreign commercial banks toestablish direct branches in Canada. These amendments have created a new Schedule III listing foreign bankspermitted to carry on banking activities through branches in Canada.
7. State Street has published on January 6, 2001, its notice of intention to apply for an order under the Bank Actpermitting it to establish a full-service branch under Schedule III to the Bank Act. State Street will take over thecurrent wholesale deposit-taking, corporate lending, custody and treasury functions currently conducted by theSSGM division of SSTCC. State Street intends to restructure its present operations in Canada by establishinga full-service branch, while maintaining SSTCC to support its custodial and fiduciary activities.
8. Section 31(a) of the Act exempts banks listed in Schedule I or II of the Bank Act (Canada) from the adviserregistration requirement in Section 22(1)(b) of the Act. State Street requests an exemption from Section 22(1)(b)on the same basis and subject to the same conditions applicable to Schedule I and Schedule II listed banks,namely that the performance of the service of an adviser is solely incidental to State Street's principal business.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS RULED pursuant to section 80 of the Act that State Street is exempt from the requirement of clause22(1)(b) of the Act where the performance of the service as an advisor is solely incidental to State Street's principalbanking business.
May 4, 2001.
"Howard I. Wetston" "Robert W. Davis"