Subsection 107(3) of the Regulation and section147 of the Act -- Order exempting trust company registered asan adviser from the capital requirements pursuant to subsection107(3)of the Regulation provided it meets the liquidity and capitalrequirements for trust corporations established by the Trustand Loan Companies Act (Canada).
Securities Act, R.S.O. 1990, c. S.5, as am.,s. 147.
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., s. 107(3).
Related Orders Cited
Re M.R.S. Trust Company, Order of the Commissiondated May 9, 2000.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5,AS AMENDED (the ACT)
IN THE MATTER OF
M.R.S. TRUST COMPANY
(Section 147 of the Act)
UPON the application of M.R.S. TrustCompany (M.R.S. Trust) to the Ontario Securities Commission(the Commission) pursuant to Section 147 of the Securities ActOntario (the Act) for an order that M.R.S. Trust be exempt fromthe capital requirement set out in Subsection 107(3) of theRegulation under the Act (the Regulation), provided it meetsthe liquidity and capital requirements for trust companies governedby the Trust and Loan Companies Act (Canada) (the TLA);
AND UPON considering the applicationand the recommendation of the staff of the Commission;
AND UPON it being represented to theCommission that:
1. M.R.S. Trust is registered with the Commissionas an adviser in the categories of investment counsel andportfolio manager, and therefore must comply with subsection107(3) of the Regulation.
2. M.R.S. Trust is a trust company continuedand regulated under the TLA.
3. Section 107 of the Regulation creates minimumcapital requirements for various categories of registrants.These are based on a working capital concept.
4. Minimum capital requirements are intendedto ensure that registrants maintain a minimum level of liquidityand solvency in their business.
5. The financial statements of M.R.S. Trustmust be prepared in accordance with generally accepted accountingprinciples (GAAP) and the provisions of the TLA and the regulationsthereto, audited by its auditors and filed with the Officeof the Superintendent of Financial Institutions (OSFI) whichadministers the TLA.
6. M.R.S. Trust is also required under theTLA to file monthly, quarterly and annual returns with OSFIand to comply with capital, liquidity and asset requirementscontained in the TLA. These address concerns with respectto the liquidity and solvency of trust companies under thatstatute similar to those addressed by Subsection 107(3) ofthe Regulation.
7. As a trust company, M.R.S. Trust acceptsdeposits from the public. Under the TLA, M.R.S. Trust mustat all times maintain sufficient unencumbered liquid assetsin accordance with guidelines under the TLA.
8. Under the TLA, M.R.S. Trust is also subjectto restrictions on its asset base expressed as a regulatoryapproved multiple of its regulatory capital.
9. Financial institutions, including M.R.S.Trust, do not generally separate assets and liabilities betweencurrent and long-term because this is not considered to bemeaningful disclosure. This is consistent with GAAP and isreferenced in Section 1510.09 of the Canadian Institute ofChartered Accountants Handbook.
AND UPON the Commission being satisfiedthat the order would not be prejudicial to the public interest;
IT IS HEREBY ORDERED, pursuant to section147 of the Act, that M.R.S. Trust be exempt from the requirementsset out under subsection 107(3) of the Regulation provided that:
1. M.R.S. Trust maintains its status as aregistered trust company in good standing under the TLA;
2. M.R.S. Trust remains in compliance withall applicable capital and liquidity requirements establishedpursuant to the TLA;
3. M.R.S. Trust shall not have custody ofany of the assets in respect of which it provides investmentcounsel or portfolio management services requiring registrationunder the Act;
4. M.R.S. Trust shall immediately notify theManager of Compliance of the Commission if:
(a) M.R.S. Trust fails to comply with anyapplicable capital and liquidity requirements establishedpursuant to the TLA; or
(b) OSFI or the Canadian Deposit InsuranceCorporation (CDIC):
(i) commences any proceedings, investigationor action (other than routine inspections); or
(ii) makes any order, or imposes any termsor conditions,
concerning the capital and liquidity requirementsof M.R.S. Trust;
5. M.R.S. Trust maintains written policiesand procedures to minimize conflicts of interest which mayarise if a client receiving investment advisory or portfoliomanagement services receives any other services from M.R.S.Trust;
6. When a client is receiving, or is to receive,investment advisory or portfolio management services fromM.R.S. Trust, and receives or is to receive services fromM.R.S. Trust which are other than investment advisory or portfoliomanagement services, M.R.S. Trust shall:
(a) disclose to such client in writing,before providing any advice to the client, the details ofthe relationship(s) and the policies and procedures adoptedto minimize the potential for conflict of interest arisingfrom the relationship(s);
(b) when there is a material change to thedetails of the relationship(s) or the policies and proceduresadopted by M.R.S. Trust, immediately disclose to such clientsthe details of the changes; and
7. This Order will terminate one year afterthe coming into force of any change in Ontario securitieslaws that would have the effect of removing the requirementthat an adviser that is a trust company calculate minimumcapital using a working capital concept, but does not includeany amendment, rule or regulation that is specifically identifiedby the Commission as not applicable for these purposes.
May 9, 2003.
"Robert L. Shirriff"
"Howard I. Wetston"