Fidelity Brokerage Services LLC et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application from U.S. broker-dealer for relief from dealer registration requirement, adviser registration requirement for incidental advice, and the prospectus requirement for the distribution of foreign securities that are traded pursuant to the registration exemptions on conditions that are similar to those provided in NI 35-101 Conditional Exemption from Registration for United States Broker-Dealers and Agents -- Temporary dealer registration relief will permit the Applicant to carry out liquidating trades in order to wind down accounts which do not qualify as tax-advantaged retirement savings plans -- Dealer registration relief includes relief for the Applicant and its Agents to trade in any securities in accounts which qualify as tax-advantaged retirement savings plans -- Dealer registration relief conditional on the Agents of the Applicants certifying that they are registered in the United States subject to United States securities laws, for the purpose of accommodating agents who are not required to be registered under United States securities laws -- Conditions similar to those provided in NI 35-101 but amended so as to be consistent with the policy rationale underlying NI 35-101 but reducing inconsistencies with corresponding U.S. rules and regulations applicable to Canadian dealers -- Condition requiring pre-existing client relationship reflects the provision of client services pursuant to introducing-carrying broker arrangements -- Filing requirements to the regulator streamlined.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74.

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

National Instrument 14-101 Definitions.

National Instrument 35-101 Conditional Exemption from Registration for United States Broker-Dealers and Agents.

March 2, 2012

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

FIDELITY BROKERAGE SERVICES LLC

NATIONAL FINANCIAL SERVICES LLC

FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY INC.

FIDELITY DISTRIBUTORS CORPORATION

(collectively, the Filers)

AND

THEIR RESPECTIVE AGENTS

DECISION

Background

The Ontario Securities Commission (OSC) has received an application from the Filers for a decision under the securities legislation of Ontario (the Legislation) exempting the Filers and the Designated Agents, on the conditions herein (the Exemption Sought) in respect of trades on or after the date of this decision, from:

(a) the dealer registration requirement in subsection 25(1) of the Legislation in respect to trades for accounts described in representations 7 and 8 below;

(b) the adviser registration requirement in subsection 25(3) of the Legislation in respect of any advisory services that are incidental to trading activities; and

(c) the prospectus requirement in section 53 of the Legislation for any foreign securities traded by the Filers and the Designated Agents pursuant to the dealer registration exemption referred to above.

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

(a) the OSC is the principal regulator for this application; and

(b) the Filers have provided notice to the OSC that the Filers and the Designated Agents intend to rely on section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) in all of the other 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.

Additional terms used in this Decision Document are defined as:

(1) "Agents" means a partner, officer, director or salesperson of a broker-dealer who is acting on behalf of a broker-dealer in effecting trades of securities.

(2) "Designated Agents" means:

(i) Agents; and

(ii) other individuals who provide services to Qualified Accounts and Non-Qualified Accounts such as administrative, transfer agency, operational and ministerial tasks that may be considered to be effecting trades in securities under Canadian legislation but who do not solicit trades and who are not, in the United States, registered representatives of the Filer.

(3) "FBS" means Fidelity Brokerage Services LLC, a registered broker-dealer based in the United States.

(4) "FDC" means Fidelity Distributors Corporation, a registered broker-dealer based in the United States.

(5) "FIIS" means Fidelity Investments Institutional Services Company Inc., a registered broker-dealer based in the United States.

(6) "FMR" means FMR LLC, the parent company of a number of subsidiaries, including the Filers, which collectively hold themselves out to the public as "Fidelity Investments".

(7) "Filers" means, collectively, FBS, FDC, FIIS and NFS, or individually, "the Filer".

(8) "foreign security" means a security that is listed for trading or quoted on an exchange or market outside of Canada, or of an issuer that is not incorporated, continued or organized under the laws of Canada or a jurisdiction of Canada.

(9) "Implementation Date" means June 1, 2012.

(10) "Jurisdictions" means, collectively, all of the provinces and territories of Canada.

(11) "NFS" means National Financial Services LLC, a registered broker-dealer based in the United States.

(12) "NI 31-103" means National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

(13) "NI 35-101" means National Instrument 35-101 Conditional Exemption from Registration for United States Broker-Dealers and Agents.

(14) "Non-Qualified Accounts" means, collectively, those accounts of the Filers that are described in paragraph 8.

(15) "SEC" means the Securities and Exchange Commission of the United States.

(16) "tax-advantaged retirement savings plan" has the same meaning as given to that term in NI 35-101.

(17) "Transition Plan" means the transition and compliance plan of the Filers provided to the OSC dated February 24, 2012 regarding the Non-Qualified Accounts, as the same may be amended from time to time with the consent of the Director where such amendments are material.

(18) "Qualified Accounts" means those accounts of a Filer that are the types of accounts as referred to in NI 35-101, namely

(i) Tax-advantaged retirement savings plans and

(ii) Accounts for an individual ordinarily resident in the United States who is temporarily resident in a Jurisdiction and with whom the Filer had a broker-dealer client relationship before the individual became temporarily resident in the Jurisdiction.

Representations

This Decision is based on the following facts represented by the Filers:

1. FMR is headquartered in Boston, Massachusetts.

2. The Filers do not have offices in Canada. Their closest significant connection is with Ontario given that the Filers have more customer relationships associated with addresses in Ontario than in any other Jurisdiction. Certain subsidiaries of FMR, including Fidelity Investments Canada ULC, have their head office located in Ontario.

3. The Filers are:

(a) FBS -- a retail brokerage firm that provides a suite of brokerage services to individuals, trusts, corporations and other business entities, as well as individual retirement accounts. Through FBS, customers can access a broad range of securities, including stocks, bonds and options as well as Fidelity and third party mutual funds;

(b) NFS -- a registered transfer agent and a clearing or carrying broker that clears on a fully disclosed basis for numerous correspondent or introducing brokers, including FBS. NFS relies on the "international dealer" exemption provided for in NI 31-103, which allows it to carry on its business of servicing institutional customers in the Jurisdictions subject to the conditions set out in NI 31-103.

(c) FIIS -- a limited purpose broker-dealer primarily responsible for marketing certain of Fidelity's U.S. mutual funds to intermediaries such as broker-dealers and banks. Some of FIIS' intermediary clients maintain their customers' investments directly on the books and records of the Fidelity mutual funds. So, while FMR attributes certain intermediary relationships to FIIS, FIIS does not maintain brokerage accounts for its intermediary clients' underlying customers; and

(d) FDC -- the general distribution agent for all of Fidelity's U.S. mutual funds. In this role, FDC is responsible for much of Fidelity's mutual fund marketing and promotional activity. FDC carries no brokerage accounts because the shareholders' positions are reflected directly on the books of the funds.

4. Each Filer is a broker-dealer in the United States, registered in that capacity with the SEC and applicable state regulators. Each is also a member of the Financial Industry Regulatory Authority (FINRA). No Filer is registered in any capacity in any Jurisdiction. As of December 31, 2011, the Filers employed approximately 11,800 registered representatives servicing customers with U.S. $3.4 trillion in assets under administration.

5. None of the Filers are in default of securities legislation of any Jurisdiction except with respect to trading with Non-Qualified Accounts and compliance with certain conditions of NI 35-101.

6. None of the Filers advertise in any Canadian media outlet of general distribution, whether in print, radio or television. Moreover, none of the Filers' solicitation efforts in the U.S., whether by Internet, direct mail, advertising or telephone, are designed to be directed at Canadian residents. Each Filer believes that it has reasonably effective policies and procedures in place designed to avoid establishing new relationships with Canadian residents and to avoid providing brokerage services in connection with such new relationships to residents of Canada, except as would be permitted pursuant to an available exemption.

7. Each Filer has Qualified Accounts on its books or otherwise associated with it that are held by individuals or entities that have Canadian addresses and that are tax-advantaged retirement savings plans. These Qualified Accounts include individual retirement accounts and 401(k), 403(b) or 457 (or similar) plans. The latter plans are employer sponsored defined contribution retirement plans that are typically referred to by citation to relevant sections of the Internal Revenue Code of the U.S.

8. Each Filer has accounts on its books or otherwise associated with it that are held by individuals or entities that have Canadian addresses and that are not tax-advantaged retirement savings plans or other Qualified Accounts. These accounts (collectively, the Non-Qualified Accounts) are of one of three broad categories of accounts:

(a) Those Non-Qualified Accounts that are similar to tax-advantaged retirement savings plans, in that they are creations of U.S. laws and are designed to allow an account holder to save money for a specific purpose, however, that purpose may not be "retirement" savings, including:

(i) Non-qualified deferred compensation plans;

(ii) Health savings accounts;

(iii) Emeriti health savings accounts; and

(iv) College savings plans.

(b) Those Non-Qualified Accounts, which while not designed to allow an account holder to save money for a specific purpose, are like the Non-Qualified Accounts described above in (a), because they are unique creations of U.S. law and have no parallel under Canadian laws, including:

(i) Transfer on Death Accounts; and

(ii) Accounts created under the Uniform Transfers to Minors Act or the Uniform Gifts to Minors Act of a particular U.S. state.

(c) Non-Qualified Accounts that do not fall within the categories outlined in (a) and (b), which are brokerage accounts or mutual fund accounts.

9. Pursuant to the Transition Plan filed with the OSC, the Filers' goal is to reduce significantly, over a time frame of approximately five years, the number of Non-Qualified Accounts, such that the Filers will seek to wind down accounts, other than Qualified Accounts or accounts established under another available exemption, that are associated with any individual or entity that has a Canadian address. The Transition Plan provides, among other things, that each Filer will demarcate each Non-Qualified Account within a specified period of time and with notice to the holder of the Non-Qualified Account, on the books of the Filer as a "liquidating trades-only" account. The holder of a Non-Qualified Account will be requested to eliminate, over time, the Non-Qualified Account if there continues to be a connection with a Canadian address and there is no other exemption available to the Filers to trade in that account under applicable Canadian securities laws.

10. As of December 31, 2011, there were approximately 8,100 Designated Agents who could be called upon to service the Qualified Accounts and the Non-Qualified Accounts. The services provided by the Designated Agents in respect of these accounts range from administrative, transfer agency, operational and ministerial tasks to the solicitation of securities transactions. None of the Designated Agents are registered in any capacity in any Jurisdiction. The Designated Agents are registered with the applicable U.S. securities authorities where required or permitted given their roles and responsibilities, in accordance with the applicable U.S. securities laws.

11. Each Filer wishes to rely, and its Designated Agents to also rely, on a dealer registration exemption in order to trade securities for Qualified Accounts similar to that provided for in sections 2.1 and 3.1 of NI 35-101 and on conditions similar to those indicated in NI 35-101, with the following variations:

(a) The Decision does not restrict the Filers and the Designated Agents from trading only in foreign securities. The Filers and the Designated Agents wish to be able to trade in any security subject to the prospectus exemption provided for in the Decision being available only in respect of a distribution of foreign securities. This amended condition is similar to the condition in section 2.1(b) and 3.1(c) of NI 35-101 but improves the reciprocity between the United States and Canada and is consistent with the underlying policy rationale of NI 35-101;

(b) The Decision reflects the business of NFS as a carrying broker, in that the "temporarily resident" exemption applies if either NFS or one of NFS' introducing brokers had an account relationship with the accountholder before the accountholder became temporarily resident in Canada. This condition is similar to the condition in sections 2.1(c)(i) and 3.1(d)(i) of NI 35-101 but recognizes introducing/carrying broker relationships ;

(c) The Filers and the Agents must file notices, statements and forms similar to those contemplated in sections 2.1(f) and 3.1(f) of NI 35-101, however, the Filers and Agents are relieved from doing so before or "immediately after" the Filers and the Agents first purported to rely on the dealer registration exemption provided for in sections 2.1 and 3.1 of NI 35-101;

(d) The Filers will provide to the OSC an annual certification concerning Agents servicing Canadian residents, with the first annual certification by the Filers filed with the OSC within 60 days of the Implementation Date. This condition is similar to the condition in sections 2.1(f) and 3.1(f) of NI 35-101 but streamlines the process to reduce the administrative burdens associated with the conditions in NI 35-101;

(e) The Filers will be sending notices to accountholders within 60 days of the Implementation Date indicating that the Filer and its Agents are not subject to the full regulatory requirements otherwise applicable in the Jurisdictions. This condition is similar to the condition in section 2.1(h) of NI 35-101.

(f) Some Designated Agents may not be required or permitted under U.S. securities laws to be registered with a securities regulatory authority in the United States given their role and responsibilities and therefore the condition similar to section 3.1(f)(ii) of NI 35-101 requires certification of registration status only by the Agents, being those who are required to be registered under U.S. securities laws;

(g) The requirement to "immediately" notify the regulators in an applicable Jurisdiction when an Agent stops dealing with residents of that Jurisdiction contemplated by section 3.2 of NI 35-101 gives rise to administrative difficulties for the Filers.. The Decision requires an annual certification by the Filers.

12. Each Filer is subject to U.S. securities laws related to trading and advising in securities.

13. Each Filer wishes to rely, and its Designated Agents to also rely, on a dealer registration exemption in order to allow it to carry out the liquidating trades contemplated under the Transition Plan in the Jurisdictions.

14. Each Filer and Designated Agent wishes to be able to provide advice to Canadians that is incidental to the trading activities contemplated in this Decision Document. An exemption from adviser registration for incidental advice is provided for in sections 2.3 and 3.3 of NI 35-101.

15. Each Filer and Designated Agent seek the ability to trade in foreign securities in circumstances where those securities are being distributed to the public in a Jurisdiction at the request of account holders of a Qualified Account. Section 4.1 of NI 35-101 affords a prospectus exemption in such circumstances.

Decision

The OSC is satisfied that the decision meets the test set out in the Legislation for the OSC to make the decision.

The decision of the OSC under the Legislation is that the Exemption Sought is granted provided that:

1. The dealer registration requirement does not apply to a Filer in any of the Jurisdictions in respect of any trades only if:

(a) the Filer has no office or other physical presence in any Jurisdiction. For greater certainty, a Filer will not be considered to have a physical presence within the meaning of this Condition 1(a) merely because an affiliate of the Filer has an office or carries on business in a Jurisdiction, or the Filer carries out trading activities pursuant to a registration exemption.

(b) the trading is with or for

(i) an individual ordinarily resident in the United States of America who is temporarily resident in one or any of the Jurisdictions and with whom the Filer (or in the case of NFS, an introducing broker that is using NFS as a carrying broker) had an account before the individual became temporarily resident in any of the Jurisdictions; or

(ii) an individual if the trade is for the individual's tax-advantaged retirement savings plan or with the individual's tax-advantaged retirement savings plan , and

(1) the tax-advantaged retirement savings plan is located in the United States of America,

(2) the individual is a holder of or contributor to the tax-advantaged retirement savings plan, and

(3) the individual was previously resident in the United States of America; or

(iii) an individual or entity if the trade is for the individual's or entity's Non-Qualified Account and is a liquidating trade made pursuant to the Transition Plan;

(c) the Filer does not advertise for or solicit new clients in any of the Jurisdictions;

(d) the Filer is a member of the Financial Industry Regulatory Authority (FINRA) in the United States;

(e) the Filer files with the OSC, on an annual basis, with the first such filing being made within 60 days of the Implementation Date, a copy of the Filer's most current FINRA filing, which filing must disclose, if applicable, the information that would be required to be provided to the OSC about the Filer pursuant to section 2.1(g) of NI 35-101 if the Filer were relying on the exemption set out in NI 35-101;

(f) the Filer files with the OSC an executed Form 35-101F1 Submission to Jurisdiction and Appointment for Service of Process, within 30 days of any change in the appointed agents for service of the Filer in any of the Jurisdictions and the Form 35-101F1 so filed, may be combined with the Form 35-101F1 for any or all of the other Filers and may consolidate information about all Jurisdictions and all agents for service in those Jurisdictions;

(g) the Filer sends a notice to all holders of a tax-advantaged retirement savings account, within 60 days of the Implementation Date, disclosing that the Filer and its Agents are not subject to the full regulatory requirements otherwise applicable under local securities legislation;

(h) the Filer, in the course of its dealings with clients, acts fairly, honestly and in good faith;

(i) the Filer notifies the OSC if the Filer ceases to engage in trading or advising activities in Canada pursuant to this Decision Document, as soon as practicable after making the decision to cease to so engage; and

(j) in connection with trades made for the Non-Qualified Accounts, the Filer complies, in all material respects, with the Transition Plan.

2. The dealer registration requirement does not apply to a Designated Agent in any of the Jurisdictions only if

(a) the trading is on behalf of or in connection with a Filer that is relying on the exemption provided for in paragraph 1 hereof;

(b) the Designated Agent has no office or other physical presence in any Jurisdiction;

(c) the trading is with or for

(i) an individual ordinarily resident in the United States of America who is temporarily resident in any of the Jurisdictions and with whom the Filer on whose behalf the Designated Agent is trading (or in the case of NFS, an introducing broker that is using NFS as a carrying broker) had an account before the individual became temporarily resident in any of the Jurisdictions; or

(ii) an individual if the trade is for the individual's tax-advantaged retirement savings plan or with the individual's tax-advantaged retirement savings plan, and

(1) the tax-advantaged retirement savings plan is located in the United States of America,

(2) the individual is a holder of or contributor to the tax-advantaged retirement savings plan and

(3) the individual was previously resident in the United States of America; or

(iii) an individual or entity if the trade is for the individual's or entity's Non-Qualified Account and is a liquidating trade made pursuant to the Transition Plan.

(d) the Designated Agent does not advertise for or solicit new clients in any of the Jurisdictions;

(e) the Filers deliver to the OSC, on an annual basis, with the first such filing being made within 60 days of the Implementation Date, a certificate that collectively certifies for the Filers:

(i) the name of each Agent that operated in the Jurisdictions as of December 31 of the applicable year, along with his or her FINRA registration number together with information about the Agent's registration status in the United States;

(ii) that each Agent has submitted to the jurisdiction of each of the Jurisdictions and has appointed the same agent for service in each of the Jurisdictions as has been appointed by the Filers; and

(iii) that the Filers will provide any securities regulator in Canada upon the reasonable request of that regulator, an up-to-date list of all Agents that are operating in the applicable Jurisdiction; and

(f) the Filers deliver to the OSC a notice describing any criminal or quasi-criminal proceeding brought against any of the Agents in any Jurisdiction or a non-Canadian jurisdiction or of any decision, order, ruling, or other requirement made with respect to or imposed on the Agent in a Jurisdiction or a non-Canadian jurisdiction as a result of any administrative, self-regulatory or regulatory action, hearing or proceeding involving fraud, theft, deceit, misrepresentation or similar conduct; with such notice being provided to the OSC as soon as reasonably practicable after the Filers becoming aware of such information about an Agent;

(g) the Designated Agent, in the course of his or her dealings with the Filers' clients, acts fairly, honestly and in good faith; and

(h) in connection with trades made for the Non-Qualified Accounts, the Filers comply, in all material respects, with the Transition Plan.

3. The adviser registration requirement does not apply to advising activities of the Filers or the Designated Agents if those activities are solely incidental to trading activities of the Filers and the Designated Agents under paragraphs 1 and 2 hereof.

4. The prospectus requirement does not apply to a distribution of foreign securities to a tax-advantaged retirement savings plan only if that distribution

(a) is made by a Filer or a Designated Agent that is exempt from the adviser registration requirement and the dealer registration requirement under paragraphs 1, 2 or 3; and

(b) is made in compliance with all applicable

(i) U.S. federal securities laws, and

(ii) state securities legislation in the United States of America.

5. The relief granted by this Decision that gives the Filers and the Designated Agents conditional exemptions for trading and advising activities carried out by any of them with Qualified Accounts will cease to be effective on the same date that rule amendments are made effective in the Jurisdictions to the equivalent exemptions that are presently provided for in NI 35-101 where such amendments materially affect the subject matter of this Decision, in respect of any such trading or advising activities of the Filers or the Designated Agents carried out on or after that effective date. For greater certainty, this "sunset" does not apply to the relief granted by this Decision in respect of any other trading or advising activities carried out by the Filers and the Designated Agents provided that, such trading or advising continues to be carried out in compliance with the conditions of this Decision, until such time as this Decision is revoked in accordance with applicable law.