FM Fund Management Limited - s. 80 of the CFA

Headnote

Subsection 80 of the Commodity Futures Act (Ontario) -- relief from the requirements of subsection 22(1)(b) of the CFA in respect of advising certain non-Canadian mutual funds related to commodity futures contracts and options traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada subject to certain terms and conditions.

IN THE MATTER OF

THE COMMODITY FUTURES ACT

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

AND

IN THE MATTER OF

FM FUND MANAGEMENT LIMITED

ORDER

(Section 80 of the CFA)

UPON the application of FM Fund Management Limited (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA that the Applicant and its directors, officers and employees acting on its behalf as an adviser (collectively the Representatives) are exempt for a period of three years from the requirements of paragraph 22(1)(b) of the CFA in respect of advising the Absolute Germany Fund, the Absolute Return Europe Fund and the European Catalyst Fund (together the Funds) in respect of trades in commodity futures contracts and options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada (the Proposed Advisory Business);

AND UPON considering the application and the recommendation of staff of the Commission;

AND UPON the Applicant having represented to the Commission as follows:

1. The Applicant is a limited liability company organized under the laws of the Cayman Islands.

2. The Applicant is not registered under the CFA as either an advisor or dealer.

3. The Applicant is registered as an Excluded Person under the Securities Investment Business Law of the Cayman Islands.

4. The Applicant serves as Investment Manager of the Funds. The Applicant is responsible for providing investment advice with respect to investments in or the use of commodity futures contracts traded on commodity futures exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada.

5. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in clause 25(1)(b) of the Securities Act, Ontario (the OSA) for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of Rule 35-502 -- Privately Placed Funds Offered Primarily Abroad (the Non-Resident Adviser Rule).

6. As would be required under section 7.10 of the Non-Resident Advisor Rule, the securities of the Funds will be:

(i) primarily offered outside of Canada;

(ii) only distributed in Ontario through one or more registrants under the OSA; and

(iii) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the OSA.

7. Prospective investors who are Ontario residents will receive disclosure that includes (i) a statement that there may be difficulty in enforcing legal rights against the Funds, and or the Applicant which advises the relevant Funds, because such entities are resident outside of Canada and as all or substantially all of their assets are situated outside of Canada; and (ii) a statement that the Applicant advising the applicable Funds is not registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Funds.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemptions requested.

IT IS ORDERED pursuant to section 80 of the CFA that the Applicant and its Representatives are, for a period of three years, not subject to the requirements of paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Business until the date when the Fund ceases to meet the criteria of the Non-Resident Adviser Rule, as set forth in paragraph 6 above, provided that:

(a) the Applicant continues to be an Excluded Person or otherwise appropriately registered under the Securities Investment Business Law of the Cayman Islands;

(b) the Fund invests in futures and options contracts traded on organized exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada, in other derivative instruments traded over the counter primarily outside of Canada, and in securities primarily outside of Canada;

(c) securities of the Fund are offered primarily outside of Canada and are only distributed in Ontario through Ontario-registered dealers, in reliance on an exemption from the prospectus requirements of the OSA and upon an exemption from the adviser registration requirements of the OSA and section 7.10 of Rule 35-502; and

(d) prospective investors who are Ontario residents will receive disclosure that includes

(i) a statement that there may be difficulty in enforcing legal rights against the Applicant, or the principals of the Applicant because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(ii) a statement that the Applicant is not registered with or licensed by any securities regulatory authority in Ontario and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Fund.

January 7, 2005.