Securities Law & Instruments

Headnote

Investment advice by a U.S. investment adviser recognized by the SEC as a "relying adviser" exempted from the requirements of paragraph 25(3) of the Act, subject to certain conditions -- investment advice is with respect to securities of Canadian issuers -- advice only provided to funds of foreign affiliate advisers -- supervisory memorandum of understanding between the Ontario Securities Commission and the Filer's principal regulator -- relief subject to five year sunset clause.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 25(3).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, AS AMENDED (THE ACT)

AND

IN THE MATTER OF APOLLO INTERNATIONAL MANAGEMENT (CANADA) ULC

ORDER (Subsection 74(1) of the Act)

UPON the application (the Application) of Apollo International Management (Canada) ULC (Apollo Canada) to the Ontario Securities Commission (the Commission) for an order, pursuant to subsection 74(1) of the Act, that Apollo Canada (including its directors, officers and employees) be exempt from the requirements of subsection 25(3) of the Act, in respect of acting as a sub-adviser to (a) an investment adviser registered with the U.S. Securities and Exchange Commission (SEC), (b) an investment adviser that is a "relying adviser" to an investment adviser registered with the SEC as defined in SEC Staff Letter dated January 18, 2012 (the Staff Letter), or (c) an investment adviser authorized by and regulated by the U.K. Prudential Regulatory Authority (PRA) (collectively, the Apollo Investment Advisers), in each case if such entity is a subsidiary of Apollo Global Management, LLC (Apollo) and acts as the investment adviser of an investment fund or managed account offered by Apollo;

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

AND UPON Apollo Canada having represented to the Commission that:

1. Apollo Canada is an unlimited liability corporation established under the laws of British Columbia of which Apollo indirectly holds one hundred percent of the voting interests. Apollo Canada will initially employ a single investment professional, who will be based in Apollo Canada's office in Toronto and may employ additional professionals in the future;

2. Apollo is a Delaware limited liability company whose shares are traded on the New York Stock Exchange. Apollo is a global alternative investment manager, whose primary business is to raise, invest and manage private equity, credit and real estate funds as well as managed accounts (collectively, Apollo Funds) on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors;

3. Apollo Canada is a relying adviser with the SEC that satisfies its obligation to register through the registration of an affiliate adviser, namely, Apollo Capital Management L.P. ;

4. As a relying adviser, Apollo Canada is subject to all of the provisions of the United States Investment Advisers Act of 1940 and the rules thereunder. In addition, Apollo Canada must comply with the code of ethics and written policies and procedures of Apollo Capital Management L.P. ;

5. The Commission has a supervisory memorandum of understanding (MOU) in place with the SEC for mutual cooperation and information sharing. The MOU would include oversight of relying advisers, such as Apollo Canada;

6. The purpose of the creation of Apollo Canada is to permit the Apollo organization to source investment opportunities in Canada for the benefit of the Apollo Funds and to provide sub-advisory services to the applicable investment adviser of the Apollo Funds. Such arrangements will be structured so that Apollo Canada will act as a sub-adviser to the Apollo Investment Advisers in respect of the Apollo Funds (the Advisory Services). All final investment decisions will be made by the Apollo Investment Advisers;

7. Apollo owns indirectly one hundred percent of the voting securities or general partner interests of the Apollo Investment Advisers;

8. Each of the Apollo Investment Advisers is (a) an investment adviser registered with the SEC, (b) an investment adviser that is a "relying adviser" of an investment adviser registered with the SEC as defined in the Staff Letter, or (c) an investment adviser authorized by and regulated by the PRA;

9. The Apollo Funds are currently domiciled outside of Canada;

10. Apollo and the Apollo Investment Advisers have no current plans to become registered in any jurisdiction in Canada or to conduct any activity requiring registration in any jurisdiction in Canada;

11. Apollo Canada will source investment opportunities only for the Apollo Funds and provide sub-advisory services only to the Apollo Investment Advisers and only in respect of the Apollo Funds;

12. In providing sub-advisory services to Apollo in respect of the Apollo Funds, Apollo Canada will comply with all applicable registration and other requirements of U.S. securities law and, if applicable, securities laws of other foreign jurisdictions;

13. Apollo Canada (including its directors, officers and employees) will not at any time advise a person or company resident in Ontario or any other Canadian jurisdiction;

14. Apollo Canada will become a "market participant" as defined under subsection 1(1) of the Act as a consequence of this decision. As a market participant, among other requirements, Apollo Canada is required to comply with the record keeping and provision of information provisions under section 19 of the Act, which includes the requirement to keep such books, records and other documents as are necessary for the proper recording of its business transactions and financial affairs and to deliver such records to the Commission if required;

AND UPON being satisfied that to make this order would not be prejudicial to the public interest;

IT IS ORDERED THAT, pursuant to subsection 74(1) of the Act, Apollo Canada (including its principals, employees and directors) is exempted from the requirements of subsection 25(3) of the Act in respect of the Advisory Services, provided that:

(a) Apollo Canada (including its directors, officers, employees, and no more than five advising representatives) complies with all applicable registration and other requirements of the securities legislation of the United States and, if applicable, the securities laws of other foreign jurisdictions;

(b) the obligations and duties of Apollo Canada are set out in a written agreement with the affiliate of Apollo that is the adviser responsible for the Apollo Fund (the "Responsible Apollo Entity");

(c) Apollo Canada provides advice only to a Responsible Apollo Entity;

(d) The Responsible Apollo Entity will be responsible for any loss that arises out of the failure of Apollo Canada

i) to exercise the powers and discharge the duties of its office honestly, in good faith and in accordance with its fiduciary duties to the Apollo Funds, or

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

(e) The Responsible Apollo Entity cannot be relieved from its responsibility for any loss that arises out of the failure of Apollo Canada to meet the Assumed Obligations;

(f) Apollo Canada and each of its representatives notifies the Commission of any regulatory action initiated with respect to Apollo Canada, or any predecessors or specified affiliates, or its representatives by completing and filing Appendix "A" -- Notice of Regulatory Action for Firms, or Appendix "B" -- Notice of Regulatory Action for Individuals, as applicable, within 10 days of the commencement of such action;

(g) Apollo Canada and each of its representatives comply with the requirements under OSC Rule 31-505 Conditions of Registration, as amended from time to time, namely, to deal fairly, honestly and in good faith with its, his, or her clients; and

(h) prior to purchasing any securities in one or more of the Apollo Funds, all investors who are Ontario residents received written disclosure that includes:

i) a statement that the Responsible Apollo Entity is responsible for any loss that arises out of the failure of Apollo Canada to meet the Assumed Obligations; and

ii) a statement that Apollo Canada is not, or will not be, registered as an adviser under the Act and, accordingly, the protections available to clients of a registered adviser under the Act will not be available to purchasers of units of the relevant Apollo Fund.

IT IS FURTHER ORDERED THAT, this order shall expire on the date that is the earlier of:

(a) any change in the recognition, supervision or oversight of a relying adviser firm by the SEC; or

(b) five years from the date of this order.

February 21, 2014

"Edward P. Kerwin"
"Christopher Portner"
Commissioner
Commissioner
Ontario Securities Commission
Ontario Securities Commission

 

APPENDIX A

NOTICE OF REGULATORY ACTION -- FIRM

1. Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?

Yes _____
No _____

If yes, provide the following information for each settlement agreement:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Regulator/organization

Date of settlement (yyyy/mm/dd)

Details of settlement

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

2. Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:

 

Yes

No

 

(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?

 

 

 

(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?

 

 

 

(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?

 

 

 

(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?

 

 

 

(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?

 

 

 

(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?

 

 

 

(g) Issued an order (other than en exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?

 

 

If yes, provide the following information for each action:

Name of Entity

 

Type of Action

 

Regulator/organization

 

Date of action (yyyy/mm/dd)

Reason for action

 

Jurisdiction

3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?

Yes _____ No _____

If yes, provide the following information for each investigation:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Reason or purpose of investigation

Regulator/organization

Date investigation commenced (yyyy/mm/dd)

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

Name of firm

Name of firm's authorized signing officer or partner

Title of firm's authorized signing officer or partner

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

 

Witness

The witness must be a lawyer, notary public or commissioner of oaths.

- - - - - - - - - - - - - - - - - - - -

Name of witness

Title of witness

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

This form is to be submitted to the following address:

Ontario Securities Commission
Suite 1903, Box 55
20 Queen Street West
Toronto, ON M5H 3S8
Attention: Registration Supervisor, Portfolio Manager Team
Telephone: (416) 593-8164
email: amcbain@osc.gov.on.ca

{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 -- Registration Information.

 

APPENDIX B

NOTICE OF REGULATORY ACTION -- INDIVIDUAL

Name of Individual

__________

__________

__________

__________

Last name

First name

Second name (N/A [ ])

Third name (N/A [ ])

1. Securities and derivatives regulation

Are you now, or have you ever been subject to any disciplinary proceedings or any order resulting from disciplinary proceedings under any securities legislation or derivatives legislation or both in any province, territory, state or country?

Yes
[ ]
No
[ ]

If "Yes", complete the following:

For each order or disciplinary proceeding, state below (1) the name of the firm, (2) the securities or derivatives regulator that issued the order or is conducting or conducted the proceeding, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding, and (7) any other relevant details.

______________________________

2. SRO regulation

Are you now, or have you ever been, subject to any disciplinary proceedings conducted by any SRO or similar organization in any province, territory, state or country?

Yes
[ ]
No
[ ]

If "Yes", complete the following:

For each order or disciplinary proceeding, state below (1) the name of the firm, (2) the SRO that issued the order or that is, or was, conducting the proceeding, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding, and (7) any other information that you think is relevant or that the regulator or, in Québec, the securities regulatory authority may request.

______________________________

3. Non-securities regulation

Are you now, or have you ever been, a subject of any disciplinary actions conducted under any legislation relating to your professional activities unrelated to securities or derivatives in any province, territory, state or country?

Yes
[ ]
No
[ ]

If "Yes", complete the following:

For each order or disciplinary proceeding, indicate below (1) the party against whom the order was made or the proceeding taken (if insurance licensed, indicate the name of the insurance agency), (2) the regulatory authority that made the order or that is, or was, conducting the proceeding, or under what legislation the order was made or the proceeding is being, or was conducted, (3) the date any notice of proceeding was issued, (4) the date any order or settlement was made, (5) a summary of any notice, order or settlement (including any sanctions imposed), (6) whether you are or were a partner, director, officer or major shareholder of the firm and named individually in the order or disciplinary proceeding and (7) any other information that you think is relevant or that the regulatory authority may request.

______________________________

- - - - - - - - - - - - - - - - - - - -

Name of firm

Name of firm's authorized signing officer or partner

Title of firm's authorized signing officer or partner

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

This form is to be submitted to the following address:

Ontario Securities Commission
Suite 1903, Box 55
20 Queen Street West
Toronto, ON M5H 3S8
Attention: Registration Supervisor, Portfolio Manager Team
Telephone: (416) 593-8164
email: amcbain@osc.gov.on.ca