Application to the Ontario Securities Commission for a ruling pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) for a ruling that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The Applicant will provide advice to its Canadian affiliate in Ontario only for so long as such affiliate remains an affiliate of the Applicant.
Applicable Legislative Provisions
Securities Act, R.S.O., c. S.5, as am., ss. 25(3) and 74(1).
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (the Act) AND IN THE MATTER OF ALLIANZ INVESTMENT MANAGEMENT U.S. LLC
UPON the application (the Application) of Allianz Investment Management U.S. LLC (the Applicant) to the Ontario Securities Commission (the Commission) for a ruling pursuant to subsection 74(1) of the Act that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a corporation existing under the laws of the State of Minnesota, based in Golden Valley, Minnesota. The Applicant does not have an office or employees in Canada.
2. The Applicant is part of a multi-national group of companies owned directly or indirectly by Allianz SE, headquartered in Munich, Germany and collectively known as the "Allianz Group". The Applicant is an affiliated company of AWP Health & Life SA (the Canadian Affiliate), which is an insurance company established under the laws of France that carries on business as a foreign insurance company federally-regulated in Canada by the Office of the Superintendent of Financial Institutions and that has been granted an order to insure in-Canada risks. The head office of the Canadian Affiliate is located in Paris, France. The Canadian Affiliate is an indirect wholly-owned subsidiary of Allianz SE, the parent company of the Allianz Group. The principal activity of Allianz SE is the holding of investments in the Allianz Group entities.
3. The Applicant has been formed specifically to provide investment management services solely to entities in the Allianz Group, including branches, subsidiaries and other entities related to Allianz SE. Given that the Applicant does not, and will not, provide investment management services to entities outside of the Allianz Group, the Applicant is not subject to the requirements to register as an adviser with the U.S. Securities and Exchange Commission under the United States Investment Advisers Act of 1940 as it is not in the business of "advising others". It is expected that the Applicant will provide investment oversight on approximately US$150 billion on behalf of entities in the Allianz Group, including approximately US$13.5 million of assets of the Canadian Affiliate.
4. The Applicant is expected to provide investment advice and portfolio management services to the Canadian Affiliate with respect to the portfolio assets of the Canadian Affiliate maintained in connection with its Canadian business. The Applicant seeks to provide investment advice and portfolio management services solely to affiliates in the Allianz Group, including the Canadian Affiliate, on a basis that would not require adviser registration under the Act.
5. The Applicant is in compliance in all material respects with securities laws of the United States of America. The Applicant is not in default of any requirements of securities legislation of any jurisdiction in Canada.
6. The Applicant proposes to provide investment advice and portfolio management services on a portfolio of assets held by the Canadian Affiliate that includes Canadian securities (being part of the investment objectives of the Canadian portfolios of the Canadian Affiliate). However, the international adviser registration exemption in section 8.26 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) does not apply with respect to the Canadian portfolio assets of the Canadian Affiliate managed by the Applicant since such advice is not incidental to the advice it is providing on a "foreign security" (as defined in Section 8.26(2) of NI 31-103).
7. There is no requirement for employees of a corporation to be registered as advisers under the Act if such employees provide investment advice to their employer on a portfolio assets held by such employer. The Canadian Affiliate does not currently employ, nor does it intend to employ, individuals who provide investment advice with respect to its Canadian portfolio assets, but rather the Canadian Affiliate intends to outsource the adviser function to the Applicant, an affiliate of the Canadian Affiliate. Outsourcing the investment function is permitted under the federal insurance company legislation.
8. The Canadian portfolio assets held by the Canadian Affiliate and expected to be managed by the Applicant are owned by the Canadian Affiliate. There are no external stakeholders (such as, for example, holders of variable annuity contracts or segregated funds/separate accounts for policyholders) that have any direct interest in the performance of such portfolios. Accordingly, there is no stakeholder in Ontario or elsewhere other than the Canadian Affiliate that would be directly affected by the investment advice provided by the Applicant.
9. Subsection 74(1) of the Act provides that a ruling may be made by the Commission that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, where the Commission is satisfied that to do so would not be prejudicial to the public interest.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS RULED, pursuant to subsection 74(1) of the Act, that the Applicant is exempt from the adviser registration requirements of subsection 25( 3) of the Act in respect of it acting as an adviser to its affiliates in Ontario, provided that:
1. the Applicant provides investment advice and portfolio management services in Ontario only to its affiliates that:
(a) are licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada or a branch of a foreign insurance company in Canada; or
(b) are holding companies that have as their principal business activity to hold securities of one or more affiliates that are each licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; and
2. with respect to any particular affiliate, the investment advice and portfolio management services provided in Ontario are provided only as long as that affiliate remains:
(a) an "affiliate" of the Applicant as defined in the Act, and
(b) a "permitted client" as defined in NI 31-103.
December 22, 2020