Securities Law & Instruments

Headnote

Subsection 38(1) of the Commodity Futures Act(Ontario) (the CFA) - relief from the registration requirementsof paragraph 22(1)(b) of the CFA granted to an extra-provincialadviser in respect of the provision of advisory services tocertain mutual funds, non-redeemable investment funds and similarinvestment vehicles established outside Canada relating to tradesin commodity futures and options principally traded on commodityfutures exchanges outside Canada and cleared through clearingcorporations outside Canada.

Statutes Cited

Commodity Futures Act, R.S.O. 1990. c. C.20,as amended, 22(1)(b), 38(1).

OSC Rule 35-502 -- Non-Resident Advisors

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C. 20,AS AMENDED (THE "CFA")

AND

IN THE MATTER OF

MORGAN STANLEY HEDGE FUNDPARTNERS LP, TRAXIS PARTNERS LLC, MORGAN STANLEY HEDGE FUND

PARTNERS CAYMAN LTD. AND MORGANSTANLEY HEDGE FUND PARTNERS GP LP

 

ORDER

(Subsection 38(1) of the CFA)

UPON the application (the "Application")of Morgan Stanley Hedge Fund Partners LP, Traxis Partners LLC,Morgan Stanley Hedge Fund Partners Cayman Ltd. and Morgan StanleyHedge Fund Partners GP LP (the "Applicants",as more fully defined below) to the Ontario Securities Commission(the "Commission") for an order pursuant tosubsection 38(1) of the CFA that each of the Applicants andtheir respective directors, partners, officers, and employees,are exempt, for a period of three years, from the requirementsof paragraph 22(1)(b) of the CFA in respect of advising certainmutual funds, non-redeemable investment funds and similar investmentvehicles ("Funds"), established outside ofCanada in respect of trades in commodity futures and optionscontracts principally traded on commodity futures exchangesoutside Canada and cleared through clearing corporations outsideCanada;

AND UPON considering the applicationand the recommendation of staff of the Commission;

AND UPON the Applicants having representedto the Commission that:

1. The Applicants include Morgan Stanley HedgeFund Partners LP, Traxis Partners LLC, Morgan Stanley HedgeFund Partners Cayman Ltd. and Morgan Stanley Hedge Fund PartnersGP LP. Each of Morgan Stanley Hedge Fund Partners GP LP andMorgan Stanley Hedge Fund Partners LP is a limited liabilitypartnership organized under the laws of the State of Delaware.Morgan Stanley Hedge Fund Partners Cayman Ltd. is an exemptedcompany incorporated with limited liability under the lawsof the Cayman Islands. Traxis Partners LLC is a limited companyorganized under the laws of the State of Delaware. The Applicantsmay also include affiliates of, or entities organized by,the Applicants which may subsequently execute and submit tothe Commission a verification certificate referencing thisApplication and confirming the truth and accuracy of the informationset out in this Application with respect to that particularApplicant.

2. The Funds are, or will be, organized ina "master-feeder" structure. Traxis Fund OnshoreLP, a Delaware limited partnership, Traxis Fund Offshore LP,a Cayman Islands exempted limited partnership along with TraxisFund Offshore II LP, a Cayman Islands exempted limited partnershipand any other feeder funds (the "Feeder Funds")will co-invest exclusively in a "master" fund, TraxisFund LP (the "Master Fund"). The Master Fundwill serve as a master fund in said master-funder structure,in which substantially all of the assets of the Feeder Fundswill be invested in return for limited partnership interestsin the Master Fund. The Master Fund and the Feeder Funds willhave identical investment programs and objectives and theperformance of the Feeder Funds will be entirely dependenton the performance of the Master Fund.

3. Securities of Traxis Fund Onshore LP, TraxisFund Offshore LP, Traxis Fund Offshore II LP and any otherFeeder Funds will be offered to a small number of Ontarioresidents who are institutional investors or high net worthindividuals. Such securities will be primarily offered outsideof Canada, and will be offered and distributed in Ontariothrough an Ontario-registered dealer, in reliance upon anexemption from the prospectus requirements of the SecuritiesAct (Ontario) ("OSA"), and in relianceupon an exemption from the adviser registration requirementof the OSA under section 7.10 of Commission Rule 35-502 Non-ResidentAdvisers ("Rule 35-502").

4. The Applicants may provide advice withrespect to commodity futures and options contracts to theMaster Fund.

5. Each of the Applicants, where required,is or will be registered or licensed or is or will be entitledto rely on appropriate exemptions from such registrationsor licences to provide advice to the Funds pursuant to theapplicable legislation of its principal jurisdiction. In particular:

(i) Morgan Stanley Hedge Fund Partners GPLP is registered with the U.S. Securities U.S. InvestmentsAdvisers Act of 1940 ("Advisers Act") andas a commodity and Exchange Commission as an investmentadviser under the pool operator and a commodity tradingadvisor with the U.S. Commodity Futures Trading Commission(the "CFTC") and the National Futures Association(the "NFA").

(ii) Morgan Stanley Hedge Fund PartnersLP is registered as an investment adviser under the AdvisersAct and as a commodity trading advisor and a commodity pooloperator with the CFTC and the NFA.

(iii) Morgan Stanley Hedge Fund PartnersCayman Ltd. is registered as a commodity pool operator withthe CFTC and the NFA.

(iv) Traxis Partners LLC is registered asan investment adviser under the Advisers Act and as commoditytrading advisor with the CFTC and the NFA.

6. None of the Applicants is registered inany capacity under the CFA or the OSA.

7. All of the Funds issue securities whichare offered primarily abroad. None of the Funds is, and nonehas any current intention of becoming a reporting issuer inOntario or in any other Canadian jurisdiction.

8. The Master Fund may, as part of its investmentprogram, invest in commodity futures and options contractsprincipally traded on organized exchanges outside of Canadaand cleared through clearing corporations located outsideof Canada.

9. Prospective investors who are Ontario residentswill receive disclosure that includes (i) a statement thatthere may be difficulty in enforcing legal rights againstthe applicable Funds or any of the Applicants advising therelevant Funds, because they are resident outside of Canadaand all or substantially all of their assets are situatedoutside of Canada; and (ii) a statement that the Applicantadvising the applicable Funds is not registered with or licensedby any securities regulatory authority in Canada and, accordingly,the protections available to clients of a registered adviserwill not be available to purchasers of securities of a Fund.

AND UPON being satisfied that it wouldnot be prejudicial to the public interest for the Commissionto grant the exemption requested on the basis of the terms andconditions proposed,

IT IS ORDERED pursuant to subsection38(1) of the CFA that each of the Applicants and their respectivedirectors, partners, officers and employees responsible foradvising the Funds are not subject to the requirements of paragraph22(1)(b) of the CFA in respect of their advisory activitiesin connection with the Funds, for a period of three years, providedthat at the time that such activities are engaged in:

(a) any such Applicant, where required, isor will be registered or licensed, or is or will be entitledto rely on appropriate exemptions from such registrationsor licences, to provide advice to the Funds pursuant to theapplicable legislation of its principal jurisdiction;

(b) the Master Fund invests in commodity futuresand options contracts principally traded on organized exchangesoutside Canada and cleared through clearing corporations locatedoutside of Canada;

(c) securities of the Funds will be offeredprimarily outside of Canada and will only be distributed inOntario through an Ontario-registered dealer, in relianceon an exemption from the prospectus requirements of the OSAand upon an exemption from the adviser registration requirementof the OSA under Section 7.10 of Rule 35-502;

(d) prospective investors who are Ontarioresidents will receive disclosure that includes (i) a statementthat there may be difficulty in enforcing legal rights againstthe applicable Funds or any of the Applicants advising therelevant Funds, because they are resident outside of Canadaand all or substantially all of their assets are situatedoutside of Canada; and (ii) a statement that the Applicantadvising the applicable Funds is not registered with or licensedby any securities regulatory authority in Canada and, accordingly,the protections available to clients of a registered adviserwill not be available to purchasers of securities of a Fund;and

(e) any Applicant whose name does not specificallyappear in this Order and who proposes to rely on the exemptiongranted under this Order, shall, as a condition to relyingon such exemption, have executed and filed with the Commissiona verification certificate referencing this Order and confirmingthe truth and accuracy of the Application with respect tothat particular Applicant.

June 10, 2003.

"Robert W. Davis"
"Harold P. Hands"