Securities Law & Instruments

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 sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts traded on commodity futures exchanges and cleared through clearing corporations and commodity futures options, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 Non Resident Advisers (Rule 35-502) made under the Securities Act (Ontario).

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

IN THE MATTER OF

HARRIS INVESTMENT MANAGEMENT, INC.

AND

TBP INVESTMENTS MANAGEMENT LLC

ORDER

(Section 80 of the CFA)

UPON the application (the Application) of Harris Investment Management, Inc. (the Principal Adviser) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA, that TBP Investments Management LLC (the Sub-Adviser) (including its directors, officers, representatives and employees acting as advisers on its behalf) be exempt, for a period of five years, from the adviser registration requirement in section 22(1)(b) of the CFA in respect of acting as an adviser for the Principal Adviser for the benefit of the Funds (as defined below) regarding commodity futures contracts traded on commodity futures exchanges and cleared through clearing corporations and commodity futures options (collectively, Contracts);

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

AND UPON the Principal Adviser having represented to the Commission the following:

The Principal Adviser and the Sub-Adviser

1. The Principal Adviser is a corporation incorporated under the laws of the State of Delaware in the United States of America (U.S.). The principal office of the Principal Adviser is located in Chicago, Illinois, U.S.

2. The Principal Adviser is currently registered as:

(a) an adviser in the category of portfolio manager under the Securities Act (Ontario) (the OSA); and

(b) an adviser in the category of commodity trading manager under the CFA.

3. The Sub-Adviser is a limited liability company formed under the laws of the State of Delaware. The principal office of the Sub-Adviser is located in Dallas, Texas, U.S.

4. The Sub-Adviser is registered with the U.S. Securities and Exchange Commission as an investment adviser and with the U.S. Commodity Futures Trading Commission as both a commodity pool operator and a commodity trading advisor.

5. The Sub-Adviser is not registered in any capacity under either the CFA or OSA.

The Funds

6. Pursuant to the terms of an investment management agreement (the IMA), the Principal Adviser will be retained to provide investment advice to the T. Boone Pickens Energy Fund (the TBP Fund). The IMA will grant the Principal Adviser the authority to appoint sub-advisers to the TBP Fund, provided certain conditions are met.

7. In addition to the TBP Fund, the Principal Adviser may in the future provide advice to other mutual funds, non-redeemable investment funds or similar investment vehicles with respect to which the Sub-Adviser may potentially provide advice, directly or indirectly to the Principal Adviser (each a Fund and, collectively with the TBP Fund, the Funds). Each Fund is, or will be, offered pursuant to a prospectus or pursuant to appropriate prospectus exemptions contained in National Instrument 45-106 Prospectus and Registration Exemptions.

8. The Funds may, as part of their investment program, invest in Contracts.

9. The Principal Adviser may, pursuant to a written agreement with each Fund:

(a) act as an adviser (as defined in the OSA) to the Fund in respect of trading securities (as defined in the OSA); and

(b) act as an adviser (as defined in the CFA) to the Fund in respect of trading Contracts,

by exercising discretionary authority in respect of the investment portfolio of the Fund, with discretionary authority to purchase or sell on behalf of the Fund:

(i) securities; and

(ii) Contracts.

The Proposed Advisory Services

10. The Principal Adviser intends to retain the services of the Sub-Adviser to provide investment advisory and portfolio management services, including discretionary authority to, inter alia, buy and sell Contracts and related products for and on behalf of the TBP Fund and potentially other Funds in the future (the Proposed Advisory Services).

11. The Principal Adviser intends to enter into a sub-advisory agreement with the Sub-Adviser, whereby the Sub-Adviser will provide the Proposed Advisory Services to the Principal Adviser in connection with the particular Fund.

12. Section 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a representative, partner or officer of a registered adviser and is acting on behalf of the registered adviser. Under the CFA, "adviser" means a person or company engaging or holding himself, herself or itself out as engaging in the business of advising others as to trading in "contracts", and "contracts" means commodity futures contracts and commodity futures options.

13. By providing the Proposed Advisory Services, the Sub-Adviser will be acting as an adviser with respect to Contracts and, in the absence of the requested relief, would be required to register as an adviser under the CFA.

14. There is presently no rule under the CFA which provides an exemption from the adviser registration requirement in section 22(1)(b) of the CFA for a person or company acting as an adviser in respect of Contracts that is similar to the exemption from the adviser registration requirement in section 25(3) of the OSA for a person or company acting as an adviser (as defined in the OSA) in respect of securities (as defined in the OSA) that is provided under section 7.3 of OSC Rule 35-502 Non Resident Advisers (Rule 35-502).

15. The relationship among the Principal Adviser, the Sub-Adviser and any Fund satisfies, or will satisfy, the requirements of section 7.3 of Rule 35-502.

16. As would be required under section 7.3 of Rule 35-502:

(a) the duties and obligations of the Sub-Adviser will be set out in a written agreement with the Principal Adviser;

(b) the Principal Adviser will contractually agree with the Funds to be responsible for any loss that arises out of the failure of the Sub-Adviser:

(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Principal Adviser and the Funds; or

(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (together with (i), the Assumed Obligations); and

(c) the Principal Adviser cannot be relieved by any Fund from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations.

17. The Sub-Adviser is not a resident of any province or territory of Canada.

18. The Sub-Adviser will only provide the Proposed Advisory Services so long as the Principal Adviser is registered in Ontario to provide advisory services to the particular Fund.

19. The Sub-Adviser is, or will be, appropriately registered or licensed, or is, or will be, entitled to rely on appropriate exemptions from such registrations or licences, to provide advice for any of the Funds pursuant to the applicable legislation of its principal jurisdiction.

20. Prior to purchasing any securities in any of the Funds from such Fund, all investors in the Funds who are Ontario residents will receive an offering document that includes:

(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations; and

(b) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser (or the individual representatives of the Sub-Adviser) advising the relevant Fund, because such entity is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

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

IT IS ORDERED, pursuant to section 80 of the CFA, that the Sub-Adviser (including its directors, officers, representatives and employees acting as advisers on its behalf) is exempt from the adviser registration requirement in section 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided to the Principal Adviser with respect to the Funds, for a period of five years, provided that at the time that such activities are engaged in:

(a) the Principal Adviser is registered under the CFA as an adviser in the category of commodity trading manager;

(b) the Sub-Adviser is appropriately registered or licensed, or is entitled to rely on appropriate exemptions from such registrations or licences, to provide advice for the particular Fund pursuant to the applicable legislation of its principal jurisdiction;

(c) the obligations and duties of the Sub-Adviser are set out in a written agreement with the Principal Adviser;

(d) the Principal Adviser has contractually agreed with the respective Fund to be responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(e) the Principal Adviser cannot be relieved by a Fund or its securityholders from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations; and

(f) prior to purchasing any securities in any of the Funds from such Fund, all investors in the Fund who are resident in Ontario will receive an offering document that includes:

(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations; and

(ii) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser (or the individual representatives of the Sub-Adviser) for the particular Fund, because such entity is resident outside of Canada and all or substantially all of their assets are situated outside of Canada.

November 24, 2009.

"Margot Howard"
Commissioner
Ontario Securities Commission
 
"Paulette Kennedy"
Commissioner
Ontario Securities Commission