Application to the Ontario Securities Commission for a ruling pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) for a ruling that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The Applicant will provide advice to certain Canadian Affiliates in Ontario only for so long as such affiliates remain affiliates of the Applicant. Filer acknowledged its activities did not comply with the registration requirements under applicable Canadian securities legislation. Exemptive relief granted is not retroactive.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(3), 74(1).
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (THE ACT)
IN THE MATTER OF ACE ASSET MANAGEMENT INC.
RULING (Subsection 74(1) of the Act)
UPON the application (the Application) of Ace Asset Management Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for a ruling pursuant to subsection 74(1) of the Act that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a corporation existing under the laws of the State of Delaware, based in New York. The Applicant does not have an office or employees in Canada.
2. The Applicant is part of a multi-national group of companies headquartered in Zurich, Switzerland and collectively known as the 'ACE Group'. The Applicant is an affiliated company of ACE INA Insurance and ACE INA Life Insurance (together, the Canadian Companies), both of which are insurance companies established under the laws of Canada that carry on business as Canadian federally licensed insurance companies with their head offices located in Toronto, Ontario. The Applicant is also an affiliated company of Combined Insurance Company of America (Combined and, together with the Canadian Companies, the Canadian Affiliates), which is established under the laws of the State of Illinois and carries on business in Canada as a federally licensed branch of a foreign insurance company with its Canadian head office in Markham, Ontario. Each of the Canadian Affiliates is a direct or indirect wholly-owned subsidiary or branch of ACE Limited, the parent company of the ACE Group.
3. The Applicant provides investment management services solely to entities in the ACE Group, including branches, subsidiaries and other entities related to ACE Limited. Given that the Applicant does not provide investment management services to entities outside of the ACE Group, the Applicant is exempt from the requirements to register as an adviser with the U.S. Securities and Exchange Commission under the United States Investment Advisers Act of 1940. As of October 31, 2013, the Applicant provided investment oversight on approximately $60 billion on behalf of entities in the ACE Group.
4. The Applicant provides investment advice and portfolio management services to the Canadian Affiliates with respect to the portfolio assets of the Canadian Affiliates maintained in connection with their respective Canadian businesses. For certain of the Canadian Affiliates, the provision of these services by the Applicant commenced as early as 2002. The Applicant provided these services to the Canadian Affiliates without obtaining adviser registration under the Act on the basis of a good faith determination that it was not providing advice to others with respect to investing in securities or buying or selling securities because it was providing such advice only to affiliates within the ACE Group. The Applicant seeks to continue to provide investment advice and portfolio management services solely to affiliates in the ACE Group, including the Canadian Affiliates, on a basis that would not require adviser registration under the Act.
5. Except as indicated in the previous paragraph, the Applicant is not in default of any requirements of securities legislation in Ontario.
6. The Applicant provides investment advice and portfolio management services on a portfolio of assets held by an Affiliated Company that includes Canadian securities (being part of the investment objectives of the Canadian portfolios of the Canadian Affiliates). However, the international adviser registration exemption in section 8.26 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) does not apply with respect to the Canadian portfolio assets of the Canadian Affiliates managed by the Applicant since such advice is not incidental to the advice it is providing on a "foreign security" (as defined in Section 8.26(2) of NI 31-103).
7. There is no requirement for employees of a corporation to be registered as advisers under the Act if such employees provide investment advice to their employer on a portfolio assets held by such employer. The Canadian Affiliates do not currently employ, nor do they intend to employ, individuals who provide investment advice with respect to its Canadian portfolio assets, but rather the Canadian Affiliates have outsourced the adviser function to the Applicant, an affiliate of the Canadian Affiliates. Outsourcing the investment function is permitted under the federal insurance company legislation.
8. The Canadian portfolio assets held by the Canadian Affiliates and managed by the Applicant are owned by each of the respective Canadian Affiliates. There are no external stakeholders (such as, for example, holders of variable annuity contracts or segregated funds/separate accounts for policyholders) that have any direct interest in the performance of such portfolios. Accordingly, there are no stakeholders in Ontario or elsewhere other than the Canadian Affiliates that are directly affected by the investment advice provided by the Applicant.
9. Subsection 74(1) of the Act provides that a ruling may be made by the Commission that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, where the Commission is satisfied that to do so would not be prejudicial to the public interest.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS RULED, pursuant to subsection 74(1) of the Act, that the Applicant is exempt from the adviser registration requirements of subsection 25( 3) of the Act in respect of it acting as an adviser to its affiliates in Ontario, provided that:
1. the Applicant provides investment advice and portfolio management services in Ontario only to its affiliates that:
(a) are licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada or a branch of a foreign insurance company in Canada, or
(b) are holding companies that have as their principal business activity to hold securities of one or more affiliates that are each licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; and
2. with respect to any particular affiliate, the investment advice and portfolio management services provided in Ontario are provided only as long as that affiliate remains:
(a) an "affiliate" of the Applicant as defined in the Act, and
(b) a "permitted client" as defined in NI 31-103.
February 7, 2014