Under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual is registered as a dealing, advising or associate advising representative of another registered firm. The Filers are affiliated entities and have valid business reasons for the individuals to be registered with both firms. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the prohibition.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1 and 15.1.
August 12, 2014
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 MANULIFE ASSET MANAGEMENT LIMITED (MAML) AND MANULIFE ASSET MANAGEMENT INVESTMENTS INC. (MAMII and, together with MAML, the Filers)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief, pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), from the requirement in paragraph 4.1(1)(b) of NI 31-103 to permit certain current and future registered individuals (each a Representative and, collectively, the Representatives) to each be registered as both a dealing representative of MAMII and also as an advising representative or as an associate advising representative of MAML (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) 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 by the Filers in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador (together with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. MAML is a corporation governed under the Business Corporations Act (Ontario) and has its head office located in Toronto, Ontario.
2. MAML is an indirect wholly-owned subsidiary of The Manufacturers Life Insurance Company (Manulife).
3. MAML is currently registered as a dealer in the category of an exempt market dealer (an EMD) and as an adviser in the category of portfolio manager in each of the Jurisdictions. MAML is also registered in Ontario as an adviser in the category of commodity trading manager under the Commodity Futures Act (Ontario), and as an investment fund manager in Ontario, Québec and Newfoundland and Labrador.
4. MAML currently uses its registration as an EMD primarily for the purpose of distributing Manulife-sponsored funds on a prospectus-exempt basis, including to Canadian accredited investors, and to MAML and other related entities' employees and their spouses pursuant to the employee exemption in section 2.24 of National Instrument 45-106 Prospectus and Registration Exemptions.
5. MAMII is a corporation incorporated under the Canada Business Corporations Act and has its head office located in Toronto, Ontario.
6. MAMII is a wholly-owned subsidiary of MAML.
7. MAMII has applied for registration as an EMD in each of the Jurisdictions.
8. MAMII wants to become registered as an EMD so that MAML, for business reasons, can transfer its exempt market dealer business to MAMII.
9. MAML has determined that it would be beneficial to transfer its EMD business to MAMII and for MAML to then surrender its registration as an EMD in each of the Jurisdictions. Moving the EMD business of MAML to MAMII is consistent with the business model used by Manulife's U.S. affiliates; and this bifurcation will better reflect that MAMII intends to increasingly sell exempt funds sponsored by Manulife affiliates other than MAML, in addition to those sponsored by MAML.
10. It is proposed that the representatives of MAML will use the Representatives of MAMII to carry out any required trades in securities on an exempt basis.
11. Certain of the Representatives of MAMII will also be registered as advising representatives or as associate advising representatives of MAML (the Dually Registered Representatives).
12. The dual registration of the Dually Registered Representatives is not expected to give rise to any conflicts of interest. The interests of the Filers are aligned as a significant number of the clients of MAMII will also be clients of MAML; as the Filers will carry out distinct but complimentary business-lines to fully service the needs of their generally shared clients (in the same manner as clients are currently serviced by MAML as an EMD, portfolio manager and investment fund manager), and as both Filers are affiliates of Manulife. As a result, the potential for conflicts of interest arising from the dual registration of the Dually Registered Representatives is very remote.
13. The Dually Registered Representatives will have sufficient time and resources to adequately serve both Filers.
14. The dealing activities that will be provided to the clients of MAMII by the Dually Registered Representatives will not interfere with their responsibilities to either Filer.
15. The Dually Registered Representatives shall act in the best interests of the clients of each Filer and will deal fairly, honestly and in good faith with these clients.
16. Each Filer has or will have appropriate compliance and supervisory policies and procedures in place to monitor the conduct of its registered individuals and to ensure that the Filers can deal appropriately with any conflicts of interest that may arise as a result of the dual registration of the Dually Registered Representatives. In particular, the Dually Registered Representatives will be subject to the supervisory, and the applicable compliance, requirements of each of the Filers. The Filers believe that they will be able to appropriately deal with any conflicts, including supervising how Dually Registered Representatives will deal with conflicts, should they arise.
17. In order to minimize client confusion, the dual registration of the Dually Registered Representatives and the relationship between MAML and MAMII will be appropriately disclosed to the clients of the Dually Registered Representatives. Disclosure will be provided to new clients in writing at the time of account opening, before acting on behalf of the client. Disclosure will be provided to each current client in writing prior to MAMII acting on behalf of these clients.
18. In the absence of the Exemption Sought, the Filers would be prohibited from having Dually Registered Representatives.
19. Neither of the Filers is in default of any requirement of securities, commodity futures or derivatives legislation in any of the Jurisdictions.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the circumstances described above in paragraphs 13, 15, 16, and 17 remain in place.