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Industrial Alliance Securities Inc. and MGI Securities Inc.
Headnote
Multilateral Instrument 11-102 Passport System -- National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 33-109 Registration Information (NI 33-109) and Derivatives Regulation (Québec) -- Relief from certain filing requirements of NI 33-109 and Derivatives Regulation (Québec) in connection with a bulk transfer of business locations and registered individuals pursuant to an amalgamation, in accordance with section 3.4 of Companion Policy 33-109CP Registration Information.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 33-109 Registration Information, ss. 2.2, 2.3, 2.5, 4.2, 7.1.
Companion Policy 33-109CP Registration Information, s. 3.4.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
Derivatives Act (Québec), s. 86.
Derivatives Regulation (Québec), s. 11.1.
March 28, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUEBEC AND ONTARIO AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF THE DERIVATIVES LEGISLATION OF QUEBEC AND IN THE MATTER OF INDUSTRIAL ALLIANCE SECURITIES INC. ("IAS") AND MGI SECURITIES INC. ("MGI") (collectively the "Filers")
DECISIONS
Background
The securities regulatory authority in Quebec (the Principal regulator) and the regulator in Ontario (the Dual Exemption Decision Makers) have received an application from the Filers, on behalf of MGI and the continuing corporation (the Amalgamated Corporation) resulting from the proposed amalgamation (the Amalgamation) of IAS and MGI, for a decision under the securities legislation of each of Ontario and Quebec (the Legislation) providing exemptions from the requirements contained in sections 2.2, 2.3, 2.5 and 4.2 of National Instrument 33-109 Registration Information ("NI 33-109") pursuant to section 7.1 of NI 33-109 to allow the bulk transfer (the "Bulk Transfer") of registered individuals (MGI Individuals) and all business locations (Locations) of MGI (branches and sub-branches) from MGI to the Amalgamated Corporation, on the Amalgamation Date (defined below), in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Exemption Sought).
The Principal regulator has also received an application from the Filers for a decision under the derivatives legislation of Quebec for relief from section 11.1 of the Derivatives Regulation (Quebec) pursuant to section 86 of the Derivatives Act (Quebec) to allow the Bulk Transfer of any MGI Individuals registered under Quebec derivatives legislation and all of the Locations to the Amalgamated Corporation, on the Amalgamation Date, in accordance with section 3.4 of Companion Policy to NI 33-109 (the Derivatives Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a hybrid application):
(a) L'Autorité des marchés financiers is the Principal regulator for the Exemption Sought;
(b) for the decision of the Principal regulator in respect of the Exemption Sought, the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland-Labrador (together with Quebec and Ontario, the Jurisdictions);
(c) the decision with respect to the Exemption Sought is the decision of the Principal regulator and evidences the decision of the regulator in Ontario; and the decision with respect of the Derivatives Exemption Sought is the decision of the Principal regulator.
Interpretation
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in these decisions, unless otherwise defined.
Representations
These decisions are based on the following facts represented by the Filers:
Industrial Alliance Securities Inc. -- amalgamating corporation
1. IAS is a corporation incorporated under the Canada Business Corporations Act and has its head office at 2200 McGill College Avenue, Suite 350, Montreal, Quebec.
2. IAS is registered as an investment dealer under the securities legislation of each Jurisdiction. IAS is also registered as a derivatives dealer in Quebec. IAS is a dealer member of the Investment Industry Regulatory Organization of Canada (IIROC).
3. IAS has no subsidiaries.
4. Industrial Alliance Insurance and Financial Services Inc. (Industrial Alliance) owns all of the issued and outstanding shares of IAS.
5. IAS is not in default of any requirements of securities legislation in any of the Jurisdictions and/or of derivatives legislation.
MGI Securities Inc. -- amalgamating corporation
6. MGI is a corporation incorporated under the Canada Business Corporations Act and has its head office at 26 Wellington Street East, Suite 900, Toronto, Ontario.
7. MGI is registered as an investment dealer under the securities legislation of each Jurisdiction. MGI is also registered as a derivatives dealer in Quebec. IAS is a dealer member of IIROC.
8. MGI has 2 wholly owned subsidiaries: MGI Securities (USA) Inc. (MGI USA) and MGI Insurance Agency Inc. (MGI INS). MGI USA is a registered broker dealer with Financial Industry Regulatory Authority (USA) dealing with valid institutional clients in the United States. MGI INS is an insurance broker firm.
9. Jovian Capital Corporation (JCC) owns all of the issued and outstanding shares of MGI and Industrial Alliance owns all of the issued and outstanding shares of JCC.
10. MGI is not in default of any requirements of securities legislation in any of the Jurisdictions and/or of derivatives legislation.
The Proposed Amalgamation
11. As contemplated when Industrial Alliance acquired all of the issued and outstanding shares of JCC on October 1, 2013, IAS and MGI will now be amalgamated.
12. The Amalgamation will be effected through the Canada Business Corporations Act regular process. As such, after the Amalgamation, IAS and MGI will continue as one legal entity. The name of the amalgamated corporation (the Amalgamated Corporation) will be Industrial Alliance Securities Inc. (with the French version Industrielle Alliance Valeurs Mobilières Inc.)
13. The shareholders of the Amalgamated Corporation will be Industrial Alliance and JCC.
14. The head office location of the Amalgamated Corporation will be the same as the current head office location of IAS. The National Registration Database (NRD) number for the Amalgamated Corporation will be the same as the current NRD number of IAS.
15. The Amalgamation is scheduled to occur on or about April 1, 2014 (the Amalgamation Date).
16. On February 21, 2014, IIROC issued a non-objection letter with regard to the Amalgamation.
Submissions in support of exemptions
17. Subject to obtaining the Exemption Sought and the Derivatives Exemption Sought, no disruption in the services provided by the Filers to their clients is anticipated as a result of the Amalgamation.
18. Neither the Exemption Sought nor the Derivatives Exemption Sought will have any negative consequences on the ability of MGI, IAS or the Amalgamated Corporation to comply with any applicable regulatory requirements or their ability to satisfy any obligations in respect of their clients.
19. Given the number of MGI Individuals and Locations to be transferred from MGI to the Amalgamated Corporation on the Amalgamation Date, it would be unduly time consuming and difficult to transfer each of the MGI Individuals and Locations through NRD in accordance with the requirements of NI 33-109 if the Exemption Sought and Derivatives Exemption Sought are not granted.
20. Both Filers are registered in the same categories of registration in each Jurisdiction, thereby affording the opportunity to seamlessly transfer the MGI Individuals and Locations to the Amalgamated Corporation on the Amalgamation Date by way of Bulk Transfer.
21. At the time of the Bulk Transfer, all of the MGI Individuals will be the only registered individuals of MGI and the Locations will be the only branches and sub-branches of MGI. Accordingly, the transfer of the MGI Individuals and Locations on the Amalgamation Date by means of Bulk Transfer can be implemented without any significant disruption to the activities of the MGI Individuals, the Locations, MGI, IAS or the Amalgamated Corporation.
22. Allowing the Bulk Transfer of the Registrants to occur on the Amalgamation Date will benefit (and have no detrimental impact on) the clients of the Filers by facilitating seamless service on the part of the Filers and the Amalgamated Corporation.
23. The Exemption Sought and the Derivatives Exemption Sought comply with the requirements and the reasons for, a bulk transfer as set out in Section 3.4 of the Companion Policy to NI 33-109 and Appendix C thereto.
24. It would not be prejudicial to the public interest to grant the Exemption Sought and the Derivatives Exemption Sought.
Decisions
The Dual Exemption Decision Makers for the Exemption Sought, and the Principal regulator for the Derivatives Exemption Sought, are satisfied that the following decisions meet the tests set out in the Legislation and the Derivatives Act (Quebec), as applicable.
The decision of the Dual Exemption Decision Makers under the Legislation is that the Exemption Sought is granted provided that the Filers make acceptable arrangements with CGI Information Systems and Management Consultants Inc. in respect of the Bulk Transfer and the Filers make these arrangements in advance of the Bulk Transfer.
The decision of the Principal regulator under the Derivatives Act (Quebec) is that the Derivatives Exemption Sought is granted provided that the Filers make acceptable arrangements with CGI Information Systems and Management Consultants Inc. in respect of the Bulk Transfer and the Filers make these arrangements in advance of the Bulk Transfer.
"Eric Stevenson"
Superintendent, Client Services and Distribution Oversight