MRRS -- Relief granted, subject to certain conditions,from the Registration Requirement and the Prospectus Requirementin respect of certain trades (and solely incidental advice)by Filer and its Affiliates and Representatives through itsToronto Call Centre and certain other trades (and solely incidentaladvice) outside and apart from the activities of its TorontoCall Centre.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53.
National Instrument 35-101 -- Conditional Exemptionfrom Registration for United States Broker-Dealers and Agents.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA,
ONTARIO, QUEBEC, NEW BRUNSWICK,PRINCE EDWARD ISLAND,
NOVA SCOTIA, NEWFOUNDLANDAND LABRADOR, YUKON, NUNAVUT AND NORTHWEST TERRITORIES
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundlandand Labrador, Yukon, Nunavut and the Northwest Territories (the"Jurisdictions") has received an application fromFMR Corp. (the "Filer") for a decision pursuant tothe securities legislation of the Jurisdictions (the "Legislation")exempting:
1. the Filer and certain representatives ofthe Filer (the "Representatives"), from the dealerand adviser registration requirements contained in the Legislation(the "Registration Requirement") and the prospectusrequirement contained in the Legislation (the "ProspectusRequirement") in respect of certain activities to beconducted by the Representatives which would involve tradingin securities with or for persons or companies who are holdersof, or contributors to, tax-advantaged retirement savingsplans ("U.S. Retirement Plans") which are locatedin the United States of America ("U.S. Retirement PlanClients") and investment advisory activities solely incidentalthereto; and
2. the Filer and those of its affiliates (the"Affiliates") who are registered broker-dealerswith the United States Securities and Exchange Commission("SEC"), and their agents, from the RegistrationRequirement and the Prospectus Requirement in order to permitthem to trade in foreign securities with U.S. Retirement PlanClients in the manner contemplated by National Instrument35-101 - Conditional Exemption from Registration for UnitedStates Broker-Dealers and Agents ("NI 35-101") providedthat such trading is conducted in accordance with all termsand conditions of NI 35-101 save and except for the requirementthat the Filer have no office or physical presence in anyjurisdiction of Canada or otherwise in accordance with therelief obtained hereunder.
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application.
AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Quebec Notice 14-101;
AND WHEREAS the Filer has representedto the Decision Makers that:
1. The Filer is a corporation incorporatedunder the laws of the State of Delaware, with its principalplace of business located in Boston, Massachusetts, UnitedStates of America. The Filer is the holding company for agroup of affiliated entities commonly known as Fidelity Investments.Through its affiliates, the Filer engages in a variety ofbusinesses, notably financial services and employer servicesoutsourcing. The Filer's affiliated entities include a numberof registered broker-dealers, investment advisers and transferagents, in North America and in other countries across theworld. The Filer currently has a presence in Canada throughFidelity Investments Canada Limited ("FICL"), anaffiliate of the Filer that is registered as a mutual funddealer, commodity trading manager and adviser in the categoriesof investment counsel and portfolio manager with the OntarioSecurities Commission, and in equivalent categories in allother provinces and territories.
2. The Filer is proposing to transfer a portionof its call centre operations to an office in Toronto, Ontario(the "Toronto Call Centre"). The Toronto Call Centrewill operate through Fidelity Canadian Corporation, a whollyowned subsidiary of the Filer that has been recently incorporatedunder the federal laws of Canada to accommodate such operations.
3. The Filer chose Ontario as the locationfor the call centre because of the ability to co-exist withFICL in terms of mitigating start-up costs and leveragingthe existing call centre systems infrastructure. For clarificationpurposes, the relationship between FICL and the Toronto CallCentre will be solely limited to the sharing of administrativeresources. Although the activities of each entity will beseparate, the Toronto Call Centre is expected to be physicallylocated in close proximity to FICL's offices.
4. The Filer is establishing the Toronto CallCentre to service clients of its unit, Fidelity Employer ServicesCompany ("FESCO"). FESCO is retained by employersto provide a broad spectrum of human resources and benefitsoutsourcing products and services. FESCO's clients includemany types of corporate, governmental and tax-exempt employers,comprising more than 12.7 million employees. FESCO servicesthese employees through the administration of more than 11,000retirement, defined benefit pension, health and welfare, humanresources administration and payroll programs.
5. The Toronto Call Centre will be establishedfor the purpose of answering inbound phone calls from FESCOclients and their employees regarding the various programsadministered by FESCO. The Filer expects the Toronto CallCentre to initially service only the defined contributionretirement plans (the "Proposed Defined ContributionRetirement Plan Services") (as discussed further in paragraph9 below) and health and welfare plans of FESCO clients. Inthe future, the Toronto Call Centre may expand its operationsto include other outsourced employer services, including humanresources administration, payroll and defined benefit pensionprograms. It is not anticipated that either the planned healthand welfare servicing or the future services will requireregistration under the Act, and no exemption is hereby requestedfor those future services.
6. The Toronto Call Centre will not otherwisebe accessible to, or by, any person or company other thanthe Filer and its associates and affiliates, and FESCO clientsand their employees.
7. As noted above, the call centre will serviceFESCO clients and their employees who participate in U.S.Retirement Plans. The U.S. Retirement Plans are defined contributionretirement plans, which are established by employers (plansponsors) for the benefit of their employees (plan participants).Contributions to these plans generally grow tax-deferred untilwithdrawn, and employee contributions can be made on a pre-taxbasis. The plan sponsor is responsible for the design, creation,implementation and operation of the plan. The plan sponsorretains service providers, such as the Filer or its affiliates,to provide necessary or appropriate plan services. The plansponsor makes all major decisions concerning the plan. Incontrast, plan participants are generally entitled only tocontribute, select investment options from a specified listof options, borrow from their plan accounts, and withdrawmoney from the plan. The funding vehicle for most definedcontribution retirement plans generally takes the form ofa trust. Under U.S. law, the plan sponsor and certain serviceproviders have strict fiduciary obligations to the plan andemployees participating in the plan.
8. There are approximately 12.6 million employeesin U.S. Retirement Plans serviced by the Filer. Certain ofthose employees currently reside in Canada (the "CanadianClients"). These Canadian Clients fall into two categories:
(a) Employees of Canadian businesses withU.S. affiliates that are contributors to U.S. RetirementPlans for their employees; and,
(b) Canadian residents who have at one timebeen, or are currently, employed by a U.S. employer whoare participants in U.S. Retirement Plans located in theU.S.
Of the 12.6 million retirement plan participantsserviced by the Filer, approximately 5,100 Canadian Clientscurrently hold funded accounts. These accounts were establishedpursuant to the rules of the retirement plans in which theCanadian Clients participate, and are valid under U.S. law.Generally, Canadian Clients benefit from participation inthe retirement plans, both by virtue of any employer contributionsto their plan accounts, and by favourable U.S. tax treatmentof their U.S. based income.
9. The scope of the Toronto Call Centre'sProposed Defined Contribution Retirement Plan Services willinitially consist of some, or all, of the following services,generally in response to inbound U.S. Retirement Plan Clientcalls in order to:
(a) provide to participants (employees)and/or clients (employers) a variety of information andinformational material regarding the plan, including descriptionsof plan features and benefits, descriptions of plan investmentoptions, and investment education and guidance tools;
(b) input and maintain participant indicativedata on the plan record-keeping system;
(c) determine the eligibility of participantsto participate in the plans based upon client data feeds,service configuration, automated eligibility tracking andsimilar systems;
(d) provide information to a participantregarding the enrolment process including a participant'scontribution deferrals;
(e) process participants' requests to exchange,or switch, between plan investment options ("switches")(being Fidelity U.S. mutual funds and other non-Canadiansecurities);
(f) process disbursement transactions includingloans, hardship withdrawals, partial and full payouts ofparticipants' balances in the plan, minimum required distributions,and return of excess contributions;
(g) provide reports to, and on behalf of,the plan sponsors including monthly trial balances, quarterlyadministrative reports, and annual reports;
(h) provide reports and notices to planparticipants, such as confirmations (e.g., for exchangesbetween investment options or plan disbursements), statements,and notices that may be required by the applicable law;and,
(i) process forfeiture and death benefittransactions, including the related functions of segregatingaccount assets and liquidating accounts, as applicable (the"Proposed Defined Contribution Retirement Plan Services").
Other than the "switches" and thecontribution deferral arrangements, Representatives will notinitially take trading orders since the calls to be directedto the Toronto Call Centre will be limited to customer serviceinquiries that can be resolved administratively.
10. The Representatives will not be, and willnot initially be required to be, registered under U.S. securitieslaw, however they will comply with any applicable rules establishedby U.S. regulatory authorities. The Representatives will berequired to follow employee screening procedures similar tothose employed by the Filer for its non-registered personnelin the U.S.
11. The Toronto Call Centre will not be registeredas a broker-dealer under U.S. securities law. The TorontoCall Centre will be operated in accordance with applicablerules, if any, established by U.S. regulatory authorities.The Toronto Call Centre will be subject to procedures similarto those set in place for the Filer's existing U.S. business,including examination by representatives from the Filer'scompliance staff or internal audit staff.
12. It is possible that in the future theRepresentatives may be registered under U.S. securities lawin order to engage in trading activities. To the extent thatthe Representatives are to engage in such trading activities,the Filer will comply with any applicable Canadian securitiesregulatory requirements at that time.
13. The Toronto Call Centre will not tradein securities with or on behalf of persons or companies whoare resident in Canada except in accordance with the dealerregistration and prospectus exemptions available pursuantto NI 35-101 or otherwise in accordance with the relief obtainedhereunder.
14. The Filer and the Representatives whoact in Ontario on behalf of the Filer in respect of tradeswith or on behalf of U.S. Retirement Plan Clients of the TorontoCall Centre will comply with any applicable requirements ofU.S. securities law.
15. Without this MRRS Decision Document, theFiler and the Representatives who act in Ontario on behalfof the Filer may be unable to satisfy the Registration Requirementand the Prospectus Requirement.
16. The Filer, its Affiliates and the TorontoCall Centre currently, or in the future may, rely on NI 35-101for the purposes of dealing with U.S. Retirement Plan Clientsthat are resident in Canada. Section 2.1 of NI 35-101 requiresthat the Filer have "no office or physical presence inany jurisdiction" of Canada.
17. As a consequence of the trading activitythat would be conducted by the Toronto Call Centre, the Filerand its Affiliates and the Toronto Call Centre will technicallyno longer be able to continue to rely on NI 35-101 as it maybe argued that the Filer has an office or other physical presencein Canada.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuantto the Legislation is that:
(a) the Representatives working in the TorontoCall Centre shall not be subject to the Registration Requirementand the Prospectus Requirement where the Representatives acton behalf of the Filer or its affiliates in respect of trades(or providing solely incidental investment advice) in securitieswith or on behalf of U.S. Retirement Plan Clients, providedthat the Representatives comply with any applicable requirementsof U.S. securities law; and
(b) the Filer and its affiliates shall notbe subject to the Registration Requirement and the ProspectusRequirement with respect to trading (or providing solely incidentalinvestment advice) through the Toronto Call Centre in securitieswith or for U.S. Retirement Plan Clients, provided that:
(i) a Representative working in the TorontoCall Centre acts on behalf of the Filer or its affiliatesin respect of such trading; and
(ii) the Filer and its affiliates complywith any applicable requirements of U.S. securities law;and
(c) the Registration Requirement and the ProspectusRequirement shall not apply to the Filer and the Affiliatesand their respective agents, in order to permit them to tradein foreign securities with U.S. Retirement Plan Clients fortrades conducted outside and apart from the activities ofthe Toronto Call Centre provided that such trading is conductedin accordance with all terms and conditions of NI 35-101 saveand except for the requirement that the Filer have no officeor physical presence in any jurisdiction of Canada or otherwisein accordance with the relief obtained hereunder.
June 10, 2003.
"Paul M. Moore"
"Harold P. Hands"