Aegon Capital Management Inc. - s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 80.
Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF
THE COMMODITY FUTURES ACT
R.S.O. 1990, CHAPTER C.20,
AS AMENDED (the CFA)
AND
IN THE MATTER OF
AEGON CAPITAL MANAGEMENT INC.
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of AEGON Capital Management Inc. (the Adviser) and certain affiliates of the Adviser located in the United States (the AEGON Foreign Adviser Affiliates) (the Sub-Advisers) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that neither the Sub-Adviser nor any of its directors, officers and employees acting on its behalf as an adviser (collectively, the Representatives) shall be subject to the adviser registration requirement in subsection 22(1)(b) of the CFA in respect of advice regarding trades in commodity futures contracts and commodity futures options (the Commodity Futures).
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Sub-Adviser having represented to the Commission the following:
1. The Sub-Advisers are all resident in the U.S. and are registered as investment advisers with the U.S. Securities and Exchange Commission and are either registered with, or exempted from registration, with the U.S. Commodity Futures Trading Commission. The AEGON Foreign Adviser Affiliates are not resident in Canada and have no current intention of seeking registration under the CFA.
2. The Adviser is incorporated under the laws of Canada with its head office in Toronto, Ontario. The Adviser is registered under the Securities Act (Ontario) as an adviser in the categories of investment counsel and portfolio manager, as a dealer in the category of limited market dealer.
3. The Adviser is seeking registration under the CFA as a commodity trading manager. Once registered the Adviser intends to begin acting as a commodity trading manager in respect of its clients in Ontario (each, a Client).
4. The Adviser will enter into a sub-advisory agreement (the Sub-Advisory Agreement) with each Sub-Adviser, whereby the Sub-Adviser will provide investment advice and portfolio management services to the Adviser in respect of purchases and sales of Commodity Futures for the portfolios of the Clients (the Proposed Advisory Services).
5. The Sub-Advisory Agreement will set out the obligations and duties of the Sub-Adviser.
6. The Adviser will contractually agree under the Sub-Advisory Agreement to be responsible for any loss that arises out of the failure of any Sub-Adviser:
(i) to exercise its powers and discharge its duties honestly, in good faith and in the best interests of the Adviser and the Clients; or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;
(collectively, the Assumed Obligations).
7. The Adviser cannot be relieved by the Clients for any loss that arises out of the failure of any Sub-Adviser to meet the Assumed Obligations.
8. The Sub-Adviser will only provide the Proposed Advisory Services so long as the Adviser is, and remains, registered under the CFA as an adviser in the category of commodity trading manager.
9. There is presently no rule under the CFA that provides exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA, for a person or company acting as an adviser to another registered adviser in respect of Commodity Futures that is similar to the exemption in section 7.3 of Commission Rule 35-502, Non-Resident Advisers, from the adviser registration requirement in section 25(1)(b) of the OSA.
AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to do so;
IT IS ORDERED THAT, pursuant to section 80 of the CFA, neither the Sub-Adviser, nor any of their Representatives, shall be subject to the adviser registration requirement in subsection 22(1)(b) of the CFA in respect of the Proposed Advisory Services, provided that:
(a) The Adviser is registered under the CFA as an adviser in the category of commodity trading manager;
(b) any Sub-Adviser is registered with the U.S Securities and Exchange Commission and is registered or exempt from registration with the U.S. Commodity Futures Trading Commission;
(c) the Adviser submits a verification statement to the Commission for every AEGON Foreign Adviser Affiliate that intends to act as a Sub-Adviser under the terms of this order;
(d) the obligations and duties of the Sub-Adviser are set out in Sub-Advisory Agreements with the Adviser;
(e) the Adviser has contractually agreed with each Client to be responsible for any loss that arises out of the failure of any Sub-Adviser to meet the Assumed Obligations;
(f) the Adviser cannot be relieved by the Clients for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations; and
(g) this Order shall terminate three years from the date hereof.
January 5, 2007
"Paul M. Moore"
"Robert L. Shirriff"