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Cee Gee Financial Services Trust - MRRS Decision
Headnote
MutualReliance Review System for Exemptive Relief Applications - relieffrom registration and prospectus requirements in connection withissuance of Corporation Notes and Trust Notes to partners andto parties related to partners, provided that no one other thanpartners and their spouses contribute assets or assume liability- revocation of previous Decision due to inclusion of Trust Notesin structure.ApplicableOntario Statutory Provisions
SecuritiesAct, R.S.O. 1990, c.S.5, as am. ss.25, 53, 74 (1) and 144.INTHE MATTER OF
THESECURITIES LEGISLATION OF
BRITISHCOLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,
ONTARIO,QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA,
PRINCEEDWARD ISLAND, NEWFOUNDLAND AND LABRADOR, YUKON,
NORTHWESTTERRITORIES AND NUNAVUT
AND
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
AND
INTHE MATTER OF
CEEGEE FINANCIAL SERVICES LTD.
AND
INTHE MATTER OF
CEEGEE FINANCIAL SERVICES TRUST
MRRSDECISION DOCUMENT
WHEREASthe local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Québec, New Brunswick, Nova Scotia, Prince EdwardIsland, Newfoundland, Yukon, Northwest Territories and Nunavut(the "Jurisdictions") has received an application from Cee GeeFinancial Services Ltd. (the "Corporation") and Cee Gee FinancialServices Trust (the "Trust") for a decision pursuant to the securitieslegislation and securities directions of the Jurisdictions (the"Legislation") that the requirements under the Legislation tobe registered to trade in a security (the "Registration Requirement")and to file and obtain a receipt for a preliminary prospectusand a prospectus (the "Prospectus Requirement") not apply to theissue from time to time by the Corporation of promissory notes(the "Corporation Notes") and the issue from time to time by theTrust of promissory notes (the "Trust Notes") and revoking thedecision of certain of the Decision Makers dated March 23, 1999in Re Cee Gee Financial Services Ltd. and Ernst & Young LLP(the "Prior Decision"); ANDWHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commissionis the principal regulator for this application; ANDWHEREAS the Corporation and the Trust have representedto the Decision Makers that: 1.The Corporation exists under the laws of the Province of Ontario.The Corporation is not, nor is it intended that the Corporationbecome, a reporting issuer or its equivalent under the Legislation. 2.All of the outstanding common shares of the Corporation are ownedby Cee Gee Educational Trust, a trust established by a formerpartner of Ernst & Young LLP ("E&Y"). 3.The Trust was established under the laws of the Province of Ontarioby a partner of E&Y and each of the trustees of the Trustis a partner of E&Y. It is not intended that the Trust becomea reporting issuer or its equivalent under the Legislation. 4.E&Y is a limited liability partnership existing under thelaws of the Province of Ontario. E&Y carries on business asa chartered accountancy and related professional services practice.E&Y also engages, through affiliated corporations and partnerships(each an "Affiliate") which are wholly-owned, directly or indirectly,either by E&Y or by one or more Partners, as defined below,in other businesses including, among others, an insolvency practice,a corporate finance services practice, an electronic publishingpractice and the acquisition or lease of premises and equipmentfor lease to E&Y. 5.Ernst & Young Advisory Services ("E&YAS") is a partnershipexisting under the laws of the Province of Ontario. E&YASprovides certain professional services to E&Y and the Affiliates.E&YAS and E&Y are collectively referred to as the "Firm". 6.The Firm is wholly-owned by its Canadian partners (the "Partners"),each of whom is a partner in E&YAS. Those Partners who arechartered accountants are also partners in E&Y. 7.The Corporation and the Trust will issue Corporation Notes andTrust Notes, respectively, only to: (a)Partners; (b)spouses of Partners; (c)corporations controlled by Partners (each a "Partner Corporation"),where a Partner is an officer and a director of the corporationand where all of the shares of the corporation are beneficiallyowned by the Partner, the spouse of the Partner, the childrenof the Partner and/or of the Partner's spouse (or trusts therefor),the nieces and nephews of the Partner and/or of the Partner'sspouse, the parents and grandparents of the Partner and/or ofthe Partner's spouse, or the grandchildren of the Partner and/orof the Partner's spouse, or any combination thereof; and (d)trusts (each a "Partner Trust"), where the beneficiaries of thetrust are the Partner, the spouse of the Partner, the childrenof the Partner and/or of the Partner's spouse, the nieces andnephews of the Partner and/or of the Partner's spouse, the parentsand grandparents of the Partner and/or of the Partner's spouse,or the grandchildren of the Partner and/or of the Partner's spouse,or any combination thereof, and where at least one of the trusteesof the trust is the Partner; suchpersons, corporations and trusts being referred to collectivelyas "Eligible Persons". 8.The Corporation Notes and the Trust Notes will not be transferableexcept: (a)with the consent of the directors of the Corporation or the trusteesof the Trust, as the case may be, between a Partner and otherEligible Persons connected with or related to such Partner; (b)by way of pledge or other security by an Eligible Person to alender for the purpose of giving collateral for indebtedness incurredfor the purpose of acquiring one or more Corporation Notes orTrust Notes; and (c)to the Corporation or the Trust, as the case may be, for cancellation. 9.Substantially all of the proceeds from the Corporation Notes andthe Trust Notes will be loaned by the Corporation or by the Trust,as the case may be, to E&Y and/or to one or more of the Affiliates,and may in turn be loaned among E&Y, such Affiliates and oneor more other Affiliates, for the purpose of funding the Firmand the Affiliates. Such loans will be evidenced by non-transferablepromissory notes which will be payable upon demand. 10.Prior to an Eligible Person advancing monies to the Corporationor the Trust to purchase one or more Corporation Notes or TrustNotes, as the case may be, the Eligible Person will be providedwith: (a)the most recent financial statements of the Corporation or theTrust, as the case may be; (b)for the most recent financial year of the Firm, a balance sheetdated as at the end of the financial year and related notes accompaniedby calculations showing interest coverage for the financial yearand asset coverage as at the end of the financial year, in eachcase for the Corporation Notes, the Trust Notes, bank debt andlong-term debt (the "Financial Information") or, if the FinancialInformation for the most recent financial year of the Firm isnot available and not more than 140 days have elapsed since theend of such financial year, for the previous financial year ofthe Firm; and (c)a copy of this decision document. 11.Prior to or contemporaneous with the advancement of monies byan Eligible Person to the Corporation or the Trust to purchaseone or more Corporation Notes or Trust Notes, as the case maybe, the Eligible Person will provide an acknowledgement of thereceipt of a copy of the decision of the Decision Makers appliedfor herein and an acknowledgement that the protections of theapplicable Legislation, including statutory rights of rescissionand damages and continuous disclosure, will not be available inrespect of the purchase of such promissory notes. 12.Within 140 days of the end of each financial year of the Firm,the Corporation or the Trust, as the case may be, will provideto each holder of one or more Corporation Notes or Trust Notesa copy of the Financial Information for such financial year anda copy of the most recent financial statements of the Corporationor the Trust, as the case may be. 13.In the case of the investment in one or more Corporation Notesor Trust Notes by an Eligible Person that is a Partner Corporationor a Partner Trust, the Partner Corporation or the Partner Trust,as the case may be, will represent to the Corporation or the Trust,as the case may be, that no shareholder of the Partner Corporationor no beneficiary of the Partner Trust, as the case may be, otherthan, in either case, the related Partner and the related Partner'sspouse, (i) has or will directly or indirectly contribute moneyor other assets to such Partner Corporation or Partner Trust,as the case may be, (ii) is or will be liable for any loan orother form of financing obtained by the Partner Corporation orthe Partner Trust, as the case may be, or (iii) is or will beinvolved in making investments decisions by the Partner Corporationor the Partner Trust, as the case may be. ANDWHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively the"Decision"); ANDWHEREAS each Decision Maker is satisfied that the testcontained in the Legislation that provides the Decision Makerwith the jurisdiction to make the Decision has been met; THEDECISION of the Decision Makers pursuant to the Legislationis that the Registration Requirement and the Prospectus Requirementshall not apply to the issue from time to time to Eligible Personsof Corporation Notes by the Corporation and Trust Notes by theTrust, provided that any subsequent trade in Corporation Notesand Trust Notes will be deemed to be a distribution or a distributionto the public under the Legislation of the Jurisdiction in whichthe trade takes place, unless such subsequent trade is one ofthe following: (a)a transfer between a Partner and other Eligible Persons connectedwith or related to such Partner;(b)a transfer to the Corporation or the Trust, as the case maybe, for cancellation; or
(c)a pledge to a financial institution for the purpose of givingcollateral for indebtedness incurred for the purpose of acquiringone or more Corporation Notes or Trust Notes; ANDIT IS THE FURTHER DECISION of the Decision Makers pursuantto the Legislation that the Prior Decision is revoked. February27, 2002. "PaulMoore" "Stephen Paddon"