National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirements in section 3.2 of National Instrument 52-107 Acceptable Accounting Principle and Auditing Standards (NI 52-107) that the combined annual and interim financial statements of Trans Québec & Maritimes Pipeline Inc. (TQM Inc.) and Trans Québec & Maritimes Pipeline Inc., as mandatary for TQM Pipeline and Company, Limited Partnership Inc. (TQM Partnership) (the Combined Financial Statements) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises to permit TQM Inc. to file the Combined Financial Statements in accordance with U.S. GAAP -- revocation or variation of decision -- TQM Inc. requests to have certain conditions in existing decision replaced with revised conditions -- Existing decision partially revoked -- Relief granted subject to a number of conditions.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principle and Auditing Standards.
Securities Act, R.S.O. 1990, c. S.5, as am., s.144 -- Revocation or variation of decision.
August 21, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (THE JURISDICTIONS) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF TRANS QUÉBEC & MARITIMES PIPELINE INC., (TQM INC.) AND TRANS QUÉBEC & MARITIMES PIPELINE INC., AS MANDATARY FOR TQM PIPELINE AND COMPANY, LIMITED PARTNERSHIP (THE PARTNERSHIP)
The securities regulatory authority or regulator in each of the Jurisdictions (theDecision Maker) has received an application (the Application) from TQM Inc. for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting TQM Inc. from the requirements of section 3.2 of Regulation 52-107 respecting Acceptable Accounting Principles and Auditing Standards (Regulation 52-107) that the combined annual and interim financial statements of TQM Inc. and the Partnership (the Combined Financial Statements) (a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and (b) disclose an unreserved statement of compliance with IFRS in the case of annual financial statements and an unreserved statement of compliance with IAS 34 in the case of the interim financial report (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers is the principal regulator for this application;
(b) TQM Inc. has provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador (the Passport Jurisdictions); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
In this decision:
(a) Unless otherwise defined herein, terms defined in Regulation 14-101 respecting Definitions, Regulation 11-102 and Regulation 52-107 have the same meaning if used in this decision; and
(b) "activities subject to rate regulation" has the meaning ascribed in Part V of the CPA Canada Handbook -- Accounting.
This decision is based on the following facts represented by TQM Inc.:
1. TQM Inc. was incorporated under the Canada Business Corporations Act on April 24, 1980. The head office of TQM Inc. is in Montreal, Québec.
2. Each of 9265-0860 Quebec Inc. (9265), a wholly owned subsidiary of Gaz Métro Limited Partnership (Gaz Métro) and TransCanada PipeLines Limited (TransCanada) (hereinafter collectively referred to as the Partners) owns 50 percent of the issued and outstanding shares in the share capital of TQM Inc.
3. The Partnership was formed on January 5, 1982 as a general partnership pursuant to the laws of Quebec. TQM Inc. was appointed mandatary of the Partnership to administer and manage the Partnership and to construct and operate a pipeline system in the Province of Québec (the Pipeline System) and to carry on its business in accordance with the General Partnership Agreement of the Partnership. On August 24, 1995 the Partnership was converted from a general partnership into a limited partnership governed by the laws of the Province of Québec of which Gaz Métro and TransCanada became the general partners and 3118240 Canada Inc. became the limited partner. Each of the general partners owns a 49.995 percent participation interest in the Partnership and 3118240 Canada Inc. owns the remaining 0.01 percent participation interest.
4. The Pipeline System is regulated by the National Energy Board (the NEB) pursuant to the National Energy Board Act (the Act). Due to the construct of the Act, there was doubt as to whether a partnership was permitted to own and operate a pipeline. As a result, TQM Inc. as a corporate entity was formed to do so on behalf of the Partnership.
5. TQM Inc. operates the Pipeline System, holds registered title to the Pipeline System on behalf of the Partnership and acts on behalf of the Partnership for the purposes of applying for and holding authorizations and certificates from the NEB. TQM Inc. acts solely as a mandatary and does not have an ownership interest in the Partnership, nor does it receive any revenue associated with the Pipeline System.
6. TQM Inc. is a reporting issuer in the Jurisdictions and in each of the Passport Jurisdictions. It is not in default of securities legislation in any jurisdiction in Canada.
7. The Partnership is not a reporting issuer under applicable securities laws.
8. The Partnership has activities subject to rate regulation.
9. TQM Inc. and the Partnership are not SEC issuers and therefore cannot rely on section 3.7 of Regulation 52-107 to file financial statements prepared in accordance with U.S. GAAP.
10. By the order rendered In the Matter of Trans Québec & Maritimes Pipeline Inc. and Trans Québec & Maritimes Pipeline Inc., as mandatory for TQM Pipeline and Company, Limited Partnership, on December 28, 2012:
(a) TQM Inc. is exempted from the obligations in Parts 4 and 5 of Regulation 51-102 respecting Continuous Disclosure Obligations, relating to the filing of annual and interim financial statements on a standalone basis along with the accompanying annual or interim MD&A (MD&A) provided that TQM Inc. files Combined Financial Statements and accompanying MD&A based on the Combined Financial Statements (the 51-102 Exemption);
(b) TQM Inc. is exempted from the obligations in Parts 4 and 5 of Regulation 52-109 respecting Certification of Disclosure in Issuers' Annual and Interim Filings, in respect of filing the Chief Executive Officer and Chief Financial Officer certificates that TQM Inc. would normally file if it prepared standalone annual and interim financial statements and accompanying MD&A, provided that the certificates are filed by TQM Inc. in respect of the Combined Financial Statements and accompanying MD&A (the 52-109 Exemption); and
(c) TQM Inc. is exempted from the obligations in Section 3.2 of Regulation 52-107 respecting Acceptable Accounting Principles and Auditing Standards, provided that TQM Inc. files Combined Financial Statements prepared in accordance with U.S. GAAP and that information for comparative periods presented in such financial statements is prepared in accordance with U.S. GAAP (the 52-107 Relief).
11. The 52-107 Relief will expire no later than 1 January 2015. The 51-102 Exemption and the 52-109 Exemption do not have an expiry date.
12. The International Accounting Standards Board (IASB) continues to work on a project focusing on accounting specific to activities subject to rate regulation. It is not yet known when this project will be completed or whether IFRS will include a specific standard that is applicable for entities with activities subject to rate regulation.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that:
(a) the 52-107 Relief is revoked;
(b) the Exemption Sought is granted to TQM Inc. in respect of the Combined Financial Statements required to be filed on or after the date of this order, provided that TQM Inc. prepares those Combined Financial Statements in accordance with U.S. GAAP; and
(c) the Exemption Sought will terminate on the earliest of the following:
i. 1 January 2019;
ii. if the Partnership ceases to have activities subject to rate regulation, the first day of the Partnership's financial year that commences after the Partnership ceases to have activities subject to rate regulation; and
iii. the effective date prescribed by the IASB for the mandatory application of a standard within IFRS specific to entities with rate-regulated activities.