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 is registered as a dealing, advising or associate advising representative of another registered firm. The Filers are affiliated entities and have valid business reasons for the individual to be registered with both firms. The individual will have sufficient time to adequately serve both firms. The Filers have policies in place to handle potential conflicts of interest. The Filers 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 and 15.1.
October 28, 2020
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUEBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF WHITEHAVEN SECURITIES INC. (WHS) AND IN THE MATTER OF WHITEHAVEN ASSET MANAGEMENT INC. (WHAM) (collectively, 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 Registrant Obligations (NI 31-103), pursuant to section 15.1 of NI 31-103, to authorize Mr. Athanasios Baltzis to register as an advising representative for WHAM, in addition to his current registration as dealing representative with WHS (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application).
1. the Autorité des marchés financiers (the AMF) is the principal regulator for this application; and
2. 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 upon in Alberta and British Columbia;
3. 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 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. WHAM is a corporation incorporated under the Canada Business Corporations Act. Its head office is located at 1595 Boulevard Daniel-Johnson, Suite 300, Laval, Quebec, H7V 4C2.
2. WHAM is a subsidiary of WhiteHaven Holding Inc.
3. WHAM is registered in the categories of investment fund manager and portfolio manager in Quebec, Ontario, Alberta and British Columbia. It is also registered in the category of derivatives portfolio manager in Québec.
4. WHAM is not in default of any requirements of securities legislation in any jurisdiction of Canada.
5. WHS is a corporation incorporated under the Business Corporations Act (Québec). Its head office is located at 1595 Boulevard Daniel-Johnson, Suite 300, Laval, Quebec, H7V 4C2.
6. WHS is a subsidiary of WhiteHaven Holding Inc. and is therefore an affiliate of WHAM.
7. WHS is registered in the categories of exempt market dealer in Alberta, British Columbia, and Quebec. It is also registered in the category of mutual fund dealer in Quebec.
8. WHS is not in default of any requirements of securities legislation in any jurisdiction of Canada.
9. WHS was required to surrender its registration as portfolio manager in order to become a member of the Mutual Fund Dealers Association of Canada (the MFDA) as the MFDA had requested that WHS no longer be registered as portfolio manager.
10. Consequently, on November 30, 2016, (the Closing Date), WHS completed the spin-off of its management business to a newly formed entity (WHAM) (the Spin-off) in order to be able to surrender its registration as portfolio manager in Alberta, in British Columbia and Quebec after the Spin-off.
11. As part of the Spin-off, portfolio managers registered with WHS and their clients were transferred to WHAM.
12. Mr. Baltzis is currently registered as dealing representative (exempt market dealer) in Ontario and Quebec, dealing representative (mutual fund dealer) in Quebec and ultimate designated person (UDP) in Quebec, Ontario, Alberta and British Columbia for WHS.
13. Additionally, Mr. Baltzis is currently registered as UDP in Quebec, Ontario, Alberta and British Columbia for WHAM.
14. Mr. Baltzis is currently director, president and chief executive officer of WHS and director and president of WHAM.
15. If the Exemption Sought is granted, Mr. Baltzis would also act as advising representative for WHAM.
Mr. Baltzis' registration as advising representative for WHAM
16. WHAM's clients would benefit from the Exemption Sought as they will have better access to a duly registered advising representative.
17. The interests of the Filers are aligned as a significant number of the clients of WHS will also be clients of WHAM; as the Filers will carry out distinct but complimentary business-lines to fully service the needs of their generally shared clients, and as both Filers are affiliates. As a result, the potential for conflicts of interest arising from the dual registration of Mr. Baltzis is very remote.
18. The dual registration of Mr. Baltzis is less likely to give rise to the conflicts of interest that may be present in a similar arrangement involving unrelated, arm's length firms.
19. Mr. Baltzis will have sufficient time to adequately serve both Filers. The management teams of the Filers, which are identical, will ensure that Mr. Baltzis continues to have sufficient time to adequately serve each Filer and will mitigate the risk of conflicts of interest.
20. Mr. Baltzis will act fairly, honestly and in good faith and in the best interests of the clients of each Filer.
21. The Filers will have the same CCO and appropriate compliance and supervisory policies and procedures in place to monitor the conduct of its registered individuals, including any material conflicts of interest that may arise as a result of the dual registration of Mr. Baltzis. In particular, Mr. Baltzis will be subject to the supervisory, and the applicable compliance, requirements of each of the Filers.
22. The Filers will be able to appropriately deal with any conflict arising out of the dual registration, as the case may be. The Filers currently share a CCO and they have been able to deal with any potential conflicts of interest.
23. In order to minimize any client confusion, WHAM, WHS and Mr. Baltzis will disclose the fact that Mr. Baltzis is registered with both firms, and the relationship between WHAM and WHS will be explained to clients. This disclosure will be made in writing prior to Mr. Baltzis providing services to clients of each of the Filers.
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 the Exemption Sought is granted, provided that:
(a) Mr. Baltzis is subject to supervision by, and the compliance requirements of, both Filers;
(b) The Chief Compliance Officer of the Filers ensures that Mr. Baltzis has sufficient time and resources to adequately serve each Filer and its respective clients;
(c) Each Filer has adequate policies and procedures in place to address any potential conflicts of interest that may arise as a result of the Dual Registration of Mr. Baltzis, and deal appropriately with any such conflicts; and
(d) The relationship between the Filers and the fact that Mr. Baltzis is dually registered with both of them is fully disclosed in writing to clients of each of them that deal with the advising representative.