AGF Investments Inc. and Highstreet Asset Management Inc.
Headnote
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 individuals to be registered with 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.
January 20, 2022
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF AGF INVESTMENTS INC. (AGF) AND HIGHSTREET ASSET MANAGEMENT INC. (Highstreet, and together with AGF, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the restriction in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the Dual Registration Restriction), pursuant to section 15.1 of NI 31-103, to permit Stephen Duench (the Representative) to be registered as an advising representative of each of AGF and Highstreet (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (OSC) is the principal regulator for this application; and
(b) 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 by the Filers in each province and territory of Canada (together with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filers:
1. AGF is a wholly owned subsidiary of AGF Management Limited and is registered as an exempt market dealer in Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan, as a portfolio manager in each of the Jurisdictions, as an investment fund manager in Alberta, British Columbia, Newfoundland and Labrador, Ontario and Québec, as a mutual fund dealer in British Columbia, Ontario and Québec and as a commodity trading manager in Ontario. The head office of AGF is in Toronto, Ontario.
2. Highstreet is a wholly owned subsidiary of AGF. Highstreet is registered as a portfolio manager and as an exempt market dealer in each of the Jurisdictions. The head office of Highstreet is in London, Ontario. Highstreet currently performs its registrable portfolio management services through one registered advising representative, and two supporting registered associate advising representatives.
3. Since Highstreet is a wholly owned subsidiary of AGF, each such entity is an affiliate of the other and are affiliated registrants.
4. Stephen Duench is a resident of London, Ontario and is a registered advising representative (portfolio manager) in each of the Jurisdictions. Stephen Duench is also the Co-Head of Highstreet Private Client at Highstreet and Vice-President and Portfolio Manager at AGF. As Co-Head of Highstreet Private Client at Highstreet, Stephen is responsible for establishing the direction of Highstreet and leads the effective and accountable management and administration of Highstreet. As Vice-President and Portfolio Manager at AGF, Stephen acts as the portfolio manager for AGF's North American equity income products and is the lead portfolio manager for Highstreet Dividend Income Fund. Stephen contributes to both quantitative and fundamental research initiatives.
5. If the Exemption Sought is granted, the Representative will register as advising representative of Highstreet, while maintaining his registration as an advising representative of AGF. The Representative will be appointed to the position of registered advising representative (portfolio manager) with Highstreet. The Representative will be responsible for supervisory oversight of the associate advising representatives and may also provide limited advice directly to Highstreet clients.
6. Highstreet requires a new registered advising representative to replace its current registered advising representative. Subject to the Exemption Sought, effective January 22, 2022, Highstreet will no longer employ a registered advising representative. The investment management capabilities and expertise of the Representative are needed in order for Highstreet to achieve its business objectives and continue its management of client accounts, including new account openings, in the ordinary course of business.
7. The Representative is familiar with the business model of each of AGF and Highstreet and is in the best position to act in the existing and proposed dual roles with AGF and Highstreet. The Representative has the requisite proficiency and registered capabilities to perform the duties of the current registered advising representative, and is already concurrently acting as the Co-Head of Highstreet Private Client at Highstreet, the Filers believe that the Representative is familiar, qualified and suitable to replace the departing advising representative in both the short and long term.
8. Dual registration would allow the Representative to continue to act as an advising representative of AGF while also acting as an advising representative of Highstreet.
9. The terms and conditions, if any, on the Representative's registration as an advising representative of Highstreet would be the same as under his advising representative registration with AGF. As of the date hereof, there are no terms and conditions on Stephen Duench's registration as an advising representative of AGF.
10. The Representative will be subject to supervision by, and the applicable compliance requirements of, both Filers.
11. Each of the Filers' respective Ultimate Designated Person will ensure that the Representative has sufficient time and resources to adequately serve each Filer and its clients. Each of the Filers' respective Chief Compliance Officers and management will ensure the Representative has sufficient time and resources to adequately serve each Filer and its clients.
12. Neither AGF nor Highstreet is in default of any requirement of securities or derivatives legislation in any of the Jurisdictions.
13. The dual registration of the Representative will not give rise to the conflicts of interest that may be present in a similar arrangement involving unrelated, arm's length firms. The interests of the Filers are aligned, and because the role of the Representative will be incremental to his existing roles with both AGF and Highstreet and to support the business activities and interests of the Filers, the potential for conflicts of interests is remote. Further there is little expected overlap of the business mandates, client base or investment strategies of AGF and Highstreet.
14. 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 the Representative and will be able to appropriately deal with any such conflicts, should they arise.
15. There is adequate supervision of any identified potential conflicts of interest to ensure that the Representative, and each of the Filers, can take appropriate measures.
16. The Filers do not expect that the dual registration of the Representative will create significant additional work and are confident that the Representative will have sufficient time to adequately serve both firms.
17. The relationship between AGF and Highstreet and the fact that the Representative is dually registered with both AGF and Highstreet will be fully disclosed to clients and prospective clients of AGF and Highstreet, as applicable. The Filers will provide written disclosure to the investors of the funds and accounts managed by each Filer, as applicable, of the affiliated registrant relationship between the Filers as well as the dual registration of the Representative in disclosure documents provided by any affected fund to their investors.
18. The Representative will act in the best interest of all clients of each Filer and will deal fairly, honestly and in good faith with these clients.
19. In the absence of the Exemption Sought, the Filers would be prohibited by the Dual Registration Restriction from permitting the Representative to be registered as an advising representative of each Filer, even though the Filers have controls and compliance procedures in place to deal with such advising and associate advising activities.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted on the following conditions:
i. The Representative is subject to supervision by, and the applicable compliance requirements of, both Filers;
ii. The Chief Compliance Officer and Ultimate Designated Person of each Filer ensures that the Representative has sufficient time and resources to adequately service each Filer and its respective clients;
iii. The Filers each have adequate policies and procedures in place to address any potential conflicts of interest that may arise as a result of the dual registration of the Representative and deal appropriately with any such conflicts; and
iv. The relationship between the Filers and the fact that the Representative is dually registered with both of them is fully disclosed in writing to clients of each of them that deal with the Representative.
"Felicia Tedesco"
Seputy Director, Compliance and Registrant Regulation
Ontario Securities Commission
Application File #: 2022/0005