Exemption pursuant to section 147 of the Securities Act (Ontario) -- Exemption from the requirement in section 139 of Regulation 1015 made pursuant to the Securities Act (Ontario) that the Applicant deliver its audited annual financial statements to the Commission by no later than 90 days following the fiscal year end.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 147.
R.R.O. 1990, Regulation 1015, am. to O. Reg. 500/06, s. 139.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
REGULATION 1015 TO THE
SECURITIES ACT, R.R.O. 1990,AS AMENDED
IN THE MATTER OF
RESEARCH AFFILIATES, LLC
(Section 147 of the Act)
UPON the application (the Application) of Research Affiliates, LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 147 of the Act, for an exemption from the requirement in section 139 of the Regulation that the Applicant deliver its annual audited financial statements to the Commission no later than 90 days following the end of its financial year (the Filing Requirement), provided that the Applicant files its annual financial statements with the Commission within 140 days after the end of its 2008 financial year;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a limited liability company organized under the laws of the state of California, in the United States. The head office of the Applicant is located in Newport Beach, California, United States.
2. The Applicant is registered with the United States Securities and Exchange Commission as an investment adviser. In the United States, the Applicant is in the business of advising customers through discretionary authority.
3. The Applicant is registered with the Commission as a non-Canadian adviser in the categories of investment counsel and portfolio manager. In Canada, the Applicant is in the business of advising customers through discretionary authority.
4. The Applicant is a non-resident of Canada, and does not maintain a business office anywhere in Canada from which it provides advice or maintains financial records.
5. The Applicant does not currently have any advisory clients in Ontario, and has not had any since obtaining its registration.
6. The Applicant is the sole member of the general partner of nine hedge funds (the Hedge Funds). Under United States generally accepted accounting principles (US GAAP), as the general partner, the Applicant is deemed to have control of the Hedge Funds. US GAAP requires the Applicant to consolidate the financial statements of the general partner and the Hedge Funds into the Applicant's financial statements.
7. To accomplish the consolidation of the financial statements of the Hedge Funds into the Applicant's financial statements, the independent certified public accountants of the Applicant must first complete an audit of the financial statements for each of the Hedge Funds.
8. In 2008, the Applicant missed the deadline to file its 2007 financial statements no later than 90 days following the end of its financial year (the 2007 Filing Deadline). As a result terms and conditions were applied to the Applicant's registration. Since missing the 2007 Filing Deadline, the Applicant has undertaken a number of steps to rectify the problem that led to its failure to meet the Filing Requirement, including, among other things, an overhaul of its auditing and accounting systems. This involved the retention of new auditors for all of the Applicant's affiliated entities including the Hedge Funds, its management company and its parent company (collectively, the Affiliated Entities), and the implementation of a new accounting software system. The Applicant has committed approximately one million United States dollars to ensure it meets the Filing Requirement.
9. As a result of the amount of time invested to overhaul its accounting process in order to meet the Filing Deadline, the Applicant's auditors finds it unduly onerous to consolidate the Applicant's audited financial statements for the period ended December 31, 2008 (the 2008 Financial Statements) in time to meet the Filing Requirement.
10. The events that are the cause of this delay were disclosed to the Commission on March, 3, 2009.
AND UPON being satisfied that to make this order would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 147 of the Act that the provisions of section 139 of the Regulation shall not apply to the Applicant provided that the Applicant file its 2008 Financial Statements with the Commission no later than 140 days after the end of its financial year.
May 5, 2009.