Hyperion Capital Management, Inc. - s. 80

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to a non-resident sub-adviser seeking registration, in respect of advising certain funds, established outside of Canada in respect of trades in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada, subject to certain terms and conditions.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., s. 22(1)(b) and s. 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers, s. 7.10

August 12, 2005.

IN THE MATTER OF

THE COMMODITY FUTURES ACT, R.S.O. 1990,

CHAPTER C.20, AS AMENDED

AND

IN THE MATTER OF

HYPERION CAPITAL MANAGEMENT, INC.

ORDER

(Section 80)

UPON the application of Hyperion Capital Management, Inc. (Hyperion) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the Commodity Futures Act (the CFA), that neither Hyperion, nor any of its directors, officers or employees acting on its behalf as an adviser (collectively, Representatives), shall be subject to paragraph 22(l)(b) of the CFA in respect of advice provided for the benefit of a Partnership (as defined below), the principal investment adviser of which is an Ontario registrant, in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside Canada and cleared through clearing houses outside Canada (the Commodity Futures);

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

AND UPON Hyperion having represented to the Commission that:

1. Hyperion is an investment manager headquartered in New York, New York. Hyperion is registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as a commodity trading adviser with the U.S. Commodities Futures Trading Commission and is a member of the U.S. National Futures Association.

2. Hyperion has applied for registration as an investment counsel and portfolio manager under Securities Act (Ontario) (the OSA) and as a commodity trading manager under the CFA.

3. Cassels Investment Management Inc. (Cassels) is registered as an adviser under the OSA in the categories of investment counsel and portfolio manager. In respect of advice related to Commodity Futures, Cassels and its directors, officers and employees will rely on section 31(d) of the CFA, which provides registration relief for OSA registrants whose services as advisers for purposes of the CFA are solely incidental to their principal business.

4. Brascan Adjustable Rate Trust I (the Fund) is a newly created investment trust established under the laws of Ontario pursuant to a declaration of trust. In order to meet its investment objectives, the Fund intends to obtain exposure to the performance of an actively managed portfolio (the Portfolio) held by Brascan Adjustable Rate Limited Partnership (the Partnership) by entering into one or more forward purchase and sale agreements with a Canadian chartered bank or its affiliate. The Partnership was established under the laws of the State of Delaware. The Fund will not invest in the Partnership.

5. The Portfolio will consist primarily of adjustable rate and hybrid mortgage-backed securities. The Partnership will not purchase or sell Commodity Futures, except as part of its hedging strategy.

6. Cassels will provide investment management services to the Fund and the Partnership.

7. Hyperion will provide investment advisory and portfolio management services to Cassels with respect to the Partnership pursuant to the terms of a sub-advisory agreement (the Sub-Advisory Agreement).

8. Under the terms of the Sub-Advisory Agreement, Hyperion will agree:

(a) to discharge its duties in a manner that is fair and reasonable to the Partnership, to act honestly and in good faith and in the best interests of Cassels, the Partnership, the general partner of the Partnership and the limited partners of the Partnership; and

(b) to exercise the degree of care, diligence and skill that a reasonably prudent portfolio manager would exercise in comparable circumstances.

(collectively the Standard of Care)

9. Cassels has contractually agreed to be responsible for the investment advice given or the portfolio management services provided by Hyperion and will be responsible to the Partnership and the Fund for any loss that arises out of the failure of Hyperion to discharge its obligations under the Sub-Advisory Agreement in accordance with the Standard of Care.

10. The offering document of the Fund will disclose that:

(a) Cassels has responsibility for the investment advice or portfolio management services provided by Hyperion; and

(b) to the extent applicable, there may be difficulty in enforcing any legal rights against Hyperion because it is resident outside of Canada and all or a substantial portion of its assets are situated outside of Canada.

11. In respect of its securities related investment advisory and portfolio management services for the benefit of the Partnership, Hyperion and its Representatives will rely on the exemption from registration under the OSA set out under section 7.3 of Ontario Securities Commission Rule 35-502 -- Non-Resident Advisers, which provides that a non-resident adviser is exempt from the OSA registration requirement where the principal adviser is a registrant, that pursuant to a written agreement, irrevocably accepts responsibility for the services provided by the exempted non-resident.

12. At the time Hyperion becomes registered as an investment counsel and portfolio manager under the OSA and a commodity trading manager under the CFA, Cassels' appointment as investment manager of the Fund and of the Partnership and Hyperion's appointment as sub-advisor will be terminated. Upon such termination, Hyperion will assume the obligations of Cassels as investment manager of the Fund and of the Partnership on substantially the same terms as Cassels.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemptions requested on the basis of the terms and conditions proposed,

IT IS ORDERED pursuant to section 80 of the CFA that Hyperion and its Representatives are not subject to the requirements of paragraph 22(l)(b) in respect of their investment advice and portfolio management services for the benefit of the Partnership, provided that:

(a) the obligation and duties of Hyperion as an adviser are set out in a written agreement with Cassels;

(b) Cassels contractually agrees with the Partnership on whose behalf investment advice and portfolio management services are to be provided by Hyperion and its Representatives to be responsible for any loss that arises out of the failure of Hyperion and its Representatives to meet the Standard of Care;

(c) Cassels cannot be relieved by the Partnership from its responsibility for loss under paragraph (b);

(d) Hyperion is registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended, with the U.S. Commodities Futures Trading Commission as a commodity trading adviser and is a member of the U.S. National Futures Association;

(e) Cassels is registered as an investment counsel and portfolio manager under the OSA; and

(f) this Order shall terminate on the day that Hyperion obtains registration as a commodity trading manager under the CFA, or three years from the date of this Order, whichever occurs first.