Arrow Hedge Partners Inc. - ss. 38(1) of the CFA

Order

Headnote

Relief from the adviser registration requirementof paragraph 22(1)(b) of the Commodity Futures Act (Ontario)(CFA) granted to a non-resident adviser in connection with theproposed advisory services to be provided to a registered commoditytrading manager under the CFA for a term of 3 years, subjectto certain terms and conditions, pursuant subsection 38(1) ofthe CFA.

Statutes Cited

Commodity Futures Act, R.S.O. 1990. c. C.20,as am., ss. 22(1)(b), 38(1).

Securities Act, R.S.O. 1990, c. S.5 (as am.)- OSC Rule 35-502 - Non-Resident Advisers, s. 7.3.

IN THE MATTER OF

THE COMMODITY FUTURES ACT

R.S.O. 1990, CHAPTER C.20,AS AMENDED (THE CFA)

AND

IN THE MATTER OF

ARROW HEDGE PARTNERS INC.

 

ORDER

(Subsection 38(1))

UPON the application of Arrow Hedge PartnersInc. (the Applicant), the manager of Arrow WF Asia Fund (theFund), to the Ontario Securities Commission (the Commission)for an Order pursuant to subsection 38(1) of the CFA that WardFerry Management (BVI) Limited (Ward Ferry) and its officers,partners, directors and representatives be exempt from the registrationrequirements of paragraph 22(1)(b) of the CFA respecting investmentadvisory services provided to the Applicant with respect tocommodity futures activities of the Fund, subject to certainterms and conditions (the Order);

AND UPON considering the applicationand the recommendation of staff of the Commission;

AND UPON the Applicant having representedto the Commission that:

1. The Applicant is a corporation incorporatedunder the laws of Ontario with its head office located inToronto, Ontario.

2. The Applicant is registered under the SecuritiesAct (Ontario) (the Act) as an advisor in the categoriesof investment counsel and portfolio manager and as a dealerin the category of limited market dealer. The Applicant isregistered under the CFA as an advisor in the category ofcommodity trading manager.

3. The Applicant is the manager and trusteeof the Fund.

4. The Fund is an unincorporated open-endedmutual fund created under the laws of Ontario and is offeredin all Canadian provinces and territories in accordance withprivate placement exemptions.

5. The Applicant is responsible for providinginvestment advice to the Fund.

6. The Applicant retains the services of WardFerry in connection with the management of the investmentportfolio of the Fund. In retaining Ward Ferry, the Applicantcomplies with the requirements of Section 7.3 of Ontario SecuritiesCommission Rule 35-502 (the Rule).

7. Ward Ferry is a corporation incorporatedin the British Virgin Islands. It is registered as an investmentadvisor with the Hong Kong Securities Commission.

8. The Applicant is proposing to permit WardFerry to advise the Applicant in respect of commodity futuresactivities of the Fund (Proposed Services).

9. The Applicant has entered into a writtenagreement with Ward Ferry outlining the duties and obligationsof Ward Ferry.

10. The Applicant will contractually agreewith the Fund to be responsible for any loss that arises outof the failures of Ward Ferry in connection with the ProposedServices:

(i) to exercise the powers and dischargethe duties of its office honestly, in good faith and inthe best interests of the Applicant and the Fund for whosebenefit the advice is or portfolio management services isbeing provided; or

(ii) to exercise the degree of care, diligenceand skill that a reasonably prudent person would exercisein the circumstances.

11. The Applicant will not be relieved bythe Fund from its responsibility for any loss described inparagraph 10.

12. The offering memorandum for the Fund disclosesthat the Applicant retains responsibility for any advice givenby Ward Ferry and that there may be difficulty in enforcingany legal rights against Ward Ferry because Ward Ferry isresident outside of Canada and that all or a substantial portionof its assets are situated outside of Canada.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to subsection38(1) of the CFA, that Ward Ferry and its officers, partners,directors and representatives are not subject to the requirementsof paragraph 22(1)(b) of the CFA in respect of the ProposedServices, provided that:

(a) the obligations and duties of Ward Ferryare set out in a written agreement with the Applicant;

(b) the Applicant contractually agrees withthe Fund to be responsible for any loss that arises outof the failure of Ward Ferry:

(i) to exercise the powers and dischargethe duties of its office honestly, in good faith and inthe best interests of the Applicant and the Fund; or

(ii) to exercise the degree of care, diligenceand skill that a reasonably prudent person would exercisein the circumstances;

(c) the Applicant cannot be relieved bythe Fund from its responsibility under paragraph (b);

(d) the offering documents for the Fund,if any, disclose that the Applicant has responsibility forany investment advice given by Ward Ferry and that, to theextent applicable, there may be difficulty in enforcingany legal rights against Ward Ferry because Ward Ferry isresident outside of Canada and all or a substantial portionof its assets are situated outside of Canada;

(e) the Applicant maintains its status asa registered commodity trading manager under the CFA; and

(f) this order shall terminate three yearsfrom the date of the order.

March 28, 2003.

"Howard I. Wetston"                    "TheresaMcLeod"