DB Capital Advisers Inc. - s. 80 of the CFA

Headnote

Section 80 of the Ontario Commodity Futures Act -- relief from the registration requirements of subsection 22(1)(b) of the CFA granted to a non-resident adviser in respect of the provision of advisory services relating to commodity futures and options to a Fund in Ontario, subject to certain terms and conditions under which DB Capital Advisers Inc. accepts legal responsibility fro the advisory services provided under such exemption.

Statutes Cited

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

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,

R.S.O. 1990, CHAPTER C. 20, AS AMENDED

(the CFA)

AND

REGULATION 90 UNDER

THE COMMODITY FUTURES ACT,

R.R.O. 1990, AS AMENDED (the Regulation)

AND

IN THE MATTER OF

DB CAPITAL ADVISERS INC.

ORDER

(Subsection 80 of the CFA)

UPON the application of DB Capital Advisers Inc. (DBCA) to the Ontario Securities Commission (the Commission) for an order, pursuant to subsection 80 of the CFA, renewing the exemption order granted by the Commission on August 8, 2003, which provided that DBCA and its officers be exempt, for a period of three years, from the requirements of paragraph 22(1)(b) of the CFA in respect of advising certain mutual funds and non-redeemable investment funds in Ontario (the Funds) in respect of trades in commodity futures contracts traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada (the Advisory Business), subject to certain terms and conditions;

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

AND UPON DBCA having represented to the Commission that:

1. DBCA is a Delaware corporation that is a wholly owned, indirect subsidiary of Deutsche Bank AG, a financial services group with operations worldwide whose shares are widely held and are traded on German stock exchanges.

2. DBCA is registered with the U.S. Commodities Futures Trading Commission (the CFTC) as a commodity trading adviser and is a member of the U.S. National Futures Association (the NFA).

3. DBCA desires to continue its Advisory Business in Ontario. The Funds which DBCA does, and will advise, are and will be mutual funds and non-redeemable investment funds in Ontario, as described in paragraph 14 of the definition of "permitted client" in section 1.1 of Ontario Securities Commission Rule 35-502 Non Resident Advisers (OSC Rule 35-502) (a Permitted Fund).

4. In the absence of the order, DBCA would be required to apply for registration as a commodity trading manager which would require, among other things, that: (a) DBCA's counselling officers comply with the proficiency requirements under the CFA and the Regulation in addition to the comparable proficiency requirements to which such officers are subject in the United States and where compliance with the proficiency requirements under the CFA would not be directly relevant to the Advisory Business; (b) DBCA prepare and deliver to the Commission audited financial statements notwithstanding that DBCA is not required to file audited financial statements with the CFTC or the NFA; (c) DBCA and its officers comply with the residency requirement under the CFA where compliance with such requirement would be unduly onerous given the nature and scope of the Advisory Business; and (d) DBCA comply with insurance and other requirements ordinarily applicable for full registration in the category of commodity trading manager in addition to the requirements to which it is subject in the United States.

5. DBCA and its counselling officers, as the case may be, have submitted to the Commission (i) a completed Freedom of Information Consent Form, (ii) a completed Appointment of Agent for Service of Process Form, and (iii) a statement of Acknowledgment of Non-Resident Requirements incorporating paragraphs 11(a), (b) and (c) of the Commission's current "List of Requirements for Registration as Adviser for Persons and Companies Currently Members of the National Futures Association and Registered with the Commodity Futures Trading Commission".

6. DBCA and its counselling officers, as the case may be, will comply with the terms and conditions set forth in the "Conditions of Order" attached as Schedule A for the duration of the Order.

7. DBCA and its counselling officers, as the case may be, will comply with all of the provisions of the CFA and the Regulation which would be applicable if DBCA were registered as a commodity trading manager under the CFA, other than sections 18, 21.4 and 22 of the CFA and sections 14(4), 15, 16, 17, 20, 21, 22, 26, 33, 37, 40 and 41 of the Regulation, for the duration of the Order.

8. The requirements with which DBCA and its counselling officers have complied and will comply as set out above are substantively equivalent to the requirements imposed on international advisers registered with the Commission pursuant to OSC Rule 35-502.

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

IT IS ORDERED pursuant to subsection 80 of the CFA that DBCA and its officers are not subject to the requirements of paragraph 22(1)(b) in respect of the Advisory Business, for a period of three years effective as of the date of this order, provided that:

(a) DBCA and its counselling officers, as the case may be, submit to the Commission (i) a completed Freedom of Information Consent Form, (ii) a completed Appointment of Agent for Service of Process Form, and (iii) a Statement of Acknowledgment of Non-Resident Requirements incorporating paragraphs 11(a), (b) and (c) of the Commission's current "List of Requirements for Registration as Adviser for Persons and Companies Currently Members of the National Futures Association and Registered with the Commodity Futures Trading Commission;

(b) DBCA and its counselling officers, as the case may be, comply with the terms and conditions set forth in the Conditions of Order attached as Schedule A for the duration of the Order;

(c) DBCA and its counselling officers, as the case may be, comply with all of the provisions of the CFA and the Regulation which would be applicable if DBCA were registered as a commodity trading manager under the CFA, other than sections 18, 21.4 and 22 of the CFA and sections 14(4), 15, 16, 17, 20, 21, 22, 26, 33, 37, 40 and 41 of the Regulation, for the duration of the Order.

August 4, 2006

"Paul K. Bates"

"David L. Knight"

SCHEDULE A

CONDITIONS OF ORDER

FOR DB CAPITAL ADVISERS INC.

PURSUANT TO SUBSECTION 80 OF

THE COMMODITY FUTURES ACT (ONTARIO)

1. For the purposes of these Conditions, the following terms have the following meanings:

"Act" means the Commodity Futures Act (Ontario);

"adviser" means an adviser registered under the Act in the category of commodity trading manager;

"CFTC" means the U.S. Commodities Futures Trading Commission;

"Commission" means the Ontario Securities Commission;

"NFA" means the U.S. National Futures Association;

"OSC Rule 35-502" means Ontario Securities Commission Rule 35-502, Non Resident Advisers;

"Permitted Fund" means: a mutual fund or a non-redeemable investment fund that distributes its securities in Ontario, if the manager of the fund (a) is ordinarily resident in a Canadian jurisdiction and is registered under the Securities Act (Ontario) as a portfolio manager, broker, investment dealer or mutual fund dealer, or is registered under Canadian securities legislation other than the Securities Act (Ontario) in an equivalent category of registration, and (b) is a party to the contract under which the international adviser provides investment advice or portfolio management services to the fund;

"mutual fund" has the meaning set forth in paragraph 1 of section 1 of the Securities Act (Ontario);

"non-redeemable investment fund" has the meaning set forth in Ontario Securities Commission Rule 14-501, Definitions;

"Regulation" means Regulation 90 under the Act.

2. DBCA shall engage only in the business of adviser in the category of commodity trading manager in Ontario solely for Permitted Funds.

3. DBCA may act as an adviser to Permitted Funds only in respect of investments in, or the use of, commodity futures contracts traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada.

4. DBCA shall maintain its registration as a commodity trading adviser with the CFTC and its membership with the NFA in good standing for so long as it shall carry on any advisory activities in Ontario or for residents of Ontario; officers of DBCA responsible for advisory activities of DBCA in Ontario or for residents of Ontario shall similarly maintain their registration and/or membership with the CFTC and the NFA in good standing for so long as they shall be responsible for advisory activities of DBCA in Ontario or for residents of Ontario and shall have submitted to the Commission a completed Freedom of Information Consent Form and a completed Appointment of Agent for Service of Process Form.

5. Not more than 25% of the aggregate consolidated gross revenues from advisory activities of DBCA and its affiliates with respect to commodity futures, in any financial year of DBCA, shall arise from their acting as advisers with respect to commodity futures for Permitted Funds in Canada.

6. DBCA shall comply with the following requirements of the Regulation:

(a) DBCA shall maintain such books and records as are required under sections 24 and 25 of the Regulation, it being understood that DBCA shall not be required to prepare and file with the Commission audited financial statements.

(b) DBCA shall maintain standards directed to ensuring fairness in the allocation of trading opportunities among DBCA 's customers.

(c) DBCA shall charge clients directly for services and such charge shall be based upon the dollar value of the client's portfolio, but not on the value or volume of the transactions initiated for the client, and except with the written agreement of the client, shall not be contingent upon profits or performance (subsection 29(3) of the Regulation).

7. In addition to the other requirements set forth in these Conditions, DBCA and its counselling officers, as the case may be, shall comply with all of the provisions of the CFA and the Regulation which would be applicable if DBCA were registered as commodity trading manager under the CFA, including, in particular but without limitation sections 50, 51 and 53 of the CFA and Schedule 1 of the Regulation (Fees). DBCA shall not be required to comply with sections 18, 21.4 and 22 of the CFA and sections 14(4), 15, 16, 17, 20, 21, 22, 26, 33, 37, 40 and 41 of the Regulation.

8.

(a) Subject to subparagraphs (b) and (c), DBCA shall ensure that the securities and money of an Ontario client be held:

(i) by the Ontario client; or

(ii) by a custodian or sub-custodian:

(A) that meets the requirements prescribed for acting as a custodian or sub-custodian of a mutual fund in National Instrument 81-102, and

(B) that is subject to the agreement announced by the Bank for International Settlements on July 1, 1988 concerning international convergence of capital measurement and capital standards.

(b) DBCA or an affiliate of DBCA that holds the securities or money of an Ontario client as custodian or sub-custodian shall hold the securities and money in compliance with sections 116, 117, 118 and 119 of the regulation under the Securities Act (Ontario).

(c) The securities of an Ontario client may be deposited with or delivered to a depository or clearing agency that is authorized to operate a book-based system.

9.

(a) At the request of the Director, the Commission or a person appointed by the Commission to make an investigation under the Act relating to DBCA's activities in Ontario, DBCA shall:

(i) immediately produce in Ontario, at DBCA's expense, appropriate persons in its employ as witnesses to give evidence on oath or otherwise;

(ii) if the appropriate persons referred to in clause (i) above are not in its employ, use its best efforts immediately to produce in Ontario, at DBCA's expense, the persons to give evidence on oath or otherwise, subject to the laws of the foreign jurisdiction that are otherwise applicable to the giving of evidence; and

(iii) if the laws of a foreign jurisdiction that are otherwise applicable to the giving of evidence prohibit DBCA or the persons referred to in clause (i) above from giving the evidence without the consent of the relevant client:

(A) so advise the Commission or the person making the request, and

(B) use its best efforts to obtain the client's counsel to the giving of the evidence.

(b) If the laws of the foreign jurisdiction in which the books, records or documents referred to in subsection 14(3) of the Act of DBCA are located prohibit production of the books, records or documents in Ontario without the consent of the relevant client, DBCA shall, upon a request by the Commission under subsection 14(3) of the Act:

(i) so advise the Commission; and

(ii) use its best efforts to obtain the client's consent to the production of the books, records or documents.

10. DBCA shall deliver to an Ontario client, before acting as an adviser to the Ontario client, a statement in writing disclosing:

(a) to the extent applicable, that there may be difficulty enforcing any legal rights the Ontario client may have against DBCA because:

(i) DBCA is ordinarily resident outside Canada and all or a substantial portion of its assets are situated outside Canada, and

(ii) if applicable, that the laws of the foreign jurisdiction in which the books, records and documents referred to in subsection 14(3) of the Act of DBCA are located prevent the production of those books, records and documents in Ontario; and

(b) DBCA is not fully subject to the requirements of the Act and the Regulations concerning proficiency, capital, insurance, record keeping, segregation of funds and securities and statements of account and portfolio.

11. A prospectus or other offering document for a Permitted Fund in respect of which advice is provided by the adviser, either directly to the fund or to the portfolio manager of the fund, shall disclose the matters referred to in paragraph 10 above.

12. DBCA and each of its counselling officers irrevocably and unconditionally submit to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of Ontario and any administrative proceeding in Ontario, in any proceeding arising out of or related to or concerning its registration under the Act or its activities in Ontario as a registrant.

13. DBCA has appointed an agent for service of process in Ontario and shall provide to each Permitted Fund in Ontario for whom it acts as an adviser, prior to so doing, a statement in writing disclosing the name and address of the agent for service of process of DBCA in Ontario or disclosing that this information is available from the Commission.

14. DBCA shall not change its agent for service of process in Ontario without giving the Commission 30 days prior notice of such change by filing a new Submission to Jurisdiction and Appointment of Agent for Service of process in the prescribed form.

15. Where, by supervisory terms or conditions imposed in respect of a partner, officer or salesperson of DBCA, DBCA is required to supervise the actions of that partner, officer or salesperson and DBCA has been so notified by letter to the attention of its compliance officer, DBCA must comply with those terms and conditions.