Prospectus and registration relief for ScheduleIII Bank -- revocation of original MRRS Decision in Ontarioand re-issuance of Ontario only decision to clarify advisingbusiness to be carried on by Schedule III Bank in Ontario.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25(1)(a) and (e), 35(1)(3)(i), 35(2), 53(i), 72(1)(a)(i),73(1)(a), 74(1), 144, 147.
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as amended, Schedule I, section 28.
OSC Policy 45-501.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O.1990,
CHAPTER S.5, AS AMENDED (the"Act")
IN THE MATTER OF
MELLON BANK, N.A.
REVOCATION AND DECISION
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundlandand Labrador, Northwest Territories, Nunavut Territory and YukonTerritory (the "Jurisdictions") made decisions onDecember 4, 2000 under the Mutual Reliance Review System forExemptive Relief Applications ("MRRS") pursuant tothe securities legislation of the Jurisdictions (the "Legislation")that Mellon Bank, N.A. ("Mellon Bank") is exempt fromvarious registration, prospectus and filing requirements ofthe Legislation in connection with the banking activities tobe carried on by Mellon Bank in Canada through its ScheduleIII Bank (the "Original Decision");
AND WHEREAS the Ontario Securities Commission(the "Commission") has received an application (the"Application") from Mellon Bank for a decision pursuantto the Securities Act (Ontario) (the "Act")to revoke the Original Decision with respect to the relief grantedby Ontario and to restate the Original Decision to clarify thebusiness of Mellon Bank to be carried on in Ontario;
AND WHEREAS it has been represented byMellon Bank to the Commission that:
1. Mellon Bank is a United States bank andis the principal bank subsidiary of Mellon Financial Corporationin the United States.
2. Mellon Financial Corporation is a multi-bankholding company whose principal wholly-owned subsidiariesare Mellon Bank, The Boston Company Inc., Boston Safe Depositand Trust Company, Mellon Capital Management Corporation,Mellon Bank (DE) National Association and Buck ConsultantsInc. The Dreyfus Corporation, a major mutual fund managementcompany in the United States, is a wholly-owned subsidiaryof Mellon Bank.
3. In June 1999, amendments to the BankAct (Canada) (the "Bank Act") were proclaimedthat permit foreign commercial banks to establish direct branchesin Canada. These amendments have created a new Schedule III,which lists foreign banks permitted to carry on banking activitiesthrough branches in Canada.
4. On November 10, 2000, Mellon Bank receivedan order under the Bank Act permitting it to establisha full service branch under the Bank Act and designatingit on Schedule III to the Bank Act.
5. Mellon Bank's principal business is bankingincluding investment counselling and portfolio managementactivities. Mellon Bank provides portfolio management servicesfor equity, fixed income, asset allocation, foreign currencyand overlay portfolios. As part of these services, MellonBank engages in foreign exchange, options, over-the-counterderivative products, financial futures, commodity futurescontracts and commodity futures options. Additional bankingactivities include commercial loans, foreign exchange, currentaccounts, lock-box and cash management services to companiesoperating in Canada. Treasury operations of Mellon Bank providefunding and liquidity for commercial lending activity of MellonBank and deal in foreign exchange. Mellon Bank is a providerof trust and custody and related services, such as securitieslending, investment accounting, trade processing, performancemeasurement, investment-related foreign exchange, risk managementand fiduciary monitoring in sub-custodian relationships withbanks. Mellon Bank is a participant in the interbank marketand accepts term deposits from major Canadian and multi-nationalcorporations.
6. The only advising activities which MellonBank undertakes are either part of its principal businessin accordance with the Bank Act or are incidental toits principal business.
7. Mellon Bank only accepts deposits fromthe following:
(a) Her Majesty in right of Canada or inright of a province or territory, an agent of Her Majestyin either of those rights and includes a municipal or publicbody empowered to perform a function of government in Canada,or an entity controlled by Her Majesty in either of thoserights;
(b) the government of a foreign countryor any political subdivision thereof, an agency of the governmentof a foreign country or any political subdivision thereof,or an entity that is controlled by the government of a foreigncountry or any political subdivision thereof;
(c) an international agency of which Canadais a member, including an international agency that is amember of the World Bank Group, the Inter- American DevelopmentBank, the Asian Development Bank, the Caribbean DevelopmentBank and the European Bank for Reconstruction and Developmentand any other international regional bank;
(d) a financial institution (i.e.: (a) abank or an authorized foreign bank under the Bank Act; (b)a body corporate to which the Trust and Loan CompaniesAct (Canada) applies; (c) an association to which theCooperative Credit Association Act (Canada) applies;(d) an insurance company or a fraternal benefit societyto which the Insurance Companies Act (Canada) applies;(e) a trust, loan or insurance corporation incorporatedby or under an Act of the legislature of a province or territoryin Canada; (f) a cooperative credit society incorporatedand regulated by or under an Act of the legislature of aprovince or territory in Canada (g) an entity that is incorporatedor formed by or under an Act of Parliament or of the legislatureof a province or territory in Canada and that is primarilyengaged in dealing in securities, including portfolio managementand investment counselling, and is registered to act insuch capacity under the applicable legislation; and (h)a foreign institution that is (i) engaged in the banking,trust, loan or insurance business, the business of a cooperativecredit society or the business of dealing in securitiesor is otherwise engaged primarily in the business of providingfinancial services, and (ii) is incorporated or formed otherwisethan by or under an Act of Parliament or of the legislatureof a province or territory in Canada);
(e) a pension fund sponsored by an employerfor the benefit of its employees or employees of an affiliatethat is registered and has total plan assets under administrationof greater than $100 million;
(f) a mutual fund corporation that is regulatedunder an Act of the legislature of a province or territoryin Canada or under the laws of any other jurisdiction andhas total assets under administration of greater than $10million;
(g) an entity (other than an individual)that has, for the fiscal year immediately preceding theinitial deposit, gross revenues on its own books and recordsof greater than $5 million;
(h) any other entity, where the depositfacilitates the provision of the following services by theauthorized foreign bank to the entity, namely,
(i) lending money,
(ii) dealing in foreign exchange, or
(iii) dealing in securities, other thandebt obligations of the authorized foreign bank; or
(i) any other person if the deposit is inan aggregate amount of greater than $150,000;
collectively referred to for purposes of thisDecision as "Authorized Purchasers".
8. Portfolio management and investment counsellingare included in the definition of the "business of banking"under the Bank Act which is the principal businessof banks in Schedule I, II and III to the Bank Act.
9. The Act refers to "Schedule I andSchedule II banks" in connection with certain exemptions,however, no reference is made in the Act to entities listedon Schedule III to the Bank Act.
10. In order to ensure that Mellon Bank, asan entity listed on Schedule III to the Bank Act, isable to provide banking services to persons in the Jurisdictions,it requires similar exemptions enjoyed by banking institutionsincorporated under the Bank Act to the extent thatthe current exemptions applicable to such banking institutionsare relevant to the banking business being undertaken by MellonBank in the Jurisdictions.
AND WHEREAS the Commission is satisfiedthat the tests contained in the Act that provides the Commissionwith the jurisdiction to make the Decision has been met;
IT IS THE DECISION of the Commissionpursuant to the Act that the Original Decision is revoked andreplaced by the following decision (the "Decision").
THE DECISION of the Commission pursuantto the Act is that in connection with the banking business tobe carried on by Mellon Bank in Ontario:
1. Mellon Bank is exempt from the requirementunder the Act to be registered as an underwriter with respectto trading in the same types of securities that an entitylisted on Schedule I or II to the Bank Act may actas an underwriter in respect of without being required tobe registered under the Act as an underwriter.
2. Mellon Bank is exempt from the requirementsunder the Act to be registered as an adviser for the purposeof providing investment counsel services and portfolio managementservices in accordance with the Bank Act or where theperformance of the service as an adviser is solely incidentalto its principal business.
3. A trade of a security to Mellon Bank, whereMellon Bank purchases the security as principal, shall beexempt from the registration and prospectus requirements ofthe Act provided that:
(i) the forms that would have been filedand the fees that would have been paid under the Act ifthe trade had been made, on an exempt basis, to an entitylisted on Schedule I or II to the Bank Act purchasingas principal are filed and paid in respect of the tradeto Mellon Bank, and
(ii) the first trade in a security acquiredby Mellon Bank pursuant to this Decision is deemed a distributionunder the Act unless the conditions in subsections 2 or3, as applicable, of section 2.5 of Multilateral Instrument45-102 - Resale of Securities are satisfied.
4. Provided Mellon Bank only trades the typesof securities referred to in this paragraph 4 with AuthorizedPurchasers, trades of bonds, debentures or other evidencesof indebtedness of or guaranteed by Mellon Bank shall be exemptfrom the registration and prospectus requirements of the Act.
5. Evidences of deposit issued by Mellon Bankto Authorized Purchasers shall be exempt from the registrationand prospectus requirements of the Act.
6. Subsection 25(1)(a) of the Act does notapply to a trade by Mellon Bank:
(i) of a type described in subsection 35(1)of the Act or section 151 of the Regulations made underthe Act; or
(ii) in securities described in subsection35(2) of the Act.
7. Except as provided for in paragraph 3 ofthis Decision. section 28 of Schedule I to Ontario Regulation1015 made under the Act shall not apply to trades made byMellon Bank in reliance on this Decision.
December 31, 2002.
"Howard I. Wetston"