Under paragraph 4.1(1)(a) 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 an officer, partner or director of another registered firm that is not an affiliate of the first-mentioned firm. The firms require relief in order to permit a registered representative of one firm to also act as a partner of another registered firm. The firms are not affiliated. The individual will have sufficient time to adequately serve both firms. The potential for conflicts of interest is significantly reduced as the registered representative is essentially serving as a non-voting shareholder as opposed to a partner of the other registered firm. The Filers have policies in place to handle potential conflicts of interest.
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, 13.4, 15.1.
July 6, 2020
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 EDGEHILL PARTNERS (EdgeHill) AND BLUE DEER CAPITAL PARTNERS INC. (Blue Deer) AND WILLIAM BRADFORD TODD WHITE (the Representative) (EdgeHill, Blue Deer, and Representative, collectively, 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 from the requirement under paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit the Representative to hold a partnership interest in EdgeHill through WBTW Inc., hold the title of partner and chairman emeritus of EdgeHill, and to register as a dealing representative of Blue Deer (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,
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Newfoundland and Labrador (with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
The decision is based on the following facts represented by the Filer:
1. EdgeHill is a partnership organized under the laws of the Province of Ontario. EdgeHill's head office is located in Toronto, Ontario.
2. EdgeHill is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador and as a dealer in the category of exempt market dealer (EMD) and as an adviser in the category of portfolio manager in the Jurisdictions.
3. EdgeHill is an alternative asset management firm providing investment management services and investment products to non-retail clients including high net worth investors, family offices and institutional clients, as well as to retail clients that are accredited investors through the adviser channel. EdgeHill acts as fund manager and portfolio manager to pooled funds offered pursuant to prospectus exemptions.
4. Blue Deer is a corporation incorporated under the laws of the Province of Ontario. Blue Deer's head office is located in Toronto, Ontario.
5. Blue Deer has applied for registration as an EMD in Ontario. Once registration has been approved in Ontario, Blue Deer will be seeking registration in Alberta, British Columbia and Quebec.
6. Blue Deer will provide advisory services, support and capital raising assistance for small and mid-market companies. It will also offer consulting in matters of corporate strategy, business development, capital structure and formation, and investor relations.
7. Blue Deer and EdgeHill are not affiliated.
8. The Representative is a resident of Ontario and currently owns a 33.3% direct voting interest in Blue Deer. Blue Deer has sponsored the Representative's application for approval as a permitted individual (shareholder) and for registration as a dealing representative in Ontario.
9. WBTW Inc. holds a 30.16% partnership interest in EdgeHill. Although WBTW Inc. is a partner of EdgeHill, the Representative could be considered as acting as such partner of EdgeHill as he is the sole officer, director, and shareholder of WBTW Inc. Accordingly, the Representative could be in contravention of paragraph 4.1(1)(a) of NI 31-103 as he is a partner and holds the title of partner and chairman emeritus of EdgeHill, and also would be registered as a dealing representative of Blue Deer.
10. The partnership interest does not allow WBTW Inc. or the Representative to be involved in the business, operations or affairs of EdgeHill like an officer, director or an active partner. The Representative has no input or voting rights with respect to the day-to-day business, operations or affairs of EdgeHill. The Representative is only entitled to vote on extraordinary matters involving EdgeHill, such as a sale of all or substantially all of its business or assets.
11. The Representative does not personally act as an officer, partner, or director of EdgeHill. He is not registered as an advising representative nor a dealing representative of EdgeHill. He has no individual decision-making authority and has not been given individual authority by the partners to bind EdgeHill.
12. The Representative has served in a limited advisory and consultative role with EdgeHill since December 31, 2019. He provides high level, non-discretionary advice, wisdom and insight regarding the firm's risk management and business operations. He is not involved in any investment decisions and does not advise on specific investments.
13. The Representative estimates that he spends 1 to 2 hours per month on EdgeHill business. He has always had, and will continue to have, sufficient time and resources to adequately meet his obligations to each firm.
14. The Representative does not control Edgehill (as such term is interpreted in subsection 1(3) of the Securities Act (Ontario)) either personally or through WBTW Inc.
15. The Filers are not in default of any requirement of securities, commodities or derivatives legislation in any of the Jurisdictions.
16. The potential for conflicts of interest or client confusion due to the Representative acting as a dealing representative of Blue Deer and as a partner of EdgeHill are mitigated by the following:
(a) the firms will be engaged in different types of businesses;
(b) the firms will have generally different client bases and products;
(c) EdgeHill manages and advises a family of privately offered investment funds that are distributed pursuant to available exemptions from the prospectus requirements under applicable securities laws;
(d) Blue Deer is seeking registration solely as an EMD and will not act as an investment fund manager or portfolio manager for investment funds. Blue Deer may provide non-registrable advice (e.g. M&A, structuring advice) to issuers, including investment funds;
(e) Blue Deer will provide advisory services, support and capital raising assistance for small and mid-market companies. Blue Deer will also offer consulting in matters of corporate strategy, business development, capital structure and formation, and investor relations.
(f) each firm does not manage, advise, or distribute any units of, the funds of the other firm;
(g) the Representative is not involved in or privy to any investment decision-making or investment strategy for, or involved in day-to-day operations of, EdgeHill;
(h) the Representative will have no client contact in connection with his role at EdgeHill;
(i) the Representative is not involved in the business, operations or affairs of EdgeHill like an officer, director or an active partner, and the Representative has no input on the day-to-day business, operations or affairs of EdgeHill; and
(j) the Representative understands conflicts of interest issues and appropriate ways to resolve them.
17. Although it is not expected that there will be any conflicts of interest between EdgeHill and Blue Deer as they will each have different businesses, and both have or will have policies and procedures in place to address conflicts of interest that may arise as a result of the Representative acting as a dealing representative of Blue Deer and holding a partnership interest in EdgeHill.
18. Blue Deer will have compliance and supervisory policies and procedures in place to monitor the conduct and outside business activities of its registered individuals (including the Representative) and to ensure that Blue Deer can deal appropriately with any conflict of interest that may arise.
19. Each of Blue Deer and Edgehill are or will be subject to the restrictions and requirements in Part 13 of NI 31-103 regarding conflicts of interest matters.
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 Exemption Sought shall cease to be effective when:
(i) The Representative is no longer a partner of EdgeHill; or
(ii) The Representative is no longer registered in any of the Jurisdictions as a dealing representative of Blue Deer.