Relief 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 acts as dealing, advising or associate advising representative of another firm registered in any jurisdiction of Canada. These individuals will have sufficient time to adequately serve both firms. The firms have policies in place to handle potential conflicts of interest. The firms 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, 15.1.
October 16, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
CHEVERNY CAPITAL INC.
CORDIANT CAPITAL INC.
(Cordiant) (the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the requirement in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registration Obligations (NI 31-103) pursuant to section 15.1 of NI 31-103 to permit Jean-François Sauvé (Sauvé) and James Kiernan (Kiernan), (together, the Representatives) to be registered as dealing representatives of the Filers and to permit Kiernan to be registered as an advising representative of Cordiant (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers (AMF) is the principal regulator for this application,
(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 in Alberta, British Columbia, Manitoba and Newfoundland and Labrador, and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 31-103 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. The Filers are both corporations governed by the Canada Business Corporations Act.
2. The head office of each Filer is located in Montréal, Québec.
3. Cordiant is registered as an exempt market dealer in Alberta, Ontario and Québec and is registered as an investment fund manager and portfolio manager in Ontario and Québec. Cordiant is also registered with the U.S. Securities and Exchange Commission and Commission de surveillance du secteur financier (Luxembourg).
4. Cheverny is registered as an exempt market dealer in each of Alberta, British Columbia, Manitoba, Ontario, Québec and Newfoundland and Labrador.
5. Cordiant is an affiliate of Cheverny since they are wholly-owned by Dominion & Colonial Investment Partners Inc. (D&C). D&C is beneficially owned by Benn Mikula and the Representatives.
6. Neither Cheverny nor Cordiant are in default of any requirement of securities legislation in any jurisdiction of Canada.
7. Sauvé is registered as the ultimate designated person (UDP) of both Filers and as a dealing representative of Cheverny in Alberta, British Columbia, Manitoba, Ontario, Québec and Newfoundland and Labrador. If the Exemption Sought is granted, Sauvé will seek registration as a dealing representative of Cordiant in Québec, Alberta and Ontario.
8. Kiernan is registered as a dealing representative of Cheverny in Alberta, British Columbia, Manitoba, Ontario, Québec and Newfoundland and Labrador and is a director of Cordiant. If the Exemption Sought is granted, Kiernan will seek registration as a dealing representative of Cordiant in Québec, Alberta and Ontario and as an advising representative of Cordiant in Québec and Ontario.
9. The objective of the Representatives to be registered with both Filers is to ensure that, in their roles as senior executives of the Filers, they will be able to provide strategic guidance and leadership at each firm as well as be able to participate in client meetings.
10. At Cordiant, the Representatives are responsible for defining strategy and managing the company. As dealing representatives, the Representatives will be responsible for developing relations with large institutional investors in the context of seeking capital to manage in one of Cordiant’s emerging market private debt funds. In addition, Kiernan will advise the funds managed by Cordiant, as an advising representative of Cordiant.
11. At Cheverny, the Representatives will interact with the senior leadership of large corporations and private equity groups in relation to strategy, mergers and acquisitions (M&A) issues and capital structure.
12. The dual registration of the Representatives at each of Cordiant and Cheverny will create operational efficiencies and optimization of resources for the two affiliated entities.
13. Sauvé will devote approximately 25 hours per week at Cordiant and 40 hours per week at Cheverny. Kiernan will devote his time evenly between Cordiant and Cheverny.
14. There will be minimal potential for conflicts of interest or client confusion because there is very little overlap between the activities of each Filer. Cordiant is an investment manager overseeing funds that invest in emerging and frontier market debt in Africa, Latin America and Asia. Cheverny focuses on M&A and corporate strategy for businesses in Canada and Europe. Moreover the client base of each Filer is different.
15. The Representatives will not engage in any discretionary trading or otherwise have any discretionary authority in their capacity as dealing representatives of Cordiant.
16. The Representatives will have sufficient time and resources to adequately serve each Filer and its clients.
17. The Representatives will be subject to supervision by, and the applicable compliance requirements of, both Filers. The existing compliance and supervisory structures will apply depending on which regulatory entity on whose behalf the Representatives are acting.
18. The Representatives will act in the best interests of both the Cheverny clients and the Cordiant clients and deal fairly, honestly and in good faith with such clients.
19. In case Cheverny would be called upon to act in a transaction that might be of interest to Cordiant, all the parties (the client, the Filers and any other interested party) would be informed of any potential conflict.
20. Both Filers are subject to the conflict of interest requirements set out in NI 31-103 and such requirements will be complied with at all times.
21. Each of the Filers has policies and procedures to address conflicts of interest and all directors and officers of each Filer are aware of those policies and procedures.
22. The roles of the Representatives at the Filers will be disclosed to clients by the Representatives both verbally and via the websites of the Filers. Relevant written materials will disclose that the Filers are affiliates.
23. In the absence of the Exemption Sought, the Representatives would be prohibited under paragraph 4.1(1)(b) of NI 31-103 from acting as dealing representatives of Cordiant and from Kiernan acting as an advising representative of Cordiant, while the individuals are a dealing representative of Cheverny, even though the Filers are affiliates.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that the representations described above in paragraphs 14, 15, 16, 17, 18, 19, 20, 21 and 22 remain true.
Superintendent, Client Services and Distribution Oversight