NBCN Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 11.2 of National Instrument 31--103 Registration Requirements and Exemptions -- A large bank-owned investment dealer with two distinct operating divisions headed by co-CEOs exempted from requirement to register a single ultimate designated person (UDP) and permitted to register two UDPs, one for each operating division.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, s. 11.2.

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

May 19, 2011

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

NBCN INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for an exemption for the Filer from the requirement contained in section 11.2 of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) to designate an individual to be the ultimate designated person (UDP) and instead be permitted to designate and register two individuals as UDP in respect of two distinct divisions of the Filer (the Exemption Sought).

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

a) the Ontario Securities Commission is the principal regulator for this application, and

b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the other Canadian jurisdictions.

Interpretation

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

Representations

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

1. The Filer has its head office in Ontario.

2. The Filer is registered under the Legislation in the category of investment dealer and is a member of the Investment Industry Regulatory Organization of Canada (IIROC).

3. The Filer is also registered as an investment dealer in each of the other Canadian jurisdictions.

4. The Filer is not, to the best of its knowledge, in default of any requirements of securities legislation in any jurisdictions in Canada.

5. The Filer's business structure is organized as follows:

a) The Filer has two distinct Divisions based on the nature of the business that is conducted -- a Correspondent Brokerage Services Division ("Correspondent Network") and anOperations Division.

b) Both divisions of the Filer are part of the Wealth Management group of National Bank Financial Group ("NBFG") and both divisions are supported by the Corporate Development and Governance unit.

c) The Correspondent Network provides services to independent securities firms (third party IIROC member firms), financial planners, investment counselors and portfolio managers.

d) The services offered by the Correspondent Network are: Trading services (Equity, Fixed Income, Options, Mutual Funds, GICs, Access to research, New issues, Structured Products and Alternative Investments), Client reporting (client statements and client confirmations), Portfolio management systems and support (Managed account solutions), Transition services, Business development and marketing, Mid office services and Client relationship management.

e) The Operations Division supports both the Correspondent Network business and the IIROC regulated dealers within NBFG in addition to the operations activities for affiliates of the Filer who are not members of IIROC (and do not need to be because of the nature of their specific activities).

f) The Operations Division provides the following services: Custody services, Clearing and Settlement for Canadian, American and Foreign transactions, Segregation / Safekeeping services and Recordkeeping, Reconciliation, Estate settlement, Administration of Taxable and Registered accounts (including tax withholding and remittance to CRA and IRS, Tax slip management), Mandatory and optional market events, Documentation management, Credit and Risk management and Banking operations.

g) The Correspondent Network Division and the Operations Division each have separate and distinct senior management structures. Although they are part of the same corporate entity (i.e. the Filer), each Division is functionally a stand-alone operation within their parent bank's group of financial services companies and each Division Head will have the title of co-Chief Executive Officer (co-CEO) of the Filer.

h) As co-CEOs, each Division Head will be Chief Executive Officer (CEO) in respect of the Division for which the Division Head is responsible. Each Division Head reports independently to a member of the Office of the President of NBFG and each has access to the Filer's Board of Directors.

i) Each of the Division Heads has final authority to effect decisions in respect of its division (subject to the Board of Directors of the Filer).

This decision is also based on the following facts represented by the Filer:

UDP Requirement

1. NI 31-103 was implemented on September 28, 2009 (the Implementation Date).

2. Under paragraph 11.2(a) of NI 31-103, a registered firm is required to designate an individual to be the UDP (the UDP Requirement) and the UDP must be the CEO or equivalent of the registered firm.

3. Under section 16.8 of NI 31-103, there is a 3-month transition period from the implementation Date for a registered firm to comply with the UDP Requirement.

4. Prior to the implementation of NI 31-103, there was no requirement under the securities legislation of any Filing Jurisdiction for an investment dealer to designate an individual, and have him or her registered, as the UDP.

5. Prior to the implementation of NI 31-103, under IIROC Rules, there was a requirement for a member to have a UDP which had to be one of the member's senior management. IIROC Rule 38 required a member to appoint a senior management person to the UDP position but did not require the person to be the CEO.

6. Designating only one of the Division Heads for purposes of satisfying the UDP Requirement would not be consistent with the policy objectives it is intended to achieve because the Division Heads will be CEOs of their respective Divisions.

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 Exemption Sought is granted to the Filer provided that:

i) each Division shall have its own UDP, who shall be designated as co-CEO.

"Erez Blumberger"
Deputy Director, Registrant Regulation
Ontario Securities Commission