Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption granted to a trust from continuous disclosure requirements under National Instrument 51-102 Continuous Disclosure Obligations and certification obligations under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, subject to certain conditions -- Trust established for purpose of effecting offerings of trust securities in order to provide bank with a cost-effective means of raising capital for Canadian bank regulatory purposes -- Trust became reporting issuer upon filing a prospectus offering trust securities -- Without relief, trust would have to comply with continuous disclosure and certification requirements -- Given the nature, terms and conditions of the trust securities and various covenants of the bank in connection with the prospectus offering, the meaningful information to public holders of trust securities is information with respect to the bank, rather than the trust.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations.

National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.

May 14, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE TORONTO-DOMINION BANK (the "Bank")

AND TD CAPITAL TRUST IV (the "Trust" and,

together with the Bank, the "Filers")

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the "Application") from the Filers for a decision (the "Requested Relief") under the securities legislation of the Jurisdiction (the "Legislation") that the requirements contained in the Legislation to:

(a)

(i) file interim financial statements and audited annual financial statements and deliver same to the security holders of the Trust, pursuant to sections 4.1, 4.3 and 4.6 of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102"),

(ii) file interim and annual management's discussion and analysis ("MD&A") and deliver same to the security holders of the Trust pursuant to sections 5.1 and 5.6 of NI 51-102,

(iii) file an annual information form pursuant to section 6.1 of NI 51-102, and

(iv) comply with any other provisions of NI 51-102,

(collectively, the "Continuous Disclosure Obligations"); and

(b) file interim and annual certificates (collectively the "Officers' Certificates") pursuant to Parts 4, 5 and 6 of National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings ("NI 52-109") (the "Certification Obligations");

shall not apply to the Trust.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission (the "Commission") is the principal regulator for this application; and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the provinces and territories of Canada other than Ontario.

Interpretation

The terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

"Bank Act" means the Bank Act (Canada);

"Prospectus" means the short form prospectus of the Bank and the Trust dated January 15, 2009 in respect of the Offering (as defined below); and

"Tax Act" means the Income Tax Act (Canada).

Representations

This decision is based on the following facts represented by the Filers:

The Bank

1. The Bank is a Schedule 1 chartered bank subject to the provisions of the Bank Act. The head office of the Bank is located at P.O. Box 1, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2.

2. The authorized share capital of the Bank consists of an unlimited number of: (i) common shares ("Bank Common Shares"); and (ii) Class A First Preferred Shares ("Bank Preferred Shares"), issuable in series.

3. The Bank Common Shares are listed and posted for trading on the Toronto Stock Exchange and the New York Stock Exchange.

4. The Bank is a reporting issuer in each province and territory of Canada and is not, to the best of its knowledge, in default of any requirement of the securities legislation in such jurisdictions.

The Trust

5. The Trust is a trust established under the laws of the Province of Ontario pursuant to an amended and restated declaration of trust dated as of January 26, 2009, as may be amended, restated or supplemented from time to time. The Trust's head and registered office is located at c/o The Toronto-Dominion Bank, Toronto Dominion Bank Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1A2.

6. The Trust completed an initial public offering (the "Offering") of two series of subordinated notes of the Trust (the "Notes") in each of the provinces and territories of Canada on January 26, 2009 and may, from time to time, issue further series of Notes. The first series of Notes were designated as 9.523% TD Capital Trust IV Notes -- Series 1 Due June 30, 2108 (the "TD CaTS IV -- Series 1") and the second series of Notes were designated as 10.00% TD Capital Trust IV Notes -- Series 2 Due June 30, 2108 (the "TD CaTS IV -- Series 2" and collectively with the TD CaTS IV -- Series 1, the "TD CaTS IV Notes"). The capital of the Trust consists of the TD CaTS IV Notes issued pursuant to the Offering and voting trust units, issuable in series (the "Voting Trust Units" and, collectively with the Notes, the "Trust Securities"). All of the Voting Trust Units are held by the Bank.

7. The Trust has been established for the purpose of effecting offerings of Trust Securities in order to provide the Bank with a cost effective means of raising capital for Canadian bank regulatory purposes by means of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding assets, which will consist primarily of one or more senior unsecured deposit notes of the Bank (each, a "Bank Deposit Note") and certain other eligible assets (as described in the Prospectus) (collectively, the "Trust Assets"). The Trust Assets will generate income for distribution to holders of Trust Securities. The Trust does not and will not carry on any operating activity other than in connection with offerings of Trust Securities and in connection with the Trust Assets.

8. As a result of the Offering, the Trust became a reporting issuer in each of the provinces and territories of Canada (the "Reporting Jurisdictions"). The Trust is not, to the best of its knowledge, in default of any requirement of the securities legislation in the Reporting Jurisdictions.

TD CaTS IV Notes

9. Each series of TD CaTS IV Notes will pay a fixed rate of interest on the last day of June and December in each year (each, an "Interest Payment Date") as described in the Prospectus until (i) June 30, 2019 in the case of the TD CaTS IV -- Series 1, and (ii) June 30, 2039 in the case of TD CaTS IV -- Series 2, following which the interest rate will be reset every 5 years (each such interest reset date, an "Interest Reset Date") until maturity at a Government of Canada Yield (as defined in the Prospectus) plus a spread as described in the Prospectus.

10. Under an assignment, set-off and trust agreement entered into in respect of each series of TD CaTS IV Notes between the Bank, the Trust and Computershare Trust Company of Canada ("Computershare") acting as trustee, the Bank has agreed, for the benefit of the holders of TD CaTS IV Notes (the "Dividend Stopper Undertaking"), that in the event that (i) the Bank elects prior to the commencement of the interest period for the TD CaTS IV Notes ending on the day preceding the relevant Interest Payment Date to require holders of TD CaTS IV Notes to invest interest paid thereon on such Interest Payment Date in a new series of Bank Deferral Preferred Shares (as defined herein); or (ii) for whatever other reason, interest is not paid in full in cash on the TD CaTS IV Notes on an Interest Payment Date (or the next following business day if the relevant Interest Payment Date is not a business day), the Bank will not declare dividends of any kind on the Bank Preferred Shares or the Bank Common Shares (collectively, the "Dividend Restricted Shares") until the sixth month following the relevant Interest Payment Date (such six-month period, the "Dividend Restricted Period"). Accordingly, it is in the interest of the Bank to ensure, to the extent within its control, that the Trust pays the interest in cash on each Interest Payment Date so as to avoid triggering the Dividend Stopper Undertaking.

11. The TD CaTS IV Notes will be automatically exchanged, without the consent of the holder, for a new series of newly-issued Bank Preferred Shares upon the occurrence of certain stated events relating to the solvency of the Bank or actions taken by the Superintendent of Financial Institutions (the "Superintendent") in respect of the Bank (an "Automatic Exchange").

12. The Trust may, subject to regulatory approval, at its option, on or after June 30, 2014, redeem the TD CaTS IV Notes without the consent of the holders thereof. The price payable per $1,000 principal amount of TD CaTS IV Notes so redeemed will be: (i) par, if redeemed on an Interest Reset Date; and (ii) the greater of par and a Canada Yield Price (as described in the Prospectus) if redeemed on a day other than an Interest Reset Date, together, in each case, with accrued and unpaid interest to, but excluding, the date fixed for redemption (in either case, the "Redemption Price").

13. Upon the occurrence of certain regulatory or tax events affecting the Bank or the Trust (each a "Special Event"), the Trust may, at its option, without the consent of holders of the TD CaTS IV Notes but subject to regulatory approval, redeem all but not less than all of the TD CaTS IV Notes at a price equal to par plus accrued and unpaid interest to, but excluding, the date fixed for redemption.

14. The Bank has covenanted that it will maintain direct or indirect ownership of 100% of the outstanding Voting Trust Units.

15. As long as any TD CaTS IV Notes are outstanding and are held by any person other than the Bank, or an affiliate of the Bank, the Trust may only be terminated with the approval of the Bank as the holder, directly or indirectly, of the Voting Trust Units and with the approval of the Superintendent: (i) upon the occurrence of a Special Event prior to June 30, 2014; or (ii) for any reason on or after June 30, 2014. As long as any TD CaTS IV Notes are outstanding and held by any person other than the Bank, or an affiliate thereof, the Bank will not approve the termination of the Trust unless the Trust has sufficient funds to pay the Redemption Price.

16. On each Interest Payment Date in respect of which a Deferral Event has occurred, holders of TD CaTS IV Notes will be required to invest interest paid on such TD CaTS IV Notes in a new series of Bank Preferred Shares (the "Bank Deferral Preferred Shares"). A "Deferral Event" will occur in circumstances where: (i) the Bank has failed to declare cash dividends on all of the outstanding Bank Preferred Shares or, if no Bank Preferred Shares are then outstanding, on all of the outstanding Bank Common Shares (other than a failure to declare dividends on such shares during a Dividend Restricted Period) in accordance with the Bank's ordinary dividend practice in the last 90 days preceding the commencement of the interest period for the TD CaTS IV Notes ending on the day preceding the relevant Interest Payment Date; (ii) the Bank elects prior to the commencement of the interest period for the TD CaTS IV Notes ending on the day preceding the relevant Interest Payment Date to require holders of TD CaTS IV Notes to invest interest paid thereon on such Interest Payment Date in Bank Deferral Preferred Shares; or (iii) for whatever other reason, interest is not paid in full in cash on the TD CaTS IV Notes on an Interest Payment Date (or the next following business day if the relevant Interest Payment Date is not a business day). All such Bank Deferral Preferred Shares so issued will be held in escrow by Computershare on behalf of holders of each applicable series of TD CaTS IV Notes until the next following Interest Payment Date which is not subject to a Deferral Event, upon which such shares will be released from escrow to holders of the applicable TD CaTS IV Notes, unless an Automatic Exchange, redemption or maturity of such series of TD CaTS IV Notes shall have occurred prior thereto, in which case the shares will be released upon the Automatic Exchange, redemption or maturity, as the case may be.

17. The TD CaTS IV Notes are non-voting and are direct unsecured obligations of the Trust ranking at least equally with other subordinated indebtedness of the Trust from time to time issued and outstanding. On a liquidation or winding-up of the Trust, the indebtedness evidenced by the TD CaTS IV Notes will be subordinate in right of payment to the prior payment in full of all other liabilities of the Trust except liabilities which by their terms rank in right of payment equally with or subordinate to the indebtedness represented by the TD CaTS IV Notes. Apart from the rights to receive the interest described herein, holders of TD CaTS IV Notes have no further right in the income of the Trust. The holders of TD CaTS IV Notes will not be entitled to initiate proceedings for the termination of the Trust.

18. Pursuant to an amended and restated administration agreement dated as of January 26, 2009, between Montreal Trust Company of Canada, as trustee of the Trust (the "Trustee") and the Bank, the Trustee has delegated to the Bank certain of its duties in relation to the administration of the Trust. The Bank, as administrative agent, provides advice and counsel with respect to management of the assets of the Trust and other matters as may be requested by the Trustee from time to time and administers the day-to-day operations of the Trust.

19. The Trust may, from time to time issue further series of Notes which qualify as Tier 1 capital of the Bank for regulatory purposes, the proceeds of which would be used to acquire additional Trust Assets.

20. Because of the terms of the Notes and the various covenants of the Bank, information about the affairs and financial performance of the Bank, as opposed to that of the Trust, is meaningful to holders of Notes. The Bank's filings will provide holders of Trust Securities and the general investing public with all information required in order to make an informed decision relating to an investment in TD CaTS IV Notes and any other Trust Securities that the Trust may issue from time to time. Information regarding the Bank is relevant both to an investor's expectation of being paid principal, interest and the Redemption Price, if any, and any other amounts on the Trust Securities when due and payable.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

1. in respect of the Continuous Disclosure Obligations:

(a) the Bank remains a reporting issuer under the Legislation and has filed all continuous disclosure documents it is required to file by the Legislation;

(b) the Bank files with the securities regulatory authority or regulator in each Reporting Jurisdiction, in electronic format under the Trust's SEDAR profile, the continuous disclosure documents referred to in paragraph 1(a) above, at the same time as those documents are required under the Legislation to be filed by the Bank;

(c) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of continuous disclosure documents under NI 51-102;

(d) the Trust sends or causes the Bank to send its interim and audited annual financial statements and interim and annual MD&A, as applicable, to holders of Trust Securities, at the same time and in the same manner as if the holders of Trust Securities were holders of Bank Common Shares;

(e) all outstanding securities of the Trust are either TD CaTS IV Notes, additional series of Notes having terms substantially similar to the TD CaTS IV Notes (the holders of which will have rights and obligations that are the same in all material respects as the rights and obligations of the holders of the TD CaTS IV Notes, with the exception of specific economic terms such as the amount of interest payable by the Trust and redemption dates and prices) or Voting Trust Units;

(f) the Bank is, directly or indirectly, the beneficial owner of all issued and outstanding voting securities of the Trust, including the Voting Trust Units;

(g) the Trust does not carry on any operating activity other than in connection with offerings of its securities and in connection with the Trust Assets and the Trust has minimal assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Trust Securities or the administration of the Trust Assets;

(h) the Bank, as holder of the Voting Trust Units, will not propose changes to the terms and conditions of any outstanding Notes that would result in such Notes being exchangeable for securities other than Bank Preferred Shares;

(i) the Trust issues a news release and files a material change report in accordance with Part 7 of NI 51-102 as amended, supplemented or replaced from time to time, in respect of any material change in the affairs of the Trust that is not also a material change in the affairs of the Bank;

(j) in any circumstances where the TD CaTS IV Notes (or any additional series of Notes having terms substantially similar to the TD CaTS IV Notes) are voting, the Trust will comply with Part 9 of NI 51-102; and

(k) the Trust complies with Parts 4A, 4B, 11 and 12 of NI 51-102.

2. in respect of the Certification Obligations:

(a) the Trust is not required to, and does not, file its own interim filings and annual filings (as those terms are defined in NI 52-109);

(b) the Trust is and continues to be exempted from the Continuous Disclosure Obligations and the Bank and the Trust are in compliance with the conditions set out in paragraph 1 above; and

(c) the Bank files with the securities regulatory authority or regulator in each Reporting Jurisdiction, in electronic format under the Trust's SEDAR profile, the Officers' Certificates of the Bank at the same time as those documents are required under the Legislation to be filed by the Bank.

3. this decision shall expire 30 days after the date a material adverse change occurs in the representations of the Trust in this decision.

"Jo-Anne Matear"
Assistant Manager
Corporate Finance Branch