Relief from the adviser registration requirementof paragraph 22(1)(b) of the Commodity Futures Act (Ontario)(CFA) granted to a non-resident adviser in connectionwith the proposed advisory services to be provided to a registeredcommodity trading manager under the CFA, subject to certainterms and conditions, pursuant subsection 38(1) of the CFA.
Commodity Futures Act, R.S.O. 1990, c. C.20,as am., ss. 22(1) & 38(1).
Securities Act, R.S.O. 1990, c. S.5, as am.- Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF THE
COMMODITY FUTURES ACT, RSO.1990, c. 20
IN THE MATTER OF
LAKE SHORE ASSET MANAGEMENTINC.
UPON the application of Lake Shore AssetManagement Inc. (Lake Shore) to the Ontario Securities Commission(the Commission) for a ruling under subsection 38(1) of theCommodity Futures Act, R.S.O. 1990, c.20 (the CFA) thatLake Shore and its officers are not subject to the requirementof paragraph 22(1)(b) of the CFA;
AND UPON considering the applicationand the recommendation of the staff of the Commission;
AND UPON Lake Shore having representedto the Commission that:
1. Lake Shore is incorporated under the lawsof Illinois and is resident in Illinois. It does not havea place of business in Ontario with partners or officers thatare resident in Ontario who act as advisors on its behalfin Ontario;
2. Lake Shore is a commodity trading advisorregistered with the Commodity Futures Trading Commission anda member of the National Futures Association in the UnitedStates, which permits Lake Shore to advise in respect of futureand forward contracts and options on futures and forward contractsin the U.S.;
3. Lake Shore currently acts as an adviserproviding discretionary portfolio management services to Ontarioclients of a registered adviser under the CFA, and may inthe future act as an adviser by providing such portfolio managementservices to clients of one or more:
(a) registered advisers under the CFA, or
(b) registered brokers and dealers actingas a portfolio adviser pursuant to section 44 of the Regulationsto the CFA,
(collectively the Registrants) in Ontario;
4. Lake Shore has entered into a written agreementwith a Registrant which sets out the obligations and dutiesof Lake Shore, and a similar agreement would be entered intowith any other Registrants in the future;
5. Lake Shore now provides, and will in thefuture only provide, discretionary portfolio management servicesin circumstances where:
(a) the Registrant has agreed in a documentproviding rights to the client of the Registrant to be responsiblefor any loss that arises out of the failure of Lake Shoreto:
(i) exercise the powers and dischargethe duties of its office honestly, in good faith and inthe best interests of the client; and
(ii) exercise the degree of care, diligenceand skill that a reasonably prudent person would exercisein the circumstances,
(the standard of care), and in providingportfolio management services to the Registrant's clientsthis responsibility cannot be waived; and
(b) disclosure is made to Ontario clientsof the Registrant that the Registrant is responsible forany loss that arises out of the failure of Lake Shore tomeet the standard of care, that there may be difficultyin enforcing legal rights against Lake Shore, and that allor substantially all of Lake Shore's assets are situatedoutside of Ontario;
AND WHEREAS paragraph 22(1)(b) of theCFA prohibits a person or company from acting as an adviserunless the person is registered as an adviser, or is registeredas a partner or an officer of a registered adviser and is actingon behalf of a registered adviser, and the registration is inaccordance with the CFA and the Regulations;
AND UPON the Commission being satisfiedthat to make this ruling would not be prejudicial to the publicinterest;
IT IS RULED, pursuant to subsection 38(1)of the CFA, that Lake Shore and its officers are not subjectto the requirements of paragraph 22(1)(b) of the CFA in respectof advice provided for the benefit of clients of a Registrant,provided that:
(a) the obligations and duties of Lake Shoreare set out in a written agreement with the Registrant inOntario;
(b) the Registrant agrees in a document providingrights to the client of the Registrant to be responsible forany loss that arises out of the failure of Lake Shore to meetthe standard of care in providing advice to the client ofthe Registrant and this responsibility is not waived; and
(c) a client agreement or offering documentdiscloses that the Registrant is responsible for any lossthat arises out of the failure of Lake Shore to meet the standardof care in providing advice to the client of the Registrantand, that there may be difficulty enforcing any legal rightsagainst Lake Shore and all or a substantial portion of LakeShore's assets are situated outside of Ontario.
and provided that this ruling will terminatethree months from the date hereof.
September 16, 2003.
"Paul M. Moore"
"Paul K. Bates"