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Sprucegrove Investment Management Ltd. - s. 6.1 of OSC Rule 13-502
Headnote
Exemption regarding the calculation of Capital Markets Participation Fees payable by a registrant registered as an adviser in the category of investment counsel and portfolio manager and dealer in the category of limited market dealer under the Securities Act (Ontario). The registrant's revenues include revenues earned from advice provided to clients located outside of Ontario. Because the registrant does not have a permanent establishment in any other jurisdiction in Canada, the income allocated to Ontario in its corporate tax filings is not an accurate proxy for the registrant's use of the Ontario capital markets. Exemption granted so that the "Ontario percentage" is calculated as the percentage of the registrant's income derived from its capital markets activities in Ontario and not as the percentage of its income allocated to Ontario in its corporate tax filings.
Ontario Rules
Ontario Securities Commission Rule 13-502 - Fees.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED (THE "ACT")
AND
IN THE MATTER OF
ONTARIO SECURITIES COMMISSION RULE 13-502
FEES (THE "RULE")
AND
IN THE MATTER OF
SPRUCEGROVE INVESTMENT MANAGEMENT LTD.
EXEMPTION ORDER
(Section 6.1 of Rule 13-502)
WHEREAS the Ontario Securities Commission (the "Commission") has received an application from Sprucegrove Investment Management Ltd. ("Sprucegrove"), pursuant to section 6.1 of the Rule, for an order exempting Sprucegrove, in part, from the requirement to pay participation fees calculated in the manner prescribed by Part 3 of the Rule;
AND WHEREAS, the Rule requires that certain registrants under the Act which have a permanent establishment in Ontario determine their participation fees by taking into account income allocated to Ontario in the corporate income tax filings for the registrant under the Income Tax Act (Canada) which includes income from certain non-Ontario sources where the registrant does not have a permanent establishment in that jurisdiction;
AND WHEREAS, unless otherwise defined, the terms herein have the meanings set out in Ontario Securities Commission Rule14-501- Definitions;
AND WHEREAS the Registrant has represented to the Commission that:
1. Sprucegrove was incorporated under the laws of the Province of Ontario with its head office in Toronto. Other than its Toronto office, Sprucegrove has no other permanent establishment in Canada.
2. Sprucegrove is registered as an adviser in the categories of investment counsel and portfolio manager under the Act, and as a dealer in the category of limited market dealer under the Act. Sprucegrove is also registered as an adviser (or the equivalent) in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, and Newfoundland. Sprucegrove is also registered in the United States of America with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940.
3. Sprucegrove is not in default of any of the requirements of the securities legislation of Ontario.
4. As a registrant firm in Ontario, Sprucegrove must pay, for each of its financial years, the participation fee shown in Appendix B of the Rule that applies to it according to Sprucegrove's specified Ontario revenues earned from its capital market activities.
5. In accordance with section 3.6 of the Rule, Sprucegrove's specified Ontario revenue for a financial year is calculated by multiplying the gross revenues earned by it as disclosed in its annual financial statements for the financial year less specified deductions, by its Ontario percentage.
6. Registrants that have a permanent establishment in Ontario must calculate their Ontario percentage by referring to the amount allocated to Ontario in their corporate income tax filings made under Income Tax Act (Canada). Registrants who do not have a permanent establishment in Ontario must calculate their Ontario percentage by determining the percentage of its total revenues which are attributable to its capital markets activities in Ontario.
7. Sprucegrove does not have a permanent establishment in any other jurisdiction in Canada other than Ontario. Accordingly, Sprucegrove reports all of its Ontario income and all of its non-Ontario income in its Ontario corporate income tax returns. Sprucegrove does not file corporate income tax returns in any other jurisdiction in Canada. Sprucegrove's corporate tax filings do not distinguish between income earned in Ontario and income earned in jurisdictions outside of Ontario.
8. Based on the calculation method disclosed above there is a material difference between the Ontario percentage for Sprucegrove and the percentage of its total revenues which are attributable to its capital markets activities in Ontario.
AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;
IT IS THE DECISION of the Director pursuant to section 6.1 of Rule 13-502, that for purposes of calculating the Capital Markets Participation Fees pursuant to Part 3 of Rule 13-502, Sprucegrove is granted relief to the extent that the "Ontario percentage" for each financial year of Sprucegrove should be calculated as the percentage of the total revenues of Sprucegrove attributable to capital markets activities in Ontario and not as the percentage of its income allocated to Ontario in its corporate income tax filings.
June 15, 2004.
"David M. Gilkes"