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Proposed Rule: OSC Rule - 35-502 - Non-Resident Advisers
Proposed Rule: OSC Rule - 35-502 - Non-Resident Advisers
Introduction
On October 2, 1998, the Commission published proposed Rule 35-502 International Advisers for comment at (1998), 21 OSCB 6263. This version of that document is called the "1998 Draft Rule" in this Notice.
During the comment period on the 1998 Draft Rule, which expired on December 31, 1998, the Commission received four submissions, plus one additional submission received after the expiry of the comment period. The names of commenters providing the submissions, a summary of their comments and the response of the Commission are contained in Appendix A to this Notice. The Commission thanks all commenters for providing their comments on the 1998 Draft Rule. The 1998 Draft Rule has been amended to reflect certain of the comments, and is being republished for further comment under the title "Non-Resident Advisers". The republished version of the instrument is called the "Proposed Rule" in this Notice.
Substance and Purpose of Proposed Rule
The Commission considers a person or company to be acting as an adviser in Ontario if it, directly or through a third party, acts as an adviser for a person or company in Ontario, notwithstanding that the advice may be given from a place outside of Ontario or that the advice may be unsolicited. The Commission also considers a person or company to be acting as an adviser in Ontario if it, directly or through a third party, acts as an adviser for a mutual fund or a non-redeemable investment fund that distributes its securities in Ontario, notwithstanding that the advice to the fund may be given to, and received by, the fund outside of Ontario. In these circumstances, the Commission considers that the Ontario investors in the fund are acquiring the advisory services of the portfolio adviser of the fund and that the securities of the fund are distributed in Ontario for the purpose of providing these advisory services in Ontario. Therefore, the portfolio adviser of the fund is considered to be acting as an adviser to Ontario purchasers of the fund, and hence acting as an adviser in Ontario, by virtue of the distribution of securities of the fund to those purchasers.
As a result, the activities outside of Ontario of non-resident persons or companies may be such as to bring them within the ambit of the registration requirements under section 25 of the Securities Act (Ontario) (the "Act"). The substance and purpose of the proposed Rule are to provide certain exemptions from section 25 of the Act for non-resident persons or companies in connection with their advisory activities in Ontario, where the nature of those activities is not such that the public interest requires registration. The substance and purpose of the proposed Rule are also to provide those non-resident persons or companies with an exemption from certain of the requirements otherwise applicable to applicants for registration as, or registrants in the categories of, investment counsel or investment counsel and portfolio manager, who are prepared to accept conditions on their registration that limit the clients to whom advisory services may be provided.
The proposed Rule is a reformulation of OSC Policy Statement No. 4.8 ("Policy 4.8") now the Rule In the Matter of Certain Advisers (1997), 20 OSCB 1217, as amended by (1998), 21 O.S.C.B. 6432 and (1999), 22 O.S.C.B. 6296.
Summary of Changes to the Proposed Rule
This section of this Notice describes changes proposed to be made in the Proposed Rule. Changes of a minor nature, or those made only for purposes of clarification or drafting reasons, are generally not discussed.
For additional background, and a summary of the 1998 Draft Rule, reference should be made to the notice that accompanied the publication of that instrument at (1998) 21 OSCB 6258.
Title of Rule
As a result of the addition of Part 8 of the Proposed Rule, dealing with extra-provincial advisers, the title of the Proposed Rule has been changed from "International Advisers" to "Non-Resident Advisers".
Part 1 - Definitions and Interpretation
A definition of "extra-provincial adviser" has been added as a result of the inclusion of Part 8 in the Proposed Rule. This definition is consistent with the definition of this term in Policy 4.8. A definition of a "submission to jurisdiction and appointment of service of process form" has also been added, as a result of the inclusion of Part 9 of the Proposed Rule. The definition of the term "client" has been deleted, with the result that this term will now have its ordinary meaning. A definition of "portfolio adviser" has been added, consistent with the use and definition of that term in National Instrument 81-102 Mutual Funds ("National Instrument 81-102").
Section 1.2 of the 1998 Draft Rule has been deleted as a result of the coming in to force of National Instrument 81-102 on February 1, 2000. The extended definition of affiliates, now found as section 1.2 of the Proposed Rule, has been amended to clarify that in appropriate circumstances a company and a partnership may be considered to be affiliated with each other.
Part 2 - International Adviser Applicants
References to directors, officers and partners of an international adviser have been amended to also include a reference to "representatives", as a result of the amendments made to section 25 of the Act to allow for the registration of adviser representatives.
Part 3 - International Advisers
Sections 3.1, dealing with bonding and insurance, and 3.2, dealing with maintenance of books and records, of the 1998 Draft Rule have been deleted. The Commission intends to amend section 99 of the Regulation to provide for "international adviser (investment counsel or portfolio manager)" to be a separate category of registration, and to amend section 101 of the Regulation to exclude international advisers and those applying for registration as international advisers or as a partner, officer or representative of an international adviser from the requirements of Part V of the Regulation, except as provided in the Proposed Rule. Accordingly, it is not necessary to exclude international advisers from the operation of subsections 107(3), 108(3), 113(3), 113(5) and 113(6) of the Regulation in the Proposed Rule as those sections will not apply to international advisers. Similarly, section 3.7 of the 1998 Draft Rule, dealing with the statements of account and portfolio referred to in section 123 of the Regulation, has been deleted for the same reason.
Conversely, the Draft Rule has been amended to ensure that international advisers are subject to those requirements of the Regulation which are intended to apply to them, namely sections 102 to 104, subsections 113(1), (2) and (4), subsections 115(3) and (4), sections 130 to 136 and section 145 of the Regulation. The ordering of the sections in this Part of the Proposed Rule has also been amended to correspond to the ordering of Part V of the Regulation.
Section 3.4 of the 1998 Draft Rule has also been amended. That section would have required an international adviser to maintain the same standards of fairness for the allocation of investment opportunities as a resident investment counsel, but the international adviser would not have been required to file a copy of those standards with the Commission or to furnish a copy to its clients. On further consideration, the Commission is of the view that an international adviser should be subject to the same requirements in this regard as would apply to an investment counsel, meaning that international advisers will be required not only to prepare these standards but to provide a copy of them to their clients in Ontario and file a copy with the Commission.
Section 5.3
Section 5.3 has been added to the Proposed Rule to ensure consistency with the provisions of Rule 33-503 Change of Registrant Information.
Section 6.4
The 1998 Draft Rule provided in section 6.4 that an international adviser was restricted to acting as an adviser in Ontario for foreign securities, and could only act as an adviser in Ontario for Canadian securities if that activity was "incidental" to its acting as an adviser for foreign securities. Section 6.4 of the Proposed Rule has been amended to provide guidance on the evaluation of "incidental". Whether the activity can be considered to be incidental shall be evaluated from the point of view of the adviser and not the client.
Part 7 - Exemptions from Registration
Section 7.1(1), which provides an exemption from the adviser registration requirement where the person or company provides unsolicited advising of not more than 5 clients in Canada, has been revised to permit the assets of the Ontario clients to be held by the clients themselves. Previously the assets of the Ontario clients had to be held by persons or companies that met the requirements of paragraph 3.7(1)(b) or are referred to in subsection 3.7(3). The reference in paragraph 7.1(1)(f) to paragraph 3.7(1)(b) has been changed to read 3.7(1) in order to implement this change.
Section 7.3 of the 1998 Draft Rule has been revised for greater clarity and is now found as sections 7.3 and 7.5 of the Proposed Rule. These sections now make it clear that the degree of "responsibility" that an Ontario registrant must take for the advice received from or portfolio management services provided by an unregistered person or company in reliance upon the exemption from registration given by those sections is limited to accepting responsibility for losses arising from the failure of the non-registered person or company to exercise the stipulated standard of care. As a result, subsection 7.3(2) of the 1998 Draft Rule is unnecessary and has been deleted. This approach is consistent with the extent to which the "manager" of a public mutual fund, within the meaning of that term in National Instrument 81-102, is required to assume responsibility for the actions of those which it has retained to provide services to the mutual fund.
Part 8 - Extra-Provincial Advisers
In the 1998 Draft Rule, the provisions dealing with extra-provincial advisers from Policy 4.8 were not included, as it was anticipated that these requirements would be included in other rules or national instruments then under consideration by the Commission. As it is now expected that the Proposed Rule will come in to force before those other instruments, these provisions are now found in Part 8 of the Proposed Rule.
Part 9 - Submission to Jurisdiction and Appointment of Agent for Service of Process
The requirement in Policy 4.8 that a non-resident adviser file a submission to jurisdiction and appointment of agent for service of process form was not included in the 1998 Draft Rule, because it was anticipated that this requirement would be contained in proposed Rule 35-501 Registration of Non-Residents. As the Proposed Rule is expected to come in to force before proposed Rule 35-501, this requirement, as it applies to non-resident advisers, has been moved into the Proposed Rule.
Authority for the Proposed Rule
The following provisions of the Act provide the Commission with the authority to make the proposed Rule and to amend the Regulation made under the Act. Paragraph 143(1)1 of the Act authorizes the Commission to make rules prescribing requirements in respect of applications for registration and the renewal, amendment, expiration or surrender of registration and in respect of suspension, cancellation or reinstatement of registration. Paragraph 143(1)2 of the Act authorizes the Commission to make rules prescribing categories or sub-categories of registration, classifying registrants into categories or sub-categories and prescribing the conditions of registration or other requirements for registrants or any category or sub-category. Paragraph 143(1)7 of the Act authorizes the Commission to make rules regarding the disclosure or furnishing or information to the public or the Commission by registrants. Paragraph 143(1)8 of the Act authorizes the Commission to make Rules providing for exemptions from the registration requirements under the Act or for removal of exemptions from those requirements. Subsection 143(3) authorizes the Commission, subject to the approval of the Minister, to, concurrently with making a rule, make a regulation that amends any provision of a regulation made by the Lieutenant Governor in Council under the Act that in the opinion of the Commission is necessary or advisable to effectively implement the rule.
Unpublished Materials
In proposing the Rule, the Commission has not relied on any significant unpublished study, report or other written materials.
Alternatives Considered
The Commission has determined that it is appropriate that the exemptive relief provided to non-resident entities that permits them to undertake certain advisory activities in Ontario without having to register as advisers, and that relief from certain of the requirements of the Act and Regulation provided to international adviser applicants and international advisers, should be set forth in a rule. The alternative methods of achieving this result would involve extensive amendments to the Act and Regulation; however, this alternative is not considered appropriate at this time.
Anticipated Costs and Benefits
It is anticipated that non-resident advisers will benefit from the proposed Rule in that they will either not be required to register under the Act, or will be able to register as international advisers; thus eliminating the costs of registration in situations where the public interest does not require registration, or simplifying the registration process and on-going compliance with the Act and Regulation in situations where the public interest does not require full compliance, thereby reducing costs to the non-resident adviser.
Amendment of Regulation
The Commission proposes to amend section 99 of the Regulation to add "international adviser (investment counsel or portfolio manager)" as an additional category of registration for advisers, and to amend section 101 of the Regulation to add as subsection (3) a provision excluding international advisers from the operation of Part V of the Regulation except as provided in this Rule.
Comments
Interested parties are invited to make written submissions with respect to the Proposed Rule. Submissions received by July 30, 2000 will be considered.
Submissions should be made to:
John Stevenson, SecretaryOntario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario M5H 3S8
A diskette containing an electronic copy of the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As the Act requires that a summary of written comments received during the comment period be published, confidentiality of submissions received cannot be maintained.
Questions may be referred to:
Randee PavalowManager, Market Regulation
Ontario Securities Commission
(416) 593-8257
Barbara Fydell
Legal Counsel, Market Regulation
Ontario Securities Commission
(416) 593-8253
Text of Proposed Rule
The text of the Proposed Rule, together with footnotes that are not part of the Proposed Rule but have been included to provide background and explanation, follows.
DATED: June 23, 2000
1. INTRODUCTION
On October 2, 1998, the Ontario Securities Commission (the "Commission") published for public comment draft Rule 35-502 International Advisers (the "1998 Draft Rule").
During the comment period on the 1998 Draft Rule, which expired on December 31, 1998, the Commission received four submissions, plus one additional submission received after the expiry of the comment period, from the following parties:
1. Association for Investment Management and Research (AIMR).
2. Fidelity Investments Canada Limited.
3. Kathleen G. Ward, Lawyer.
4. Simon Romano, Lawyer.
5. Osler, Hoskin & Harcourt.
Copies of the comment letters may be viewed at the office of Micromedia, 20 Victoria Street, Toronto, Ontario, (416) 312-5211 or (800) 387-2689.
The following is a summary of the comments received, together with the Commission's responses.
2. GENERAL COMMENTS
Two commenters in general supported the 1998 Draft Rule. One of the two felt that the 1998 Draft Rule advanced the interests of both investment professionals and investors. The commenter believed that an ethical and proficient industry was in the best interests of the investors who rely on the profession's advice and management services and was also in the best interest of investment professionals who seek to compete fairly on the basis of their activities. The commenter also believed that the 1998 Draft Rule was consistent with Canada's movement towards free trade and the elimination of costly barriers to trade.
3. SPECIFIC COMMENTS
Definition of "Permitted Clients"
One commenter suggested eliminating those parts of the definition of permitted clients in section 1.1 of the 1998 Draft Rule which are based upon net worth, specifically the provisions which refer to a registered charity with assets of at least $5 million, an individual with a net worth of at least $5 million and a person or company that is entirely owned, legally and beneficially, by an individual with a net worth of at least $5 million. The commenter believed that high net worth does not necessarily indicate a high level of investment knowledge or sophistication that would justify the elimination of disclosure requirements.
Another commenter noted that the list of permitted clients is not consistent the other principal categorizations of sophisticated investors contained in Ontario securities laws. The examples provided were paragraph 72(1)(d) of the Act, as amended by Rule 45-501 Prospectus Exempt Distributions, where investors having $150,000 or more to invest are deemed to be sophisticated, and paragraph 204(1)(g) of the Regulation, where pension funds with net assets of $5,000,000 or more are eligible to be treated as designated institutions.
Response:
The Commission considered, when the predecessor policy was first implemented, the criteria for appropriate clients and is not reconsidering the issue at this time, but may consider it further as part of its ongoing initiative to streamline the various categories of registration.
Disclosure Requirements
One commenter was concerned that, by allowing non-resident advisers to avoid certain disclosure requirements, the Commission would be opening a potential registration gap in which a non-resident who is registered in a foreign jurisdiction that has fewer disclosure requirements may do business in Ontario with less disclosure than an equivalent resident advisers. The commenter recommended that the Commission retain certain minimum disclosure requirements to close this gap. The commenter suggested that the Commission require non-residents to maintain the same books and records and to provide the same disclosure that it requires of residents who register as advisers in Ontario. The Commission should additionally require that the non-resident adviser's books and the records be readily available to Ontario investors for inspection on request.
Response:
International advisers are exempt from certain registration requirements because they are limited in their permitted activities, with the result that the Commission need not regulate them in the same way as advisers whose activities are not so restricted. The purpose behind the Proposed Rule is to allow the Commission, through the registration process, to know who the people or companies are that are providing advisory services in Ontario from outside Ontario, but not to regulate how they conduct that business. International advisers are not exempt from subsection 19(3) of the Act, which provides that market participants must make available to the Commission the books and records that the market participants are required to keep under Ontario securities laws. The books and records of any registrant are not available to investors except for those pertaining to the investors' own accounts.
Requiring Standards of Fairness
One commenter noted that the 1998 Draft Rule would require an international adviser to maintain the same standards of fairness for the allocation of investment opportunities as a resident investment counsel but that the international adviser is not required to file a copy of those standards with the Commission or to furnish a copy to its clients. The commentator also noted that the international adviser is not required to document additional important standards of fairness, such as personal investing and priority of transactions. The commenter suggested the Commission require international advisers to develop a written fairness standard that addresses these issues and to require them to submit it to the Commission so that it may be subject to regulatory and public review. The commenter also suggested that clients be made aware of the policy.
Response:
The Commission agreed with this comment and has revised the Proposed Rule to impose upon international advisers requirements similar to those that apply under subsection 115(1) of the Regulation to investment counsel.
Restricted Advisory Activities for International Advisers
One commenter felt that the rationale of two of the provisions of Part 6 of the 1998 Draft Rule were unclear. The first was section 6.4, which prohibits international advisers from advising in respect of Canadian securities on other than an incidental basis. The other was section 6.5, which limits the percentage of consolidated gross revenues that can arise from the international adviser acting as adviser for clients in Canada.
Response:
The purpose of these sections is to ensure the integrity of the underlying policy of providing access to foreign advisers whose main business activity is outside of Canada, while not encouraging businesses to locate outside of Canada for the purpose of avoiding registration requirements. The Commission recognizes that it is a benefit to Canadian investors to be able to have access to advice concerning foreign securities which may otherwise not be available in Canada, but believes any investment adviser located outside of Canada who wishes to provide advice with respect to Canadian securities ought to become fully registered as an adviser (investment counsel portfolio manager) under the Act. Similarly, if a substantial portion of that investment adviser's business arises from its activities in Canada, the Commission believes that such adviser ought to become fully registered. The Proposed Rule has, however, been amended to provide guidance on the evaluation of "incidental".
Exemptions from Registration
One commenter was pleased to see that Part 7 of the 1998 Draft Rule substantially continues the regulatory regime provided by Policy 4.8. The commenter believed that the exemptions provided by Part 7 have worked well in the marketplace and ought to be continued as proposed.
One commenter felt that the 1998 Draft Rule provided very limited exemptions based on the Commission's assessment of the "public interest", without any justification therefor. The commentator gave the example of section 7.1 which has limitations on the type and number of clients in Canada that one may have on an unsolicited basis. It was pointed out that the Commodity Futures Act has no such limitation.
Response:
The 1998 Draft Rule was and the Proposed Rule is intended to maintain the status quo established by Policy 4.8. The Commission is not reconsidering exemption policies at the moment but may do so during the streamlining of registration categories.
One commenter pointed out an apparent typographical error in subsection 7.3(2) of the 1998 Draft Rule, in that the first line of this subsection refers to paragraph (1)(c), whereas the correct reference would appear to be (1)(b).
Response:
The commenter is correct. This section has been reworked in the Proposed Rule.
Another commenter expressed concern with regard to an apparent change in the sub-adviser exemption set out in section 7.3 of the 1998 Draft Rule. Policy 4.8 provides that a non-resident adviser does not need to register as an adviser in order to act as an adviser for a registered adviser or for a registered broker or investment dealer. The commenter took the view that "registered adviser" included an international adviser, allowing them to engage a non-registered sub-adviser. In the 1998 Draft Rule, the exemption applies to a non-resident adviser who acts as an adviser to "...an investment counsel or a portfolio manager, for a broker or investment dealer acting as a portfolio manager under subsection 148(1) of the Regulation...". This change suggests that an international adviser would not be able to engage an exempt sub-adviser. The commenter suggested the 1998 Draft Rule be amended to refer again to "registered adviser" or alternatively, to include the language "international adviser" in the exemption. It was also suggested that other categories of advisers, such as financial advisers and securities advisers, would also benefit from a similar change.
Response:
The Commission intended that the registered adviser be a full registrant. It would be inappropriate to allow an exempted sub-adviser to be engaged by an adviser who is already exempted from many of the requirements normally imposed on advisers.
One commenter questioned why section 7.9 of the 1998 Draft Rule, which provides an exemption for a fund that is distributed primarily abroad and only privately placed in Canada through a registrant, requires a registrant in a situation in which a registration exemption would be available. The commenter suggested that this would result in many private placements to sophisticated Ontario residents not being feasible thus removing investment opportunities from Ontario investors.
Response:
The exemption in section 7.9 of the 1998 Draft Rule does not require the fund to be distributed by registrants in other provinces of Canada; it only requires it to be sold by registrants in Ontario. This is in keeping with the requirements of "universal registration", which would typically require, at a minimum, that a limited market dealer be involved in prospectus-exempt trades to Ontario registrants.
Legal Rights Against a Non-Resident
One commenter was concerned about the possibility that Ontario investors would not be able to take legal action and collect judgments against a non-resident adviser who might not fall under Ontario's jurisdiction. The commenter strongly supported the requirements of disclosure to clients of the potential difficulty in enforcing legal rights against the international adviser. However, the commenter recommended that the 1998 Draft Rule be amended to require resident registered advisers to obtain a written agreement from the international sub-adviser that in the event of any litigation within the province of Ontario, the international sub-adviser agrees to maintain the litigation in Ontario.
Response:
Section 3.8 of the 1998 Draft Rule, now section 3.4 of the Proposed Rule, provides for written disclosure to Ontario clients regarding the potential difficulty of enforcing any legal rights against the international adviser. The Commission does not believe a written agreement by the international sub-adviser is necessary as, pursuant to sections 7.3(b) and 7.5(b) of the Proposed Rule, the Ontario registrant assumes responsibility for the advice being given by the sub-adviser.
Custody of Assets
One commenter was concerned about the custody requirements applicable to the holding of assets of clients of international advisers. It was noted that U.S. investment advisers which are also registered as broker-dealers with the Securities and Exchange Commission (the "SEC") are exempt from the custody rules under the Investment Advisers Act of 1940 if they comply with the net capital requirements applicable to broker-dealers under the Securities Exchange Act of 1934. It was suggested that the 1998 Draft Rule be amended to recognize U.S. broker dealers subject to the SEC net capital requirements as acceptable custodians, so as to spare Ontario clients utilizing the services of a U.S. broker dealer registered as an international adviser the cost of involving a U.S. bank or other qualifying financial institution as custodian of their assets managed by that broker-dealer.
Response:
The Commission believes the additional expense of retaining a qualified custodian to be justified by the additional protections afforded by the provisions of section 3.3 of the Draft Rule.
NON-RESIDENT ADVISERS(1)
PART 1 DEFINITIONS AND INTERPRETATION(2)
1.1 Definitions - In this Rule
"book-based system" has the meaning ascribed to that term in National Instrument 81-102 Mutual Funds;
"Canadian security" means a security other than a foreign security;
"extra-provincial adviser" means a person or company that is registered or applying for registration as an adviser under the Act, other than an international adviser or international adviser applicant, and that does not have a place of business in Ontario with partners, officers or representatives resident in Ontario who are acting on its behalf in Ontario;
"foreign security" has the meaning ascribed to that term in subsection 204(1) of the Regulation;
"Form 3" and "Form 4" mean Form 3 or Form 4 to the Regulation, respectively;
"fund" means a mutual fund or a non-redeemable investment fund(3);
"international adviser applicant" means a person or company applying for registration as an international adviser(4) under the Act;
"international adviser" means
(a) a person or company that has been granted registration as an international adviser (investment counsel or portfolio manager) under the Act, and
(b) a registrant whose registration is subject to the restrictions set out in former Rule In the Matter of Certain Advisers (1997), 20 OSCB 1217, as amended;
"manager" means the person or company the directs the business, operations or affairs of a fund;
"Ontario client" means a permitted client who is ordinarily resident in Ontario;
"permitted client" means one of the following clients:
1. A bank listed in Schedule I or II to the Bank Act (Canada), acting as principal or as agent for accounts fully managed by it.
2. A loan corporation or trust corporation registered under the Loan and Trust Corporations Act, acting as principal or as trustee or agent for accounts fully managed by it.
3. An insurance company licensed under the Insurance Act.
4. Each of a treasury branch, credit union or caisse populaire that, in each case, is authorized to carry on business in Ontario.
5. The Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada).
6. Her Majesty in right of Canada or of any jurisdiction(5).
7. A portfolio manager(6) acting as principal or as agent for accounts fully managed by it.
8. A broker(7) or investment dealer(8) acting as principal or, as permitted by section 148 of the Regulation, as agent for accounts fully managed by it.
9. A pension fund that is regulated either by the Office of the Superintendent of Financial Institutions (Canada) or by a provincial pension commission, or a group of pension funds that are so regulated, if the pension fund has, or the group of pension funds have, net assets of at least $100 million, or its equivalent in another currency, provided that, in determining net assets, the liability of the pension fund for future pension payments shall not be included.
10. A registered charity under the ITA(9) with assets not used directly in charitable activities or administration of at least $5 million or its equivalent in another currency.
11. An individual who has a net worth of at least $5 million or its equivalent in another currency, excluding the value of his or her principal residence, as certified by the individual.
12. A person or company that is entirely owned, legally and beneficially, by an individual or individuals referred to in paragraph 11, who hold its or their ownership interest in the person or company directly or through a trust the trustee(10) of which is a trust company registered under the Loan and Trust Corporations Act.
13. A corporation that has shareholders' equity of at least $100 million on a consolidated basis or its equivalent in another currency.
14. A fund that distributes its securities in Ontario, if the manager of the fund
(a) is ordinarily resident in a jurisdiction and is registered under the Act as a portfolio manager, broker, investment dealer or mutual fund dealer(11), or is registered under Canadian securities legislation other than the Act in an equivalent category of registration, and
(b) is a party to the contract under which the international adviser provides investment advice or portfolio management services to the fund.
15. A fund that distributes its securities in Ontario only to persons or companies referred to in paragraphs 1 through 13 or described in section 7.7 or 7.8;
"portfolio adviser" means a person or company that provides investment advice or portfolio management services under a contract with a fund or with the manager of the fund; and
"submission to jurisdiction and appointment of agent for service of process form" means, for an international adviser, the form set out in Appendix A to this Rule and, for a partner, officer or representative of an international adviser, the form set out in Appendix B to this Rule.
1.2 Extended Meaning of Affiliates - An international adviser that is a partnership is considered to be affiliated with another partnership or with a company, and an international adviser that is a company is considered to be affiliated with a partnership, if the partnerships, or the partnership and the company, would be affiliates of each other under the definition of "affiliated companies" in the Act, if that definition and the related definitions of "controlled companies" and "subsidiary companies" were each read as if references to a "company" were references to a "partnership".
PART 2 INTERNATIONAL ADVISER APPLICANTS
2.1 Completion of Form 3
(1) An international adviser applicant shall complete and execute a Form 3 and shall indicate in response to question 1 of Form 3 that the applicant is applying for registration as an international adviser.
(2) An international adviser applicant is not required to complete item 3 of Form 3.
(3) An international adviser applicant is not required to complete item 11 of Form 3, other than item 11A(b).
(4) An international adviser applicant, in responding to items 9 and 10 of Form 3, need only list and provide information about
(a) its partners, officers or representatives who will be acting on its behalf in respect of the business of the international adviser applicant in Ontario; and
(b) each director of the international adviser applicant.(12)
2.2 Completion of Form 4 - A person that applies for registration as a partner, officer or representative, or that seeks approval as a partner, officer, representative or director, listed in the international adviser's Form 3 pursuant to section 2.1(4) shall complete and execute a Form 4, unless the information required by Form 4 has previously been filed by the applicant and the information as previously filed is current and correct as of the date the of application, but is not required to complete items 7, 8, 10, 20 and 21 of Form 4.
PART 3 INTERNATIONAL ADVISERS
3.1 General Requirements
(1) No registration or renewal of registration shall be granted to an international adviser applicant or an international adviser unless the international adviser applicant or the international adviser has complied with the requirements of this Rule and any applicable requirements of the Regulation at the time of the granting of the registration or the renewal of registration.
(2) An international adviser and each of its partners, officers or directors registered under the Act shall comply with the requirements of this Rule and any other applicable requirements of Ontario securities law.
(3) The Commission may prescribe conditions of registration for an international adviser or its registered partners, officers or representatives, or for a group of international advisers or group of its or their registered partners, officers or representatives, that are in lieu of some or all of the conditions of registration set forth in this Rule, if the Commission gives prior notice of the proposed conditions to those persons or companies affected and affords them an opportunity to be heard and the Commission publishes notice in a publication published by the Commission of each instance when it so prescribes.
3.2 Acquisition of an Interest in Another Registrant - An international adviser is subject to the requirements of section 104 of the Regulation or Part 4 of Rule 33-503 Change of Registration Information when it becomes effective.
3.3 Record Keeping and Production of Records and Witnesses
(1) An international adviser is subject to the requirements relating to record keeping set out in subsections 113(1), (2) and (4) of the Regulation.
(2) If the laws of the foreign jurisdiction(13) in which the books, records or documents referred to in subsection 19(3) of the Act of an international adviser are located prohibit production of the books, records or documents in Ontario without the consent of the relevant client, an international adviser shall, upon a request by the Commission under subsection 19(3) of the Act
(a) so advise the Commission; and
(b) use its best efforts to obtain the client's consent to the production of the books, records or documents.
(3) At the request of the Director, the Commission or a person appointed by the Commission to make an investigation under the Act relating to the international adviser's activities in Ontario, an international adviser shall
(a) immediately produce in Ontario, at the international adviser's expense, appropriate persons in its employ as witnesses to give evidence on oath or otherwise;
(b) if the appropriate persons referred to in paragraph (a) are not in its employ, use its best efforts immediately to produce in Ontario, at the international adviser's expense, the persons to give evidence on oath or otherwise, subject to the laws of the foreign jurisdiction that are otherwise applicable to the giving of evidence; and
(c) if the laws of a foreign jurisdiction that are otherwise applicable to the giving of evidence prohibit the international adviser or the persons referred to in paragraph (a) from giving the evidence without the consent of the relevant client
(i) so advise the Commission or the person making the request, and
(ii) use its best efforts to obtain the client's consent to the giving of the evidence.
3.4 Standards Ensuring Fairness - An international adviser shall adopt and maintain standards directed to ensuring fairness in the allocation of investment opportunities among the Ontario clients of the investment counsel and a copy of the standards so established shall be furnished to each Ontario client of the international adviser and filed with the Commission.
3.5 Compensation of Partners, Officers or Representatives of International Advisers - An international adviser shall not compensate its partners, officers or representatives in a manner that is based upon the value or the volume of the transactions initiated for the Ontario clients of the international adviser.
3.6 Supervision of Accounts - Subsections 115(3) and (4) of the Regulation apply to an international adviser.
3.7 Holding of Client Assets
(1) Subject to subsections (2) and (3), an international adviser shall ensure that the securities and money of an Ontario client are held
(a) by the Ontario client; or
(b) by a custodian or sub-custodian
(i) that meets the requirements prescribed for acting as a custodian or sub-custodian of a mutual fund in National Instrument 81-102(14), and
(ii) that is subject to the agreement announced by the Bank for International Settlements on July 1, 1988 concerning international convergence of capital measurement and capital standards.
(2) An international adviser or an affiliate of the international adviser that holds the securities or money of an Ontario client as custodian or sub-custodian shall hold the securities and money in compliance with sections 116, 117, 118 and 119 of the Regulation.
(3) The securities of an Ontario client may be deposited with or delivered to a depository or clearing agency that is authorized to operate a book-based system.
3.8 Renewals of Registration - Sections 130 to 133 of the Regulation apply to an international adviser and each of its registered partners, officers and representatives.
3.9 Examinations - Section 134 of the Regulation applies to an international adviser and each of its registered partners, officers and representatives.
3.10 Amendments to Registration - Sections 135 and 136 of the Regulation apply to an international adviser and each of its registered partners, officers and representatives.
3.11 Conducting an Audit at the Request of the Commission - Section 145 of the Regulation applies to an international adviser.
3.12 Disclosure of Status to Clients - An international adviser shall deliver to an Ontario client, before acting as an adviser to the Ontario client, a statement in writing disclosing
(a) to the extent applicable, that there may be difficulty enforcing any legal rights the Ontario client may have against the international adviser because
(i) the international adviser is ordinarily resident outside Canada and all or a substantial portion of its assets are situated outside Canada, and
(ii) if applicable, that the laws of the foreign jurisdiction in which the books, records and documents referred to in subsection 19(3) of the Act of the international adviser are located prevent the production of those books, records and documents in Ontario; and
(b) that the international adviser is not fully subject to the requirements of the Act and the regulations concerning proficiency, capital, insurance, record keeping, segregation of funds and securities and statements of account and portfolio.
3.13 Disclosure of Status in Offering Documents - A prospectus filed in Ontario for a fund whose portfolio adviser is an international adviser, or whose portfolio adviser receives investment advice or portfolio management services from an international adviser, shall disclose the matters referred to in section 3.12.
PART 4 EXEMPTION FROM FINANCIAL STATEMENT PREPARATION AND FILING REQUIREMENTS
4.1 Exemption from Financial Statement Preparation Requirements and Filings - An application under section 147 of the Act for an exemption from the requirement of subsection 21.10(3) of the Act that registrants file annual audited financial statements may consist of the following sentence if the international adviser applicant or the international adviser is not applying for registration, and is not registered, in any category of registration in addition to registration as a international adviser and if the application is made by an international adviser applicant concurrently with the filing of an application for registration or by an international adviser before or on the first anniversary of registration as an adviser after the date this Rule comes into force:
"We hereby apply for an exemption from the requirement of the Act that registrants file annual audited financial statements. We understand that this exemption will terminate if we become a registrant in another category of registration under the Act."
4.2 Order Granting Exemption - The issuance by the Director of a certificate of registration or renewal of registration to the international adviser applicant or to the international adviser is evidence of the approval of the application made under section 4.1, if that section has been complied with, unless the exemption request is denied in writing by the Director.
PART 5 EXEMPTION FROM REPORTING OF CERTAIN CHANGES
5.1 Exemption from Reporting of Certain Changes under the Act - An application under subsection 33(4) of the Act for an exemption from the requirement of subsection 33(2) of the Act that advisers notify the Director of the changes in information required to be reported under that subsection, to the extent that the change required to be reported relates to information that was not required to be furnished to the Director upon the filing of the application for registration by an international adviser, may consist of the following sentence if the international adviser applicant or the international adviser is not applying for registration, and is not registered, in any category of registration in addition to registration as a international adviser and if the application is made by an international adviser applicant concurrently with the filing of an application for registration or by an international adviser before or concurrently with the first anniversary of registration as an adviser made after the date this Rule comes into force:
"Subsection 33(2) of the Ontario Securities Act requires advisers to notify the Director of changes in the information required to be reported by that subsection. We hereby apply for an exemption from these requirements to the extent that the change relates to information that was not required to be furnished to the Director upon the filing of our application for registration as an international adviser. We understand that this exemption will terminate if we become a registrant in another category of registration under the Act."
5.2 Order Granting Exemption - The issuance by the Director of a certificate of registration or renewal of registration to the international adviser applicant or the international adviser is evidence of the approval of the application made under section 5.1, if that section has been complied with, unless the exemption request is denied in writing by the Director.
5.3 Exemption from Rule 35-503 - Despite Rule 35-503 Change of Registration Information, an international adviser is not required to file an amendment to its registration or to notify the Director of a notifiable change(15) relating to information that was not required to be furnished to the Director upon the filing of the applicant's application for registration as an international adviser.
PART 6 RESTRICTED ADVISORY ACTIVITIES FOR INTERNATIONAL ADVISERS
6.1 Permitted Clients
(1) An international adviser shall only act as an adviser in Ontario for permitted clients.
(2) In determining whether a permitted client that is a pension fund, group of pension funds, registered charity or corporation meets the financial requirements referred to in paragraphs 9, 10 and 13 of the definition of a "permitted client" in section 1.1, the international adviser may rely on the most recent audited financial statements of the permitted client.
(3) The financial requirements referred to in paragraphs 9, 10, 11 and 13 of the definition of the term "permitted client" in section 1.1 are only required to be satisfied at the time the international adviser first acts as an adviser for the client.
(4) Despite subsection (2), if an international adviser was acting as an adviser for a client on June 1, 1992 and has acted for that client continuously since that date, the financial requirements referred to in section 1.1 may be satisfied as of June 1, 1992.
6.2 Indirect Advising - An international adviser shall not act as an adviser in Ontario to a person or company that is not a permitted client indirectly, by providing investment advice or portfolio management services through another person or company, other than a person or company referred to in paragraphs 1, 2, 7 or 8 of the definition of "permitted client" in section 1.1 or except as permitted by Part 7.
6.3 Advising in Another Country - An international adviser shall not act as an adviser in Ontario for a type of security unless it is engaged in the business of an adviser in a foreign jurisdiction for that type of security.
6.4 Advising in Respect of Foreign Securities - An international adviser shall not act as an adviser in Ontario for Canadian securities unless this activity is incidental to its acting as an adviser in Ontario for foreign securities. Whether the activity can be considered to be incidental shall be evaluated from the point of view of the adviser and not the client.
6.5 Limitation on Revenues - No more than 25 per cent of the aggregate consolidated gross revenues from advisory activities of an international adviser and its affiliates or affiliated partnerships, in any financial year of the international adviser, shall arise from the international adviser and its affiliates or affiliated partnerships acting as advisers for clients in Canada.
PART 7 EXEMPTIONS FROM REGISTRATION
7.1 Unsolicited Advising of not More than Five Clients in Canada
(1) The adviser registration requirement(16) does not apply to a person or company, not ordinarily resident in Ontario, if
(a) it, and its affiliates or affiliated partnerships that are not ordinarily resident in Ontario, did not act as an adviser during the preceding 12 months for more than five clients in Canada;
(b) it acts as an adviser in Ontario in reliance upon the exemption provided by this section solely for permitted clients, other than a fund;
(c) it does not solicit clients in Ontario;
(d) its acting as an adviser in Ontario for Canadian securities is incidental to its acting as an adviser in Ontario for foreign securities;
(e) before advising an Ontario client, it notifies the Ontario client that it is not registered as an adviser in Ontario; and
(f) all assets of its Ontario clients are held by persons or companies that meet the requirements of paragraph 3.7(1) or are referred to in subsection 3.7(3).
(2) For purposes of paragraph (1)(a), in determining if a person or company has acted as an adviser for more than five clients in Canada
(a) two or more persons who are or intend to become the joint registered owners of securities or an account in respect of which the person or company acts as an adviser are counted as one client;
(b) a person or company acting as trustee or agent for more than one fully managed account is counted as one client;
(c) clients referred to in sections 7.2 through 7.9 are excluded; and
(d) clients who would be excluded by sections 7.2 through 7.9 if they were residents of Ontario are excluded.
7.2 Commodity Pool Programs - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, that is registered under the Commodity Futures Act, in connection with that person or company acting as a portfolio adviser to a mutual fund that is subject to National Instrument 81-104 Commodity Pools or to a non-redeemable investment fund that would be subject to that National Instrument if it were a mutual fund.
7.3 Sub-Adviser for a Registrant
(1) The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as an adviser for an investment counsel or portfolio manager, or for a broker or investment dealer acting as a portfolio manager as permitted by subsection 148(1) of the Regulation, if
(a) the obligations and duties of the person or company so acting as an adviser are set out in a written agreement with the registrant;
(b) the registrant contractually agrees with its clients on whose behalf investment advice is or portfolio management services are to be provided to be responsible for any loss that arises out of the failure of the person or company so acting as an adviser
(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the registrant and each client of the registrant for whose benefit the advice is or portfolio management services are to be provided, or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;
(c) the registrant cannot be relieved by its clients from its responsibility for loss under paragraph (b); and
(d) the person or company so acting as an adviser, if a resident of a jurisdiction, is registered as an adviser in the jurisdiction.
7.4 Advising Funds Outside Ontario - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as a portfolio adviser to a fund that does not have an address in Ontario, if
(a) advice to the fund is given and received or portfolio management services are provided outside of Ontario; and
(b) the person or company is registered in a jurisdiction in a category of registration that permits the person or company to provide discretionary portfolio management services or as a broker or investment dealer acting as a portfolio manager as permitted by a provision similar to subsection 148(1) of the Regulation.
7.5 Advising Advisers to Funds Outside Ontario - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as an adviser to a portfolio adviser to a fund exempted from the adviser registration requirements under section 7.4, if
(a) the obligations and duties of the person or company are set out in a written agreement with the portfolio adviser to the fund;
(b) the portfolio adviser to the fund contractually agrees with the fund to be responsible for any loss to the fund that arises out of the failure of the person or company
(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the fund, or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;
(c) the portfolio adviser to the fund cannot be relieved by the fund or its securityholders from its responsibility for loss under paragraph (b); and
(d) the person or company, if a resident of a jurisdiction, is registered as an adviser in the jurisdiction.
7.6 Advising Pension Funds of Affiliates - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as an adviser for a pension fund sponsored by an affiliate of the person or company for the benefit of the employees of the affiliate or affiliates of the affiliate.
7.7 Distributions to Existing Holders - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as a portfolio adviser to a fund, if the fund
(a) does not have an address in Canada;
(b) is not organized under the laws of Canada or a jurisdiction; and
(c) only distributes securities to a person or company in Ontario in a distribution to which the prospectus requirements of the Act would apply but for the availability of one or more of the exemptions contained in
(i) Rule 81-501 Mutual Fund Reinvestment Plans,
(ii) subclause 72(1)(f)(iii) of the Act, or
(iii) in a transaction in which securities of the fund are acquired by substantially all holders of securities of a class of the fund or another fund that has the same portfolio adviser.
7.8 Existing Privately Placed Funds - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as a portfolio adviser to a fund, if the fund
(a) has sold its securities in Ontario in a distribution to which the prospectus requirements of the Act would apply but for the availability of one or more of the exemptions contained in clause 72(1)(a) or (c) of the Act, in clause 72(1)(d) or (p) of the Act subject to compliance with the requirements of Rule 45-501 Prospectus Exempt Distributions, or in subsection 1.2(a) of Rule 32-503 Registration and Prospectus Exemption for Trades by Financial Intermediaries in Mutual Fund Securities to Corporate Sponsored Plans; and
(b) only distributes securities to a person or company in Ontario in a distribution to which the prospectus requirements of the Act would apply but for the availability of one or more of the exemptions contained in
(i) Rule 81-501 Mutual Fund Reinvestment Plans,
(ii) subclause 72(1)(f)(iii) of the Act, or
(iii) in a transaction in which securities of the fund are acquired by substantially all holders of securities of a class of the fund or another fund that has the same portfolio adviser.
7.9 Funds Managed Under Prior Legislation - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as a portfolio adviser to a fund, if
(a) the person or company or an affiliate of the person or company has acted continuously as a portfolio adviser to the fund since before May 1, 1967;
(b) securities of the fund have continuously been distributed in Ontario since May 1, 1967 by means of a prospectus prepared and filed in accordance with the Act or its predecessor legislation; and
(c) the person or company has not been registered as an adviser.
7.10 Privately Placed Funds Offered Primarily Abroad - The adviser registration requirement does not apply to a person or company, not ordinarily resident in Ontario, in connection with the person or company acting as a portfolio adviser to a fund, if the securities of the fund are
(a) primarily offered outside of Canada;
(b) only distributed in Ontario through one or more registrants; and
(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the Act.
7.11 Disclosure in Offering Documents - A prospectus filed in Ontario for a fund whose portfolio adviser is relying upon an exemption from the adviser registration requirements provided by this Part, or whose portfolio adviser receives investment advice or portfolio management services from a person or company that relies upon an exemption from the adviser registration requirements provided by this Part, shall include disclosure that
(a) if the person or company is advising a registrant in reliance on the exemption in section 7.3 or a portfolio adviser in reliance upon the exemption in section 7.5, the registrant or portfolio adviser has responsibility for the investment advice given or portfolio management services provided by the person or company; and
(b) to the extent applicable, there may be difficulty in enforcing any legal rights against the person or company because it is resident outside Canada and all or a substantial portion of its assets are situated outside Canada.
PART 8 EXTRA-PROVINCIAL ADVISERS
8.1 Registration in Another Province - A person or company applying for registration as an adviser under the Act that is an extra-provincial adviser shall be registered under securities legislation of the jurisdiction in which the head office or principal place of business of the person or company is located in a category of registration that permits the person or company to carry on the activities in that jurisdiction that registration as an adviser under the Act would permit the person or company to carry on in Ontario.
8.2 Change in Registration Status in Another Jurisdiction - An extra-provincial adviser shall inform the Director immediately upon the extra-provincial adviser becoming aware that the registration of the extra-provincial adviser in another jurisdiction
(a) is not being renewed, is lapsing or is being suspended, cancelled, revoked or is becoming restricted by the imposition of any terms or conditions; or
(b) is the subject of an investigation by a securities regulatory authority other than the Commission.
8.3 Counselling Officer Resident in Ontario - An extra-provincial adviser shall have at least one officer resident in Canada who is registered as a senior counselling officer in accordance with O.S.C. Registration Section Clarification Note 2.
PART 9 SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE OF PROCESS FORMS
9.1 Submission to Jurisdiction - An international adviser, an extra-provincial adviser and each partner, officer or representative of an international adviser or an extra-provincial adviser seeking registration under the Act shall file as part of his, her or its application for registration an executed submission to jurisdiction and appointment of agent for service of process form.
9.2 Disclosure of Submission to Jurisdiction to Clients - An international adviser or an extra-provincial adviser shall deliver to an Ontario client, before acting as an adviser to the Ontario client, a statement in writing disclosing the name and address of the agent for service of process of the international adviser or extra-provincial adviser in Ontario appointed by the international adviser or extra-provincial adviser or that this information is available from the Commission.
9.3 Disclosure of Submission to Jurisdiction in Offering Documents - A prospectus filed in Ontario for a fund whose portfolio adviser is an international adviser or an extra-provincial adviser, or whose portfolio adviser receives investment advice or portfolio management services from an international adviser or an extra-provincial adviser, shall disclose the matters referred to in section 9.2.
PART 10 EXEMPTION
10.1 Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
1. Name of the applicant (the "Applicant"):
2. Jurisdiction of incorporation or organization of the Applicant:
3. Name of agent for service of process (the "Agent"):
4. Address for service of process of the Agent in Ontario:
5. The Applicant designates and appoints the Agent at the address stated above as its agent upon whom may be served any notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal, penal or other proceeding (each, a "Proceeding") arising out of or relating to or concerning the Applicant's activities as an adviser in Ontario, and irrevocably waives any right to raise as defence in any Proceeding any alleged lack of jurisdiction to bring that Proceeding.
6. The Applicant irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of Ontario and any administrative proceeding in Ontario, in any Proceeding arising out of or related to or concerning the Applicant's activities as an adviser in Ontario.
7. Until six years after the Applicant ceases to be registered as an adviser in Ontario, the Applicant shall file
(a) a new Submission to Jurisdiction and Appointment of Agent for Service of Process in this form at least 30 days before termination for any reason of this Submission to Jurisdiction and Appointment of Agent for Service of Process and immediately after the death or incapacity of the Agent or the Agent ceasing to carry on business; and
(b) an amended Submission to Jurisdiction and Appointment of Agent for Service of Process at least 30 days before any change in the name or address of the Agent from that set forth above.
8. This Submission to Jurisdiction and Appointment of Agent for Service of Process is governed by and construed in accordance with the laws of Ontario.
Dated:
[Name of Applicant]
By:
(Signature of authorized signatory)
(Name and title of authorized
signatory)
The undersigned accepts the appointment as agent for service of process of (Insert name of Applicant) under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service of Process and agrees to deliver to the Ontario Securities Commission (the "Commission") a copy of each document served on the undersigned as agent for service of process of the Applicant, within five days of the date the document was served on the undersigned, and to advise the Commission immediately if the undersigned is unable to deliver to the Applicant a copy of a document served on the undersigned as Agent.
Dated:
(Signature of Agent or authorized signatory)
(Name and Title of Authorized Signatory)
1. Name of the adviser (the "Registrant"):
2. Jurisdiction of incorporation or organization of the Registrant:
3. Name and address of person filing this form (the "Filing Person"):
4. Name of agent for service of process (the "Agent"):
5. Address for service of process of the Agent in Ontario:
6. The Filing Person designates and appoints the Agent at the address of the Agent 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, penal or other proceeding (each, a "Proceeding") arising out of or relating to or concerning the Filing Person's activities in Ontario as a registrant under the Securities Act (Ontario) (the "Act"), and irrevocably waives any right to raise as a defence in any Proceeding any alleged lack of jurisdiction to bring that Proceeding.
7. The Filing Person irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of Ontario and any administrative proceeding in Ontario, in any Proceeding arising out of or related to or concerning the Filing Person's activities in Ontario as a registrant under the Act.
8. Until the earlier of the termination of the Filing Person's position as a partner, officer or representative of the Registrant and six years after the Registrant ceases to be a registrant under the Act, the Filing Person shall file
(a) a new Submission to Jurisdiction and Appointment of Agent for Service of Process in this form at least 30 days prior to termination for any reason of this Submission to Jurisdiction and Appointment of Agent for Service of Process and immediately after the death or incapacity of the Agent or the Agent ceasing to carry on business; and
(b) an amended Submission to Jurisdiction and Appointment of Agent for Service of Process at least 30 days before any change in the name or address of the Agent as set forth above.
9. This Submission to Jurisdiction and Appointment of Agent for Service of Process is governed by and construed in accordance with the laws of Ontario.
Dated:
(Signature of Filing Person)
(Name of Filing Person)
The undersigned accepts the appointment as agent for service of process of (Insert name of Filing Person) pursuant to the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service of Process and acknowledges agrees to deliver to the Ontario Securities Commission (the "Commission") a copy of each document served on the undersigned as agent for service of process of the Filing Person, within five days of the date the document was served on the undersigned, and to advise the Commission immediately if the undersigned is unable to deliver to the Filing Person a copy of a document served on the undersigned as Agent.
Dated:
(Signature of Agent or authorized signatory)
(Name and title of authorized signatory)
PART 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
1.2 Extended Meaning of Affiliates
PART 2 INTERNATIONAL ADVISER APPLICANTS
2.1 Completion of Form 3
2.2 Completion of Form 4
PART 3 INTERNATIONAL ADVISERS
3.1 General Requirements
3.2 Acquisition of an Interest in Another Registrant
3.3 Record Keeping and Production of Records and Witnesses
3.4 Standards Ensuring Fairness
3.5 Compensation of Partners, Officers or Representatives of International Advisers
3.6 Supervision of Accounts
3.7 Holding of Client Assets
3.8 Renewals of Registration
3.9 Examinations
3.10 Amendments to Registration
3.11 Conducting an Audit at the Request of the Commission
3.12 Disclosure of Status to Clients
3.13 Disclosure of Status in Offering Documents
PART 4 EXEMPTION FROM FINANCIAL STATEMENT PREPARATION AND FILING REQUIREMENTS
4.1 Exemption from Financial Statement Preparation Requirements and Filings
4.2 Order Granting Exemption
PART 5 EXEMPTION FROM REPORTING OF CERTAIN CHANGES
5.1 Exemption from Reporting of Certain Changes under the Act
5.2 Order Granting Exemption
5.3 Exemption from Rule 35-503
PART 6 RESTRICTED ADVISORY ACTIVITIES FOR INTERNATIONAL ADVISERS
6.1 Permitted Clients
6.2 Indirect Advising
6.3 Advising in Another Country
6.4 Advising in Respect of Foreign Securities
6.5 Limitation on Revenues
PART 7 EXEMPTIONS FROM REGISTRATION
7.1 Unsolicited Advising of not More than Five Clients in Canada
7.2 Commodity Pool Programs
7.3 Sub-Adviser for a Registrant
7.4 Advising Funds Outside Ontario
7.5 Advising Advisers to Funds Outside Ontario
7.6 Advising Pension Funds of Affiliates
7.7 Distributions to Existing Holders
7.8 Existing Privately Placed Funds
7.9 Funds Managed Under Prior Legislation
7.10 Privately Placed Funds Offered Primarily Abroad
7.11 Disclosure in Offering Documents
PART 8 EXTRA-PROVINCIAL ADVISERS
8.1 Registration in Another Province
8.2 Change in Registration Status in Another Jurisdiction
8.3 Counselling Officer Resident in Ontario
PART 9 SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE OF PROCESS FORMS
9.1 Submission to Jurisdiction
9.2 Disclosure of Submission to Jurisdiction to Clients
9.3 Disclosure of Submission to Jurisdiction in Offering Documents
PART 10 EXEMPTION
10.1 Exemption
APPENDIX A Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by a Non-Resident Adviser
APPENDIX B Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by Non-Resident Partners, Officers or Representatives of a Non-Resident Adviser
1. Regulation 1015 of the Revised Regulations of Ontario, 1990 (the "Regulation") is amended as follows:
(1) Section 99 of the Regulation is amended by adding the following paragraph:
"5. International advisers (investment counsel and portfolio managers), being persons of companies that are investment counsel or portfolio managers or both and that have registered under the Act in reliance upon Rule 35-502 Non-Resident Advisers.".
(2) Section 101 of the Regulation is amended by adding the following subsection:
"(3) The provisions of this Part, other than section 99, do not apply to an international adviser (investment counsel and portfolio manager) except as provided in Rule 35-502 Non-Resident Advisers.".
2. This Regulation comes into force on the same day as the rule made by the Ontario Securities Commission entitled "Rule 35-502 Non-Resident Advisers".
1 This proposed Rule is based on OSC Policy Statement No. 4.8, now the Rule In the Matter of Certain Advisers (1997), 20 OSCB 1217, as amended.
2 A general definition rule has been adopted as Rule 14-501 Definitions ("Rule 14-501"). It contains definitions of certain terms used in more than one rule. Rule 14-501 also provides, among other things, that terms used in a rule and defined in section 1 of the Securities Act or subsection 1(2) of the Regulation will have the respective meaning given to them in the Securities Act or Regulation, as appropriate. Rule 14-501 also incorporates terms defined in National Instrument 14-101 Definitions ("NI 14-101"). NI 14-101 contains, among other things, definitions for terms used in more than one national instrument.
3 The term "non-redeemable investment fund" is defined in Rule 14-501 as meaning "an issuer (a) whose primary purpose is to invest money provided by its securityholders; (b) that does not invest for the purpose of exercising effective control, seeking to exercise effective control, or being actively involved in the management of the issuers in which it invests, other than other mutual funds or non-redeemable investment funds; and (c) that is not a mutual fund".
4 Section 99 of the Regulation will be amended to add "international adviser (investment counsel or portfolio manager)" as an additional category of adviser registration.
5 The term "jurisdiction" is defined in NI 14-101 as meaning "a province or territory of Canada except when used in the term foreign jurisdiction".
6 The term "portfolio manager" is defined in Rule 14-501 as meaning "a person or company that is registered under the Act in the category of portfolio manager".
7 The term "broker" is defined in Rule 14-501 as meaning "a person or company registered under the Act in the category of broker".
8 The term "investment dealer" is defined in Rule 14-501 as meaning "a person or company registered under the Act in the category of investment dealer".
9 The term "ITA" is defined NI 14-101 as meaning "the Income Tax Act (Canada)".
10 The term "trustee" is defined in Rule 14-501 as meaning "a person or company named as trustee under a trust indenture". The term "trust indenture" is defined as meaning "a document by which as issuer issues securities and in which a trustee is appointed for the holders of the securities issued under the document".
11 The term "mutual fund dealer" is defined in Rule 14-501 as meaning "a person or company registered under the Act in the category of mutual fund dealer".
12 Section 101 of the Regulation will be amended effectively to exclude international advisers from the requirements of Part V of the Regulation, except to the extent provided in this Rule. Accordingly, the provisions of clauses 129(a) and (b) of the Regulation, setting out the otherwise applicable requirements to complete and file a Form 3 and a Form 4, respectively, will not apply to international advisers.
13 The term "foreign jurisdiction" is defined in NI 14-101 as meaning "a country other than Canada, or a political subdivision of a country other than Canada".
14 Part 6 of National Instrument 81-102 prescribes institutions that qualify to act as custodians and sub-custodians for mutual funds.
15 The term "notifiable change" is defined in Rule 33-503 as meaning "any change to information about a registrant for which notice to the Director is required after the change in information as set out in Part 3 of [that] Rule".
16 The term "adviser registration requirement" is defined in National Instrument 14-101 as meaning "the requirement in securities legislation that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under securities legislation".