Manulife Asset Management Limited et al. -- s. 80 of the CFA

Order

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-advisers not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts 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 made under the Securities Act (Ontario).

Applicable Legislative Provisions

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.

August 14, 2012

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C. 20, AS AMENDED

(the CFA)

AND

IN THE MATTER OF

MANULIFE ASSET MANAGEMENT LIMITED AND

MANULIFE ASSET MANAGEMENT (US) LLC AND

MANULIFE ASSET MANAGEMENT

(HONG KONG) LIMITED

ORDER

(Section 80 of the CFA)

UPON the application (the Application) of Manulife Asset Management Limited (the Principal Adviser) and Manulife Asset Management (US) LLC and Manulife Asset Management (Hong Kong) Limited (each, a Sub-Adviser and together, the Sub-Advisers) to the Ontario Securities Commission (the Commission) for an order:

(a) pursuant to subsection 78(1) of the CFA, revoking the exemption order granted by the Commission to Manulife Asset Management (US) LLC (formerly MFC Global Investment Management (U.S.), LLC), on November 23, 2009; and

(b) pursuant to section 80 of the CFA, that each Sub-Adviser, and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services (as defined below) be exempt, for a period of five years, from the adviser registration requirements of paragraph 22(1)(b) of the CFA when acting as a sub-adviser to the Principal Adviser in respect of the Clients (as defined below) in respect of commodity futures contracts and commodity futures options traded on commodity futures exchanges (collectively, the Contracts) and cleared through clearing corporations (as defined below);

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

AND UPON the Principal Adviser and the Sub-Advisers having represented to the Commission that:

Principal Adviser

1. The Principal Adviser is a corporation organized under the laws of Ontario with its head office located in Toronto, Ontario.

2. The Principal Adviser is registered under the Securities Act (Ontario) (the OSA) as an investment fund manager, as an adviser in the category of portfolio manager and as a dealer in the categories of mutual fund dealer and exempt market dealer. The Principal Adviser is also registered under the CFA as an adviser in the category of commodity trading manager.

3. To the best of the knowledge of the Principal Adviser, the Principal Adviser is not in default of securities legislation of Ontario.

Sub-Advisers

Manulife Asset Management (US) LLC

4. Manulife Asset Management (US) LLC (MAM US) is a limited liability company existing under the laws of the State of Delaware, United States with its head office located in Boston, Massachusetts.

5. MAM US is currently registered as an investment adviser with the U.S. Securities and Exchange Commission and is exempted from registration as a commodity trading adviser and commodity pool operator with the U.S. Commodity Futures Trading Commission.

Manulife Asset Management (Hong Kong) Limited

6. Manulife Asset Management (Hong Kong) Limited (MAM HK) is a company incorporated under the laws of Hong Kong with its head office located in Hong Kong.

7. MAM HK is currently licensed with the Securities and Futures Commission in Hong Kong to conduct various regulated activities in Hong Kong including advising in securities and futures contracts, dealing in securities, and asset management activities (managing portfolios of securities, including investment trading in futures contracts).

8. Neither of the Sub-Advisers is a resident of any province or territory of Canada.

9. Neither of the Sub-Advisers is registered in any capacity under the CFA or the OSA.

10. The Sub-Advisers and the Principal Adviser are affiliates, and are, respectively, direct and indirect subsidiaries of Manulife Financial Corporation.

Clients

11. The Principal Adviser is the investment manager of and/or provides discretionary portfolio management services in Ontario to (i) investment funds, the securities of which are qualified by prospectus for distribution to the public in Ontario and the other provinces and territories of Canada (the Investment Funds); (ii) pooled funds, the securities of which are sold on a private placement basis in Ontario and certain other provinces and territories of Canada pursuant to prospectus exemptions contained in National Instrument 45-106 Prospectus and Registration Exemptions (the Pooled Funds); (iii) managed accounts of clients who have entered into investment management agreements with the Principal Adviser (the Managed Accounts); and (iv) other Investment Funds, Pooled Funds and Managed Accounts that may be established in the future in respect of which the Principal Adviser engages a Sub-Adviser to provide portfolio advisory services (the Future Clients) (each of the Investment Funds, Pooled Funds, Managed Accounts and Future Clients being referred to individually as a Client and collectively as the Clients).

12. Certain of the Clients may, as part of their investment program, invest in Contracts.

13. The Principal Adviser acts, or will act, as a commodity trading manager in respect of such Clients.

Sub-Advisory Services

14. Each Sub-Adviser is or will be registered or licensed, or is or will be entitled to rely on appropriate exemptions from such registrations or licenses, to provide advice with respect to securities, futures contracts and futures options to the Principal Adviser and/or the Clients pursuant to the applicable legislation of its principal jurisdiction.

15. In connection with the Principal Adviser acting as an adviser to Clients in respect of the purchase or sale of Contracts, the Principal Adviser has retained or will retain, pursuant to a written agreement made between the Principal Adviser and each Sub-Adviser, each Sub-Adviser to act as a sub-adviser to the Principal Adviser by exercising discretionary authority on behalf of the Principal Adviser, in respect of all or a portion of the assets of the investment portfolio of the respective Client, which may include discretionary authority to buy or sell Contracts for the Client (theSub-Advisory Services), provided that:

(a) in each case, the Contracts must be cleared through an "acceptable clearing corporation" (as defined in National Instrument 81-102 Mutual Funds, or any successor thereto (NI 81-102)) or a clearing corporation that clears and settles transactions made on a futures exchange listed in Appendix A of NI 81-102; and

(b) such investments are consistent with the investment objectives and strategies of the applicable Client.

16. The written agreement between the Principal Adviser and each Sub-Adviser sets out or will set out the obligations and duties of each party in connection with the Sub-Advisory Services and permits or will permit the Principal Adviser to exercise the degree of supervision and control it is required to exercise over the Sub-Adviser in respect of the Sub-Advisory Services.

17. The relationship among the Principal Adviser, each Sub-Adviser and any Client satisfies, or will satisfy, the requirements of section 7.3 of Ontario Securities Commission Rule 35-502 Non-Resident Advisers (Rule 35-502).

18. Each Sub-Adviser will only provide the Sub-Advisory Services as long as the Principal Adviser is, and remains, registered under the CFA as an adviser in the category of commodity trading manager.

19. The Principal Adviser will deliver to the Clients all applicable reports and statements under applicable securities and derivatives legislation.

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

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

(b) the Principal Adviser will contractually agree with each Client 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 Client; or

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

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

21. The prospectus or similar offering document for each Client for which the Principal Adviser engages the Sub-Adviser to provide the Sub-Advisory Services includes or will include the following disclosure:

(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 any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services) because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

22. Prior to purchasing any securities of one or more of the Investment Funds or Pooled Funds directly from the Principal Adviser or entering into an investment management agreement with the Principal Adviser for a managed account, all investors of the Client who are Ontario residents will receive written disclosure prior to the purchasing of any Contracts for such Client 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 any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services) because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

23. Paragraph 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 or as a partner or an officer of a registered adviser and is acting on behalf of a registered adviser. Under the CFA, "adviser" means a person or company engaging in 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.

24. By providing the Sub-Advisory Services, each Sub-Adviser and any individuals acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services will be engaging in, or holding himself, herself or itself out as engaging in, the business of advising others in respect of Contracts and, in the absence of being granted the requested relief, would be required to register as an adviser, or a representative of an adviser, as the case may be, under the CFA.

25. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures contracts and commodity futures options that is similar to the exemption from the adviser registration requirement in section 25(3) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.3 of Rule 35-502.

26. On November 23, 2009, the Commission granted MAM US (formerly MFC Global Investment Management (U.S.), LLC) an exemption from the adviser registration requirements of the CFA when acting as an adviser for the Principal Adviser (formerly Elliott & Page Limited) (the Previous Order). The Previous Order is scheduled to expire on November 23, 2012. MAM HK has not sought equivalent relief previously.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the relief requested;

IT IS ORDERED, pursuant to section 80 of the CFA, that each Sub-Adviser and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services are exempt, for a period of five years, from the adviser registration requirements of paragraph 22(1)(b) of the CFA when acting as a sub-adviser to the Principal Adviser in respect of the Clients in respect of Contracts, provided that at the relevant 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 and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services are appropriately registered or licensed, or are entitled to rely on appropriate exemptions from such registrations or licences, to provide advice with respect to securities, futures contracts and futures options for the particular Client pursuant to the application legislation of their 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 Clients to be responsible for any loss that arises out of any failure of the Sub-Adviser to meet the Assumed Obligations;

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

(f) the prospectus or similar offering document for each Client for which the Principal Adviser engages the Sub-Adviser to provide the Sub-Advisory Services will include the following disclosure:

(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 respective Sub-Adviser (or any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services) because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and

(g) prior to purchasing any securities of one or more of the Investment Funds or Pooled Funds directly from the Principal Adviser or entering into an investment management agreement with the Principal Adviser for a managed account, all investors of the Client who are Ontario residents will receive written disclosure prior to the purchasing of any Contracts for such Client 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 any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the Sub-Adviser in respect of the Sub-Advisory Services) because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.

August 14, 2012

"Christopher Portner"
Commissioner
Ontario Securities Commission
 
"James Turner"
Vice-Chair
Ontario Securities Commission