Mutual Reliance Review System for ExemptiveRelief Applications -- Underwriter and advisor registrationrelief for Schedule III bank - prospectus and registration relieffor trades where Schedule III bank purchasing as principal andfirst trade relief for Schedule III bank - prospectus and registrationrelief for trades of bonds, debentures and other evidences ofindebtedness of or guaranteed by Schedule III bank providedtrades involve only specified purchasers - prospectus and registrationrelief for evidences of deposits by Schedule III bank to specifiedpurchasers.
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25(1)(a)&(c), 34(a), 35(1)(3)(i), 35(1)(11), 35(2)1(c),53(1), 72(1)(a)(i), 73(1)(a), 74(1), 147.
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., ss. 151, 206, 218.
Ontario Securities Commission Rule 32-502 --Registration Exemption for Certain Trades by Financial Intermediaries,Ontario Securities Commission Rule 32-503 -- Registration andProspectus Exemption for Trades by Financial Intermediariesin Mutual Fund Securities to Corporate Sponsored Plans.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,
ONTARIO, NEW BRUNSWICK, NOVASCOTIA,
PRINCE EDWARD ISLAND, NEWFOUNDLANDAND LABRADOR,
YUKON TERRITORY, NORTHWESTTERRITORIES AND
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 the provinces of British Columbia, Alberta, Saskatchewan,Ontario, New Brunswick, Nova Scotia, Prince Edward Island, andNewfoundland and Labrador, and in each of the Northwest Territories,Nunavut Territory and Yukon Territory (the "Jurisdictions")has received an application (the "Application") fromUBS AG ("UBS") for a decision (the "Decision")under the securities legislation of the Jurisdictions (the "Legislation")that UBS is exempt from various registration, prospectus andfiling requirements of the Legislation in connection with thebanking activities to be carried on by UBS in the Jurisdictions;
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission (the "OSC") is theprincipal regulator for this Application;
AND WHEREAS UBS has represented to theDecision Makers that:
1. UBS is a corporation duly organized underthe laws of Switzerland. UBS was formed on June 29, 1998 bythe merger of Union Bank of Switzerland (founded in 1862)and Swiss Bank Corporation (founded in 1872). The principaloffices of UBS are located in Zurich and Basel, Switzerland.
2. UBS is one of the world's leading financialservices organizations and, together with its subsidiaries,provides a comprehensive range of financial services includingcommercial, retail and investment banking, lease and tradefinancing, wealth and asset management services, investmentmanagement services and trust services.
3. UBS is publicly listed, with its sharestrading on the New York, Swiss and Tokyo stock exchanges.No individual or entity owns more than 10% of UBS' shares.
4. UBS has approximately 327 branches in Switzerland.UBS also operates branches in over 50 countries outside Switzerland.
5. In Canada, UBS has a wholly-owned subsidiary,UBS Bank (Canada), which is a Schedule II chartered bank underthe Bank Act (Canada) (the "Bank Act").
6. As at December 31, 2002, UBS had totalassets of CHF 1,181,118 million (approximately Cdn.$1,194,346million, based on a conversion using the Bank of Canada'snoon spot rate on December 31, 2002).
7. UBS is not, and has no current intentionof becoming, a reporting issuer or the equivalent in any Jurisdiction,nor are any of its securities listed on any stock exchangein Canada.
8. In June 1999, amendments to the Bank Actwere proclaimed that permit foreign banks to operate directlyin Canada through branches, rather than separate subsidiarySchedule II banks. Foreign banks permitted to carry on bankingactivities in Canada through branches will be designated inSchedule III to the Bank Act. The foreign bank branches willincrease competition in the Canadian financial services marketplace to the benefit of Canadian consumers.
9. On May 16, 2003, UBS received approvalfrom the Minister of Finance (Canada) to establish a fullservice foreign bank branch in Canada and, on May 30, 2003,received an order from the Office of the Superintendent ofFinancial Institutions approving the commencement and carryingon of business in Canada pursuant to sections 524 and 534of the Bank Act.
10. Upon approval of the Bank Act Application,UBS established and commenced operation of a Schedule IIIforeign bank branch under the Bank Act.
11. The operations of UBS' foreign bank branchwill primarily consist of commercial lending, originationof structured products, equity derivatives and fixed incomederivatives, and wealth management services and the offeringof UBS' products to private clients.
12. UBS will only accept deposits from:
(a) Her Majesty in right of Canada or inright of a province or a territory, an agent of Her Majestyin either of those rights, including 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 of that country, an agencyof the government of a foreign country or any politicalsubdivision of that country, or an entity that is controlledby the government of a foreign country or any politicalsubdivision of that country;
(c) an international agency of which Canadais a member, including the Inter-American Development Bank,the Asian Development Bank, the Caribbean Development Bank,the European Bank for Reconstruction and Development andany other international regional bank of which Canada isa member, and an international agency of which Canada isa member that is a member of the World Bank Group;
(d) a financial institution (that is, (i)a bank or an authorized foreign bank under the Bank Act,(ii) a body corporate to which the Trust and Loan CompaniesAct (Canada) applies, (iii) an association to whichthe Cooperative Credit Associations Act (Canada)applies or a central cooperative credit society for whichan order has been made under subsection 473(1) of that Act,(iv) an insurance company or a fraternal benefit societyincorporated or formed under the Insurance CompaniesAct (Canada), (v) a trust, loan or insurance corporationincorporated by or under an Act of the legislature of aprovince or territory in Canada, (vi) a cooperative creditsociety incorporated and regulated by or under an Act ofthe legislature of a province or territory in Canada, (vii)an entity that is incorporated or formed by or under anAct of Parliament or of the legislature of a province orterritory in Canada and that is primarily engaged in dealingin securities, including portfolio management and investmentcounselling, and is registered to act in such capacity underthe applicable Legislation, and (viii) a foreign institution(that is, an entity that is, (A) engaged in the businessof banking, the trust, loan or insurance business, the businessof a cooperative credit society or the business of dealingin securities or is otherwise engaged primarily in the businessof providing financial services, and (B) incorporated orformed otherwise than by or under an Act of Parliament orof the legislature of a province or territory in Canada);
(e) a pension fund that is maintained inrespect of a pension plan registered for income tax purposesand that has total assets under administration of more than$100 million at the time the first deposit transaction ismade;
(f) a mutual fund that is regulated underan Act of the legislature of a province or territory inCanada or under the laws of a jurisdiction outside Canadaand the assets of which are managed by a person that hastotal assets under their management of more than $10 millionat the time the first deposit transaction is made;
(g) an entity that, at the time the firstdeposit transaction is made, has for the fiscal year immediatelypreceding that deposit transaction, gross revenues of morethan $5 million;
(h) any other entity, where the depositfacilitates the provision of the following services by thebank to the entity, namely,
(i) lending money;
(ii) dealing in foreign exchange; or
(iii) dealing in securities, other thandebt obligations of the bank; or
(i) any other person if the deposit (asdefined in the Bank Act) is not less than $150,000,
as may be amended by the Bank Act from timeto time (collectively referred to for purposes of this Decisionas "Authorized Customers").
13. UBS will execute unsolicited trades ordersthrough registered dealers as agent for a person or companyand will also engage in trades of the types described in section1.1 of Rule 32-502 of the OSC and sections 1.1 and 1.2 ofRule 32-503 of the OSC.
14. The only advising activities which UBSintends to undertake will be incidental to its primary businessand it will not advertise itself as an adviser or allow itselfto be advertised as an adviser in the Jurisdictions.
15. The Legislation applicable in each Jurisdictioncurrently refers to either "Schedule I and Schedule IIbanks", "banks", "savings institutions"or "financial institutions" in connection with certainexemptions, but no reference is made in any of the Legislationto entities listed under Schedule III to the Bank Act. SinceUBS' foreign bank branch will not be listed under ScheduleI or II of the Bank Act, but rather under Schedule III tothe Bank Act, the existing exemptions relating to the registration,prospectus and filing requirements will not be available toit.
16. In order to ensure that UBS, as an entitylisted under Schedule III to the Bank Act, will be able toprovide banking services to businesses in the Jurisdictions,it requires similar exemptions enjoyed by banking institutionslisted under Schedules I and II to the Bank Act to the extentthat the current exemptions applicable to such banking institutionsare relevant to the banking business to be undertaken by UBSin the Jurisdictions.
AND WHEREAS under the System, this MRRSDecision Document evidences the Decision of each of the DecisionMakers;
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 underthe Legislation is that in connection with the banking businessto be carried on by UBS in the Jurisdictions as a branch designatedon Schedule III to the Bank Act:
1. UBS is exempt from the requirement underthe Legislation, where applicable, to be registered as anunderwriter with respect to trading in the same types of securitiesin respect of which an entity listed under Schedule I or IIto the Bank Act may act as an underwriter without being requiredto be registered under the Legislation as an underwriter.
2. UBS is exempt from the requirement underthe Legislation to be registered as an adviser where the performanceof the service as an adviser is solely incidental to its primarybanking business.
3. A trade of a security to UBS, where UBSpurchases the security as principal, shall be exempt fromthe registration and prospectus requirements of the Legislationof the Jurisdiction in which the trade takes place (the "ApplicableLegislation") provided that:
(i) the forms that would have been filedand the fees that would have been paid under the ApplicableLegislation if the trade had been made, on an exempt basis,to an entity listed on Schedule I or II to the Bank Actpurchasing as principal (referred to in this Decision asa "Schedule I or II Bank Exempt Trade") are filedand paid in respect of the trade to UBS; and
(ii) the first trade in a security acquiredby UBS pursuant to this Decision is deemed a distributionor primary distribution to the public under the ApplicableLegislation unless the conditions in subsections 2 or 3,as applicable, of section 2.5 of Multilateral Instrument45-102 -- Resale of Securities are satisfied.
4. The execution of an unsolicited order topurchase or sell through a registered dealer by UBS as agentfor a person or company and the trade by such person or companyin placing the unsolicited order with UBS shall be exemptfrom the registration requirements of the Legislation of theJurisdiction in which the trade takes place provided thatUBS does not actively promote or market an order executionaccess service.
5. Provided UBS only trades the types of securitiesreferred to in this paragraph with Authorized Customers orany other person if the trade is in a security which has anaggregate acquisition cost to the purchaser of $150,000 ormore, trades of bonds, debentures or other evidences of indebtednessof or guaranteed by UBS shall be exempt from the registrationand prospectus requirements of the Legislation.
6. Evidences of deposit issued by UBS to AuthorizedCustomers, as permitted under the Bank Act, shall be exemptfrom the registration and prospectus requirements of the Legislation.
THE FURTHER DECISION of the DecisionMaker in Ontario is that:
A. Subsection 25(1)(a) of the SecuritiesAct (Ontario) R.S.O. 1990 c. S.5 (as amended) (the "OntarioAct") does not apply to a trade by UBS:
(i) of a type described in subsection 35(1)of the Ontario Act or section 151 of the Regulations madeunder the Ontario Act; or
(ii) the securities described in subsection35(2) of the Ontario Act.
B. Subsection 25(1)(a) and section 53 of theOntario Act do not apply to a trade by UBS in:
(i) a security of a mutual fund, if thesecurity is sold to a pension plan, deferred profit sharingplan, retirement savings plan or other similar capital accumulationplan maintained by the sponsor of the plan for its employees,and
(a) the employees deal only with the sponsorin respect of their participation in the plan and thepurchase of the security by the plan, or
(b) the decision to purchase the securityis not made by or at the direction of the employee, or
(ii) the security of a mutual fund that
(a) is administered by a body corporateto which the Trust and Loan Companies Act (Canada)applies or a trust, loan or insurance corporation incorporatedby or under an Act of the legislature of a province orterritory in Canada,
(b) consists of a pool of funds that
(A) results from, and is limited to,the combination or commingling of funds of pension orother superannuation plans registered under the IncomeTax Act (Canada), and
(B) is established by or related topersons or companies that are associates or affiliatesof or that otherwise do not deal at arm's length withthe promoters of the mutual fund except the trust, loanor insurance corporation that administers the fund,and
(c) is managed, in whole or in part, bya person who is registered or who is exempt from registrationunder the Ontario Act.
October 21, 2003.
"Robert L. Shirriff"
"Robert W. Davis"