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P/E Global LLC – s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirement of paragraph 22(1)(b) of the CFA granted to a sub-adviser headquartered in a foreign jurisdiction in respect of advice regarding trades in commodity futures contracts and commodity futures options, subject to certain terms and conditions -- Relief mirrors exemption available in section 8.26.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations made under the Securities Act (Ontario) -- Relief is subject to a sunset clause.
Applicable Legislative Provisions
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 1(1), 22(1)(b) and 80.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 25(3).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 8.26.1.
Ontario Securities Commission Rule 35-502 Non-Resident Advisers, s. 7.11.
IN THE MATTER OF THE COMMODITY FUTURES ACT, R.S.O. 1990, CHAPTER C.20, AS AMENDED (the CFA) AND IN THE MATTER OF P/E GLOBAL LLC
ORDER (Section 80 of the CFA)
UPON the application (the Application) of P/E Global LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA (the Order), that the Applicant, and any individuals engaging in, or holding themselves out as engaging in, the business of advising others as to trading in Foreign Contracts (as defined below) on the Applicant's behalf (the Representatives), be exempt, for a specified period of time, from the adviser registration requirement in paragraph 22(1)(b) of the CFA when acting as a sub-adviser to Ninepoint Partners LP (the Principal Adviser) in respect of the Ninepoint FX Strategy Fund (the Fund) and such future investment funds as may be established by the Principal Adviser or other publicly offered investment funds for which the Applicant may act as a sub-adviser (collectively with the Fund, the Funds), subject to certain terms and conditions;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND WHEREAS for the purposes of this Order:
CFA Adviser Registration Requirement means the requirement in paragraph 22(1)(b) of the CFA that prohibits a person or company from acting as an adviser with respect to trading in Contracts unless the person or company is registered in the appropriate category of registration under the CFA;
CFTC means the Commodity Futures Trading Commission of the United States;
Contract has the meaning ascribed to that term in subsection 1(1) of the CFA;
Foreign Contract means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;
International Adviser Exemption means the exemption set out in section 8.26 of NI 31-103 from the OSA Adviser Registration Requirement;
NFA means National Futures Association of the United States;
NI 81-102 means National Instrument 81-102 -- Investment Funds, as amended from time to time;
NI 31-103 means National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations, as amended from time to time;
OSA means the Securities Act, R.S.O. 1990, c. S.5, as amended from time to time;
OSA Adviser Registration Requirement means the requirement in the OSA that prohibits a person or company from engaging in or holding himself, herself or itself out as engaging in the business of advising others as to the investing in or the buying or selling of securities, unless the person or company is registered in the appropriate category of registration under the OSA;
Permitted Client means a client in Ontario that is a "permitted client", as that term is defined in section 1.1 of NI 31-103, except that for purposes of this Order such definition shall exclude a person or company registered as an adviser or dealer under the securities or derivatives legislation, including commodity futures legislation, of a jurisdiction of Canada;
SEC means the Securities and Exchange Commission of the United States;
specified affiliate has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information; and
United States means the United States of America.
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a limited liability company incorporated under the laws of the State of Delaware, U.S.A. The head office of the Applicant is located in Boston, Massachusetts.
2. The Applicant is registered in the United States as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended, as a commodity trading adviser (CTA) and a commodity pool operator (CPO) with the CFTC and is a member of the NFA. The Applicant has claimed a CFTC Rule 4.7 exemption as a CTA and CPO pursuant to which the Applicant is subject to reduced disclosure and recordkeeping requirements with respect to certain qualified eligible person accounts and pools.
3. The Applicant provides investment advisory and portfolio management services on a discretionary basis to persons that are "qualified eligible persons" under CFTC rules, high net worth individuals, banking or thrift institutions, pension and profit sharing plans, pooled investment vehicles, charitable organizations, foundations, investment companies, corporations, trusts and other business entities, and state or municipal government entities.
4. The investment strategies utilized by the Applicant may invest in futures (primarily foreign exchange (FX), government bond and equity index futures), forwards, swaps, U.S. Treasury bills, money market securities, foreign currencies, cash or cash equivalents.
5. The Applicant is authorized by the CFTC and SEC to advise on, inter alia, securities, options, futures, swaps, forward rate agreements and any other derivative contracts.
6. The Applicant is not registered under the OSA or the CFA in Ontario or under the securities legislation or derivatives legislation, including commodity futures legislation, of any other jurisdiction of Canada.
7. On December 22, 2017, the Applicant was granted an exemption (the BC Order) from the adviser registration requirement of the securities legislation of British Columbia so that the adviser registration requirement does not apply to the Applicant and the Representatives acting on the Applicant's behalf, subject to certain terms and conditions. The BC Order is also being relied upon in Alberta, Saskatchewan, New Brunswick and Nova Scotia pursuant to Multilateral Instrument 11-102 Passport System.
8. On May 8, 2018, an exemption order from the CFA Adviser Registration Requirement was granted by the Commission so that the CFA Adviser Registration Requirement does not apply to the Applicant and the Representatives acting on the Applicant's behalf, subject to certain terms and conditions (the Ontario Order).
9. On June 22, 2018, the Applicant was granted an exemption from the adviser registration requirement of the securities legislation of Manitoba so that the adviser registration requirement does not apply to the Applicant and the Representatives acting on the Applicant's behalf, subject to certain terms and conditions (the Manitoba Order and together with the BC Order and the Ontario Order, collectively, the Previous Orders).
10. Pursuant to the Previous Orders, the Applicant is permitted to provide advice as to trading in Foreign Contracts and managing trading in Foreign Contracts through discretionary authority to investors that qualify as Permitted Clients. However, any person or company registered as an adviser or dealer under the securities legislation or derivatives legislation, including commodity futures legislation, of a jurisdiction of Canada is specifically excluded from the definition of Permitted Client for the purposes of the Previous Orders.
11. The Applicant is not in default of the securities legislation or derivatives legislation, including commodity futures legislation, of any jurisdiction of Canada. The Applicant is also in compliance in all material respects with the securities legislation, commodity futures legislation and derivatives legislation of the United States.
12. The Principal Adviser is a limited partnership formed under the Limited Partnerships Act (Ontario).
13. The Principal Adviser is registered under securities law as an Investment Fund Manager in Ontario, Québec and Newfoundland and Labrador and as an adviser in the category of Portfolio Manager in all provinces of Canada other than Québec and Prince Edward Island and as a dealer in the category of Exempt Market Dealer in all provinces of Canada other than Prince Edward Island. The Principal Adviser is registered as a commodity trading manager under the CFA.
14. The Applicant is not an affiliate of the Principal Adviser.
15. The Principal Adviser is not in default of the securities legislation or derivatives legislation, including commodity futures legislation, of any jurisdiction of Canada.
16. The Principal Adviser is or will be the investment fund manager of and/or provides or will provide investment advice and/or discretionary portfolio management services in Ontario to the Funds.
17. The Funds may, as part of their investment strategies, invest in Contracts. The Principal Adviser acts or will act as a portfolio manager in respect of such Funds.
18. In connection with the Principal Adviser acting as portfolio adviser to the Funds in respect of the purchase or sale of Foreign Contracts the Principal Adviser, pursuant to a written agreement, has retained, or will retain, the Applicant to act as a sub-adviser to the Principal Adviser in respect of the purchase and sale of Foreign Contracts in which the Applicant has experience and expertise by exercising discretionary authority on behalf of the Principal Adviser, in respect of all or a portion of the assets of the investment portfolio of the respective Funds, including discretionary authority to buy or sell Foreign Contracts for the Funds (the Sub-Advisory Services), provided that such investments are consistent with the investment objectives and strategies of the applicable Fund.
19. The written agreement between the Principal Adviser and the Applicant sets out (or will set out) the obligations and duties of each party in connection with the Sub-Advisory Services and requires (or will require) the Principal Adviser to exercise the degree of supervision and control it is required to exercise over the Applicant in respect of the Sub-Advisory Services.
20. The relationship among the Principal Adviser, the Applicant and any Fund will be consistent with the requirements of section 8.26.1 of NI 31-103.
21. The CFA Adviser Registration Requirement prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a representative or as partner or an officer of a CFA registered adviser and is acting on behalf of a CFA registered adviser.
22. By providing the Sub-Advisory Services, the Applicant and each of its Representatives will be engaging in, or holding himself, herself or itself out as engaging in, the business of advising others in respect of Foreign Contracts and, in the absence of being granted the requested relief, would be required to register as an adviser or representative of an adviser under the CFA.
23. There is currently no rule or regulation under the CFA that provides an exemption from the CFA Adviser Registration Requirement that is similar to the exemption from the adviser registration requirement in subsection 25(3) of the OSA that is provided under section 8.26.1 of NI 31-103.
24. The Principal Adviser will deliver to the Funds all applicable reports and statements required under applicable securities, commodity futures and derivatives legislation.
25. The Applicant will only provide the Sub-Advisory Services to the Principal Adviser as long as the Principal Adviser is, and remains, registered under the CFA as an adviser in the category of commodity trading manager.
26. The relationship among the Principal Adviser, the Applicant and the Funds will be consistent with the requirements of section 8.26.1 of NI 31-103 and specifically:
(i) the obligations and duties of the Applicant in connection with the Sub-Advisory Services are (or will be) set out in a written agreement with the Principal Adviser; and
(ii) the Principal Adviser has and will enter into a written agreement with each Fund, agreeing to be responsible for any loss that arises out of the failure of the Applicant to exercise:
(a) the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Principal Adviser and each Fund; or
(b) the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (this obligation, together with the obligation in subparagraph (i), the Assumed Obligations).
27. The prospectus or other offering document, if any, for each Fund for which the Principal Adviser engages the Applicant to provide the Sub-Advisory Services will include the following disclosure (the Required Disclosure):
(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Applicant to meet the Assumed Obligations; and
(ii) a statement that there may be difficulty in enforcing any legal rights against the Applicant (or any of its Representatives) because the Applicant is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
28. There is currently no rule or regulation under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA that is similar to the exemption from the adviser registration requirement in section 25(3) of the OSA, which is provided under section 8.26.1 of NI 31-103. Consequently, in order for the Applicant and its Representatives to provide the Sub-Advisory Services to the Principal Adviser in the absence of this Order, the Applicant would be required to satisfy the CFA Adviser Registration Requirement by applying for and obtaining registration in Ontario as an adviser under the CFA in the category of commodity trading manager.
29. In connection with the Ontario Order, the Applicant has previously submitted to the Commission a completed Submission to Jurisdiction and Appointment of Agent for Service substantially in the form attached as Appendix A to this Order.
30. To the best of the Applicant's knowledge, the Applicant confirms that there are currently no regulatory actions of the type contemplated by the Notice of Regulatory Action attached as Appendix B to this Order, except as otherwise disclosed to the Commission.
31. The Applicant has complied with, and is currently in compliance with, all of the terms and conditions of the Previous Orders.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to make this Order.
IT IS ORDERED, pursuant to section 80 of the CFA, that the Applicant and the Representatives are exempt from the adviser registration requirement in paragraph 22(1)(b) of the CFA in respect of providing Sub-Advisory Services to the Principal Adviser in respect of all or a portion of the assets of the investment portfolio of the respective Funds, including discretionary authority to buy or sell Foreign Contracts for the Funds, provided that:
(a) the Applicant provides Sub-Advisory Services to the Principal Adviser only as to trading in Foreign Contracts and does not advise any Permitted Client as to trading in Contracts that are not Foreign Contracts, unless providing such advice is incidental to its providing advice on Foreign Contracts;
(a) the Applicant's head office or principal place of business remains in the United States;
(b) the Applicant is registered in a category of registration, or operates under an exemption from registration, under the applicable securities legislation or commodity futures legislation of the United States, that permits it to carry on the activities in the United States that registration as an adviser under the CFA in the category of commodity trading manager would permit it to carry on in Ontario;
(c) the Applicant continues to engage in the business of an adviser, as defined in the CFA, in the United States;
(d) as at the end of the Applicant's most recently completed financial year, not more than 10% of the aggregate consolidated gross revenue of the Applicant, its affiliates, and its affiliated partnerships (excluding the gross revenue of an affiliate or affiliated partnership of the Applicant if the affiliate or affiliated partnership is registered under securities legislation, commodity futures legislation, or derivatives legislation of a jurisdiction of Canada) was derived from the portfolio management activities of the Applicant, its affiliates, and its affiliated partnerships in Canada (which, for greater certainty, includes both securities-related and commodity futures-related activities);
(e) before advising the Principal Adviser with respect to Foreign Contracts, the Applicant notifies the Principal Adviser of all of the following:
(i) the Applicant is not registered in Ontario to provide the advice described under paragraph (a) of this Order;
(ii) the foreign jurisdiction in which the Applicant's head office or principal place of business is located;
(iii) all, or substantially all, of the Applicant's assets may be situated outside of Canada;
(iv) there may be difficulty enforcing legal rights against the Applicant because of the above; and
(v) the name and address of the Applicant's agent for service of process in Ontario;
(f) the Applicant submits to the Commission an amended Submission to Jurisdiction and Appointment of Agent for Service in the form attached as Appendix A within 10 days of any change to the information contained in the Submission to Jurisdiction and Appointment of Agent for Service currently on file with the Commission;
(g) the Applicant notifies the Commission of any regulatory action initiated after the date of this Order with respect to the Applicant or, to the best of the Applicant's knowledge and after reasonable inquiry, any predecessors or the specified affiliates of the Applicant by filing Appendix B within 10 days of the commencement of each such action; and
(h) if the Applicant is not subject to the requirement to pay a participation fee in Ontario because it is not registered under the OSA and does not rely on the International Adviser Exemption, by December 31st of each year, the Applicant pays a participation fee based on its specified Ontario revenues for its previous financial year in compliance with the requirements of Part 3 and section 6.4 of Commission Rule 13-502 Fees as if the Applicant relied on the International Adviser Exemption; and
IT IS FURTHER ORDERED that this Order will terminate on the earliest of:
(a) the expiry of any transition period as may be provided by law, after the effective date of the repeal of the CFA;
(b) six months, or such other transition period as may be provided by law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) or Ontario securities law (as defined in the OSA) that affects the ability of the Applicant to act as an adviser to a Permitted Client; and
(c) five years after the date of this Order.
DATED at Toronto, Ontario this 8th day of November, 2019.
"Heather Zordel"
Commissioner
Ontario Securities Commission
"Mary Anne De Monte-Whelan"
Commissioner
Ontario Securities Commission
APPENDIX A
SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM REGISTRATION UNDER THE COMMODITY FUTURES ACT (ONTARIO)
1. Name of person or company ("International Firm"):
2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:
3. Jurisdiction of incorporation of the International Firm:
4. Head office address of the International Firm:
5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.
Name:E-mail address:Phone:Fax:
6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):
[ ] Section 8.18 [international dealer]
[ ] Section 8.26 [international adviser]
[ ] Other
7. Name of agent for service of process (the "Agent for Service"):
8. Address for service of process on the Agent for Service:
9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.
10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.
11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator
a. a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated;
b. an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service; and
c. a notice detailing a change to any information submitted in this form, other than the name or above address of the Agent for Service, no later than the 30th day after the change.
12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.
Dated: ____________________
______________________________
(Signature of the International Firm or authorized signatory)
______________________________
(Name and Title of authorized signatory)
Acceptance
The undersigned accepts the appointment as Agent for Service of ____________________ under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.
Dated: ____________________
______________________________
(Signature of Agent for Service or authorized signatory)
______________________________
(Name and Title of authorized signatory)
This form, and notice of a change to any information submitted in this form, is to be submitted through the Ontario Securities Commission's Electronic Filing Portal:
https://www.osc.gov.on.ca/filings
APPENDIX B
NOTICE OF REGULATORY ACTION{1}
1. Has the firm, or any predecessors or specified affiliates of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, self-regulatory organization (SRO) or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
|
Yes __________ |
No [X] __________ |
If yes, provide the following information for each settlement agreement:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Regulator/organization
Date of settlement (yyyy/mm/dd)
Details of settlement
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
2. Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:
Yes
No
(a)
Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?
_____
_____
(b)
Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?
_____
_____
(c)
Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(d)
Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(e)
Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?
_____
_____
(f)
Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(g)
Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?
_____
_____
If yes, provide the following information for each action:
Name of entity
Type of action
Regulator/organization
Date of action (yyyy/mm/dd)
Reason for action
Jurisdiction
3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliates is the subject?
|
Yes __________ |
No [X] __________ |
If yes, provide the following information for each action:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Reason or purpose of investigation
Regulator/organization
Date investigation commenced (yyyy/mm.dd)
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
- - - - - - - - - - - - - - - - - - - -
Name of witness
Title of witness
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
This form is to be submitted through the Ontario Securities Commission's Electronic Filing Portal:
https://www.osc.gov.on.ca/filings
{1} Terms defined for the purposes of Form 33-506F6 Firm Registration to Ontario Securities Commission Rule 33-506 (Commodity Futures Act) Registration Information have the same meaning if used in this Appendix except that any reference to "firm" means the person or company relying on relief from the requirement to register as an adviser or dealer under the Commodity Futures Act (Ontario).