Securities Law & Instruments

Headnote

Filers exempted from section 13.12 [Restriction on lending to clients] of National Instrument 31-103 for a one-year transition period, to the extent section 13.12 applies to each filer because it is registered under the Act as an "exempt market dealer" and/or an "international adviser", subject to other conditions and restrictions -- Each of the filers was registered under the Act as a "limited market dealer", before the coming into force of NI 31-103, and is automatically registered under the Act as an "exempt market dealer" under subsection 16.3(2) of NI 31-103, and/or was registered under the Act as an "international adviser", before the coming into force of NI 31-103, and remains registered as an "international adviser" under section 16.19 of NI 31-103 (for the one-year transition period specified in section 16.19) -- Among the conditions and restrictions on the exemption are requirements that: (i) the head office or principal place of business of the filer be in a foreign jurisdiction; and (ii) the filer be licensed or registered under the securities legislation of the foreign jurisdiction in which its head office or principal place of business is located, in a category of licensing or registration that permits it to carry on the activities in that jurisdiction that registration as an investment dealer would permit it to carry on in Ontario.

Statute Cited

Securities Act, R.S.O. 1990, c. S.5, as am.

Instruments Cited

Multilateral Instrument 11-102 Passport System, s. 4.7.

National Instrument 14-101 Definitions.

National Instrument 31-103 Registration Requirements and Exemptions, ss. 9.3(1), 12.1, 13.12, 15.1, 16.3, 16.3(1), 16.3(2), 16.3(4).

Rule Cited

Ontario Securities Commission Rule 35-502 Non-Resident Advisers.

September 28, 2009

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, C. S.5, AS AMENDED

AND

IN THE MATTER OF

NATIONAL INSTRUMENT 31-103

REGISTRATION REQUIREMENTS AND EXEMPTIONS

(NI 31-103 or the Instrument)

AND

IN THE MATTER OF

AXA ROSENBERG INVESTMENT MANAGEMENT

LLC, BLOOMBERG TRADEBOOK (BERMUDA)

LTD., BLOOMBERG TRADEBOOK LLC, BNY

MELLON CAPITAL MARKETS LLC, CREDIT

SUISSE SECURITIES (EUROPE) LIMITED, CREDIT

SUISSE SECURITIES (USA) LLC, GOLDMAN

SACHS EXECUTION & CLEARING, L.P.,

GOLDMAN, SACHS & CO., MORGAN STANLEY

& CO. INCORPORATED AND

MORGAN STANLEY SMITH BARNEY LLC

(the Filers)

 

DECISION

Interpretation

Unless otherwise defined in this decision or the context otherwise requires, terms used in this decision that are defined in NI 31-103 have the same meaning, and other terms used in this decision that are defined in National Instrument 14-101 Definitions have the same meaning.

Background

1. NI 31-103 comes into force in Ontario on September 28, 2009.

2. Under subsection 16.3(2) of NI 31-103, in Ontario and Newfoundland and Labrador, persons or companies that are registered in the jurisdiction as a "limited market dealer" (immediately before the coming into force of NI 31-103) are automatically registered in the jurisdiction as an "exempt market dealer".

3. Section 13.12 of NI 31-103 provides that a registrant must not lend money, extend credit or provide margin to a client.

4. Although NI 31-103 includes transition provisions for the application of certain requirements -- including subsections 16.3(1) and (4), which provide that, in Ontario and Newfoundland Labrador, section 12.1 [Capital requirements] does not apply to a person or company (a mapped-over exempt market dealer) registered as an exempt market dealer under subsection 16.3(2) until one year after the Instrument comes into force -- there is no transition provision for the application of section 13.12 of the Instrument to a mapped over exempt market dealer. There is also no transition provision for the application of section 13.12 to a person or company (a transitioned international adviser) that was registered in Ontario as an "international adviser" on the day NI 31-103 comes into force and remains registered as an international adviser under section 16.19 of NI 31-103 (with such registration to be identified by the regulator on NRD as "portfolio manager", but subject to terms and conditions which confirm the status of this registrant as an "international adviser" for the purposes of Ontario Securities Commission Rule 35-502 Non Resident Advisers).

5. Subsection 9.3(1) of NI 31-103 provides that section 13.12 does not apply to an investment dealer that is a member of IIROC to the extent that section 13.12 applies to the activities of an investment dealer.

6. In certain comments received on NI 31-103, when it was published for comment, it was suggested that the new prohibitions in section 13.12 should not apply to registered firms that are subject to a margin regime, similar to that imposed by IIROC on its member firms, because of the registered firm's membership in an international self-regulatory organization(s), or because of other regulatory requirements applicable to the registered firm in an international jurisdiction. The CSA responded to these comments by suggesting that these circumstances could be considered on a case-by-case basis, through exemption applications, and that an exemption should be made available to registrants who have "adequate measures in place to address the risks involved and other regulatory concerns".

7. The temporary exemption from section 13.12 of NI 31-103 provided for in this Decision is intended to facilitate the case-by case assessment of exemption applications referred to in paragraph 6.

Applications

Each of the Filers has applied to the regulator in Ontario (the Decision Maker), under section 15.1 of NI 31-103, for an exemption from section 13.12 of NI 31-103, subject to the conditions and restrictions set out in this decision.

Representations

Each of the Filers has represented that the head office of the Filer is outside of Canada.

Decision

The Decision Maker is satisfied that this decision meets the test set out in the securities legislation (the Legislation) of Ontario for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that each of the Filers is exempt from the requirements of section 13.12 of NI 31-103, but only to the extent that the provisions of section 13.12 apply to the Filer because it is registered as an exempt market dealer or as a transitioned international adviser, and subject to the following other conditions or restrictions:

(a) the head office or principal place of business of the Filer is in a foreign jurisdiction;

(b) the Filer is not registered in any other category of registration in Ontario other than that of exempt market dealer, by virtue of section 16.3 of NI 31-103, or that of transitioned international adviser;

(c) the Filer is licensed or registered under the securities legislation of the foreign jurisdiction in which its head office or principal place of business is located, in a category of licensing or registration that permits it to carry on the activities in that jurisdiction that registration as an investment dealer would permit it to carry on in the local jurisdiction;

(d) this decision is not to be relied upon by the Filer in a jurisdiction other than Ontario under section 4.7 of Multilateral Instrument 11-102 Passport System; and

(e) this decision will expire one year after the Effective Date.

DATED at Toronto, Ontario this 28th day of September, 2009.

"Erez Blumberger"
Manager
Registrant Regulation