State Farm Investor Services (Canada) Co. and Desjardins Financial Security Investments Inc.

Decision

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) – relief from certain filing requirements of NI 33-109 in connection with a bulk transfer of business locations and registered and non-registered individuals pursuant to an asset acquisition in accordance with section 3.4 of Companion Policy 33-109CP to NI 33-109.

Applicable Legislative Provisions

Multilateral Instrument 11-102 Passport System.
National Instrument 33-109 Registration Information and Companion Policy 33-109CP.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

August 7, 2018

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
STATE FARM INVESTOR SERVICES (CANADA) CO. (SFIS)

AND

DESJARDINS FINANCIAL SECURITY
INVESTMENTS INC. (DFSI)
(the Filers)

DECISION

Background

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 from the requirements contained in sections 2.2, 2.3 2.5, 3.2 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 all the registered individuals and all the business locations of SFIS to DFSI, on the Completion Date (as defined below), in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a)           the Ontario Securities Commission (the OSC) is the principal regulator for this application, and

(b)           the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied by each of the Filers in Alberta and New Brunswick (collectively with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

SFIS

1.             SFIS is a corporation existing under the laws of Nova Scotia, and is wholly-owned by 9294-2150 Québec inc. (Acquisition Co.), a wholly-owned subsidiary of Desjardins Financial Security Life Assurance Company (DFS), which itself is indirectly held by the Fédération des Caisses Desjardins du Québec (Desjardins Group).

2.             SFIS’s National Registry Database (NRD) number is 10450

3.             SFIS’s head office is located in Aurora, Ontario.

4.             SFIS is registered as a mutual fund dealer in the provinces of Alberta, New Brunswick and Ontario (each, a Jurisdiction and collectively, the Jurisdictions).

5.             SFIS is a member of the Mutual Fund Dealers Association of Canada (MFDA).

6.             SFIS provides mutual funds and related services to its clients.

7.             SFIS has 631 representatives registered with the Canadian Securities Administrators in the Jurisdictions (the Registered Representatives). SFIS has 1 business branch and 403 sub-branches (the Business Locations).

8.             SFIS is a level 3 member of the MFDA.

9.             SFIS is not in default of any requirements of securities legislation in any of the Jurisdictions.

DFSI

9.             DFSI is a corporation existing under the laws of the province of Québec, and is wholly-owned by DFS.

10.          DFSI’s NRD number is 23430.

11.          DFSI’s head office is located in Québec City, Québec.

12.          DFSI is registered in all Canadian provinces and territories as a mutual fund dealer and as an exempt market dealer and a restricted dealer in Québec only.

13.          DFSI is a level 4 member of the MFDA.

14.          DFSI is not in default of any requirements of securities legislation in any of the Jurisdictions.

The Transaction

15.          On, or about October 1, 2018 (the Completion Date) and in order to regroup the mutual fund dealer activities of SFIS with the mutual fund dealer activities of DFSI (collectively the Transaction),

(a)           all the issued and outstanding securities of SFIS will be transferred to DFSI; and

(b)           pursuant to the terms of a general conveyance agreement to be entered into by DFSI and SFIS, all the assets, obligations and liabilities of SFIS will be transferred to DFSI (including the mutual fund dealer activities of SFIS).

16.          Upon completion of the Transaction, SFIS will cease to act as mutual fund dealer in the Jurisdictions. Consequently,

(a)           DFSI will assume all of the existing registrations, approvals, rights and obligations for all SFIS’s Registered Representatives as well as of the Business Locations;

(b)           SFIS’s Chief Compliance Officer, Radek Loudin, which currently also acts as such for DFSI, will continue in this role with DFSI;

(c)           SFIS’s Ultimate Designated Person, Barbara Bellissimo, will no longer act in such capacity because DFSI already has its own Ultimate Designated Person, André Langlois, who will continue in this role with DFSI;

(d)           none of the Registered Representatives will be relocated during the upcoming bulk transfer;

(e)           any and all litigation procedures, complaints or other regulatory matters involving SFIS will continue with DFSI. Therefore, no claimants will be affected by the Transaction;

(f)            as a result of the Transaction, SFIS’s activities will continue using DFSI’s NRD Number e.g. 23430. As such, SFIS will surrender its registration in the Jurisdictions as well as its membership with the MFDA;

(g)           subject to the Exemption Sought, it is not anticipated that there will be any business process interruptions or disruption in the ability of SFIS and/or DFSI to trade on behalf of their respective clients as a result of the Transaction;

(h)           after completion of the Transaction DFSI will continue to be registered in the same categories of registration as it currently is and will continue to be a member of the MFDA.

17.          Upon completion of the Transaction, the Registered Representatives will be transferred to DFSI and the Business Locations will become sub-branches and branches of DFSI.

18.          By letter dated June 15, 2018, the MFDA approved the Transaction.

19.          At the time of the Bulk Transfer, all of the Registered Individuals will only be registered individuals of SFIS and the Business Locations will be the only branches and sub-branches of SFIS. Accordingly, the transfer of the Registered Individuals and Business Locations on the Completion Date by means of the Bulk Transfer can be implemented without any significant disruption to the activities of the Registered Individuals, the Business Locations, SFIS or DFSI.

20.          Given the number of Registered Representatives and Business Locations to be transferred from SFIS to DFSI on the Completion Date, it would be unduly time consuming and difficult to transfer each of the Registered Representatives and Business Locations through NRD in accordance with the requirements of NI 33-109 if the Exemption Sought is not granted.

21.          Allowing the bulk transfer of the Registered Representatives and Business Locations to occur on the Completion Date will benefit (and have no detrimental impact on) the clients of the Filers by facilitating seamless service on the part of the Registered Representatives and the Filers.

22.          DFSI will ensure that all filings required to be made under NI 33-109 will made on time.

23.          Upon completion of the Transaction all activities currently conducted by SFIS will be under the responsibility of DFSI.

24.          The Exemption Sought complies with the requirements of, 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.

25.          It would not be prejudicial to the public interest to grant the Exemption Sought.

26.          SFIS’s clients have been made aware of the Transaction through a prior notice.

27.          In accordance with its obligations under NI 31-103, DFSI will remit to the SFIS’s clients all information about DFSI that is required.

Decision

The principal regulator is satisfied that the decision meets the tests 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 Filers make acceptable arrangements with CGI Information Systems and Management Consultants Inc. in respect of the Bulk Transfer and that the Filers make such arrangements in advance of the Bulk Transfer.

“Pat Chaukos”
Deputy Director
Ontario Securities Commission