Securities Law & Instruments

Headnote

NI 31-103 Registration Requirements and Exemptions (NI 31-103), which came into force on September 28, 2009, does not continue the registration category of international dealer that currently exists in Ontario and Newfoundland and Labrador. NI 31-103 will instead permit activities which are broadly similar to those of an international dealer registrant to be carried out on an exempt basis under section 8.18. It is anticipated that upon the coming into force of NI 31-103, most currently registered international dealers will choose to carry on business under the exemption.

However, the activities permitted under the international dealer exemption are more narrow than those permitted under the former international dealer registration category. In particular, the only debt securities that an international dealer can trade outside of their distribution are debt securities that are foreign securities (section 8.18(2)(c)). This means that registered international dealers who traded debt securities that were not foreign securities outside of their distribution before the Instrument came into effect have to either cease doing so in order to be able to rely on the exemption, or become registered in a category that will permit them to do so (such as exempt market dealer). NI 31-103 does not provide a transition period for current international dealers to become registered in another category. The transitional relief in this decision provides that for a period of one year, persons or companies that were registered international dealers immediately before the coming into force of NI 31-103 will continue to be permitted to trade debt securities that are not foreign securities outside of their distribution.

Persons or companies wishing to carry on business in reliance on the international dealer exemption in section 8.18 are required to provide a prescribed notice to clients. The transition provisions for international dealers in section 16.18 allow them one month in which to provide this notice to existing clients. However, some international dealers will have difficulty in doing so within that time. The transitional relief in this decision provides that for a period of six months, persons or companies that were registered international dealers immediately before the coming into force of NI 31-103 will be permitted to carry on business in reliance on the exemption in section 8.18 without having delivered the prescribed notices to their existing clients.

September 25, 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

NATIONAL INSTRUMENT 31-103

REGISTRATION REQUIREMENTS

AND EXEMPTIONS

(NI 31-103 or the Instrument),

MILLER TABAK ROBERTS SECURITIES, LLC

(the Filer)

AND CERTAIN OTHER INTERNATIONAL DEALERS

 

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 or Multilateral Instrument 11-102 Passport System (MI 11-102) have the same meaning.

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 Filer has provided notice that section 4.7(1) of MI 11-102 is intended to be relied upon in Newfoundland and Labrador.

Background

1. NI 31-103 will come into force on September 28, 2009 (the Effective Date).

2. Pursuant to subsection 16.18(2) of NI 31-103, in Ontario and Newfoundland and Labrador, persons or companies that are registered in those jurisdictions as an international dealer immediately before the coming into force of NI 31-103 (International Dealers) will have their registrations in that category (which is not continued under NI 31-103) revoked immediately upon the Effective Date.

3. Section 8.18 [International dealer] of NI 31-103 provides an exemption from the dealer registration requirement (the International Dealer Exemption) that permits activities which are broadly similar, but narrower in some cases, to those that had been permitted for International Dealers under section 208 of Ontario Regulation 1015 (the Regulation) made under the Securities Act, Ontario (the OSA).

4. Upon the Effective Date, International Dealers who had traded Canadian debt securities outside of a distribution of the securities with designated institutions (as that term is defined in section 204 of the Regulation) pursuant to their international dealer registration (the Canadian Debt Securities Activity), will no longer be able to carry on that activity since it is not permitted under the International Dealer Exemption.

5. NI 31-103 does not provide a transition period for International Dealers so that they may become registered in another category of registration in the Jurisdiction in order to allow them to carry on the Canadian Debt Securities Activity.

6. Under section 16.18(3) of NI 31-103, International Dealers will have one month following the Effective Date to provide the notice prescribed in subsection 8.18(4)(b) to each of their clients (together the Notice Requirement) in order to be permitted to rely on the International Dealer Exemption.

Application

The Filer has applied to the securities regulatory authority in Ontario (the Decision Maker), under section 74(1) of the OSA for an exemption from the dealer registration requirement in section 25 of the OSA to allow it as well as other International Dealers (together with the Filer, the Filers) to:

1. continue to carry on the Canadian Debt Securities Activity for a period of one year from the Effective Date, subject to the conditions and restrictions set out in this decision; and

2. carry on business in a manner otherwise consistent with the International Dealer Exemption for a period of six months from the Effective Date before complying with the Notice Requirement in respect of existing clients of the Filers as of the Effective Date, subject to the conditions and restrictions set out in this decision.

Filers may also be registered as an International Dealer in Newfoundland and Labrador immediately before the coming into force of NI 31-103 (each, a Newfoundland and Labrador Filer), and in such case, the Filers have provided notice that section 4.7(1) of MI 11-102 is intended to be relied upon on the same basis in Newfoundland and Labrador; but otherwise this decision is not intended to be relied upon by any Filer in any other jurisdiction under MI 11-102.

Representations of the Filers

1. Each Filer has its head office or principal place of business in a foreign jurisdiction.

2. Each Filer is 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 registration that permits it to carry on the activities in that jurisdiction that registration as a dealer would permit it to carry on in the local jurisdiction.

3. Each Filer engages in the business of a dealer in the foreign jurisdiction in which its head office or principal place of business is located.

4. Each Filer is acting as principal or as agent for the issuer of the securities, for a permitted client, or for a person or company that is not a resident of Canada.

5. Each Filer was registered with the Commission as an international dealer immediately before the Effective Date.

6. Without the exemption sought under this Application, Filers will not be able to engage in Canadian Debt Securities Activity which they are currently able to engage in.

7. A transitional relief period of one year will enable Filers to obtain registration in an appropriate dealer category if they wish to continue to engage in Canadian Debt Securities Activity on an ongoing basis.

8. Despite good faith efforts, Filers may face practical difficulties in satisfying the Notice Requirement with respect to existing clients within one month of the Effective Date.

9. A transitional relief period of six months will enable them to satisfy the Notice Requirement with respect to existing clients.

Decision

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

The decision of the Decision Maker under the Legislation is that upon the Effective Date,

1. each Filer is exempt from the dealer registration requirement in respect of the following:

(a) an activity, other than a sale of a security, that is reasonably necessary to facilitate a distribution of securities that are offered primarily in a foreign jurisdiction;

(b) a trade in a debt security with a permitted client during the security's distribution, if the debt security is offered primarily in a foreign jurisdiction and a prospectus has not been filed with a Canadian securities regulatory authority for the distribution;

(c) a trade in a debt security with a designated institution, other than during the security's distribution;

(d) a trade in a foreign security with a permitted client, unless the trade is made during the security's distribution under a prospectus that has been filed with a Canadian securities regulatory authority;

(e) a trade in a foreign security with an investment dealer;

(f) a trade in any security with an investment dealer that is acting as principal; and

2. provided that "foreign security" means:

(a) a security issued by an issuer incorporated, formed or created under the laws of a foreign jurisdiction, or

(b) a security issued by a government of a foreign jurisdiction; and

3. provided that "designated institution" has the meaning in section 204 of the Regulation as it was at the date or this order (and not as it will be upon the coming into effect of amendments to the Regulation on September 28, 2009); and

4. provided that the Filer

(a) has its head office or principal place of business in a foreign jurisdiction;

(b) is 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 registration that permits it to carry on the activities in that jurisdiction that registration as a dealer would permit it to carry on in the local jurisdiction;

(c) engages in the business of a dealer in the foreign jurisdiction in which its head office or principal place of business is located;

(d) is acting as principal or as agent for the issuer of the securities, for a permitted client, or for a person or company that is not a resident of Canada;

(e) was registered with the Commission as an international dealer immediately before the Effective Date;

(f) within one month of the Effective Date, submits to the Commission a completed Form 31-103F2 Submission to Jurisdiction and Appointment of Agent for Service and indicates its intention to rely on the transitional relief in this decision; and

5. provided that unless the permitted client or designated institution is a person or company registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, the Filer must have, with six months of the Effective Date, notified the permitted client or designated institution of all of the following:

(i) the Filer is trading with them in reliance upon an exemption from the dealer registration requirement;

(ii) the Filer's jurisdiction of residence;

(iii) the name and address of the agent for service of process of the Filer in the local jurisdiction; and

(iv) there may be difficulty enforcing legal rights against the Filer because it is resident outside Canada and all or substantially all of its assets may be situated outside of Canada.

This decision will expire one year after the Effective Date.

"David L Knight"
Commissioner
Ontario Securities Commission
 
"Mary Condon"
Commissioner
Ontario Securities Commission