Securities Law & Instruments

Headnote

Application under section 144 of the Securities Act (Ontario) (OSA) to vary and restate the interim order of FundSERV Inc. (FundSERV) to extend its interim exemption, which exempts OCC under section 147 of the OSA on an interim basis from recognition as a clearing agency under subsection 21.2(0.1) of the OSA.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21.2(0.1), 147, 144

IN THE MATTER OF

THE SECURITIES ACT,

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

(the Act)

AND

IN THE MATTER OF

FUNDSERV INC.

ORDER

(Section 144 of the Act)

WHEREAS the Ontario Securities Commission (Commission) issued an interim order dated March 1, 2011, pursuant to section 147 of the Act, exempting FundSERV Inc. (FundSERV) from the requirement to be recognized as a clearing agency under subsection 21.2(0.1) of the Act ("Interim Order");

AND WHEREAS the Interim Order will terminate on September 1, 2011 unless extended by order of the Commission;

AND WHEREAS FundSERV has filed an application dated August 22, 2011 with the Commission pursuant to section 144 of the Act requesting that the Commission vary and restate the Interim Order;

AND WHEREAS the Commission has determined that it is not prejudicial to the public interest to issue this order that varies and restates the Interim Order;

IT IS ORDERED, pursuant to section 144 of the Act, that the Interim Order be varied and restated as follows:

IN THE MATTER OF

THE SECURITIES ACT

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

(the Act)

AND

IN THE MATTER OF

FUNDSERV INC.

ORDER

(Section 147 of the Act)

WHEREAS FundSERV Inc. (FundSERV) had filed an application dated February 18, 2011 (February Application) with the Ontario Securities Commission (Commission) pursuant to section 147 of the Act requesting an interim order exempting FundSERV from the requirement to be recognized as a clearing agency under section 21.2 of the Act.

AND WHEREAS the Commission had granted such order dated March 1, 2011(Order);

AND WHEREAS the Order will terminate on September 1, 2011 unless extended by order of the Commission;

AND WHEREAS FundSERV has filed an application dated August 22, 2011 (August Application) with the Commission pursuant to section 144 of the Act requesting that the Commission vary and restate the Order to extend the termination date;

AND WHEREAS FundSERV has represented to the Commission that:

1. FundSERV is a Canadian corporation with its head office located in Toronto, Ontario;

2. FundSERV is a leading provider of electronic business services to the Canadian investment fund industry;

3. FundSERV's core service is to provide the network infrastructure for its customers to place and reconcile orders through efficient, secure data exchange, and, for those who so elect, to enable them to settle orders through a payment exchange handled by the Royal Bank of Canada through the Large-Value Transfer System operated by the Canadian Payments Association;

4. FundSERV operates on a cost-recovery basis, serving more than 700 organizations and their business units and providing online access to over 10,000 investment fund instruments;

5. FundSERV's business model does not involve credit enhancement, the assumption of counter-party risk, novation or custody;

6. While FundSERV has developed robust and reliable business continuity systems, market participants can and do transact without FundSERV's assistance;

7. FundSERV also supports the customer staffed committees and working groups that address issues and develop electronic data and security standards for the industry; and

8. FundSERV is transparent to the industry participants and responsive to any information request from the Commission.

AND WHEREAS subsection 21.2(0.1) of the Act prohibits a clearing agency (as defined in the Act) from carrying on business in Ontario unless it is recognized by the Commission as a clearing agency or exempted by the Commission;

AND WHEREAS FundSERV is in the process of filing a full application to the Commission for a subsequent order (Subsequent Order) exempting FundSERV from the requirement to be recognized as clearing agency under section 147 of the Act or seeking recognition under subsection 21.2(0.1) of the Act;

AND WHEREAS FundSERV has committed to working with Commission staff to complete the final application process in a timely manner;

AND WHEREAS based on the February Application, the August Application and the representations FundSERV has made to the Commission, the Commission has determined that varying the Order would not be prejudicial to the public interest;

IT IS HEREBY ORDERED by the Commission that, pursuant to section 147 of the Act, FundSERV is exempt on an interim basis from recognition as a clearing agency under section 21.2 of the Act;

PROVIDED THAT the Order shall terminate on the earlier of (i) May 1, 2012 or (ii) the effective date of the Subsequent Order.

DATED March 1, 2011, as varied on August 30, 2011

"Paulette L. Kennedy"
 
"Margot C. Howard"