Bear Stearns Asset 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 in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles established outside of Canada in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada, subject to certain terms and conditions.
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
BEAR STEARNS ASSET MANAGEMENT INC.
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of Bear Stearns Asset Management Inc. (the Applicants, as more fully defined below) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that the Applicants and their directors, officers, partners, principals, members and employees acting on their behalf as advisers (collectively, the Representatives), be exempt, for a period of three years, from the registration requirements of section 22(1)(b) of the CFA in respect of advising certain investment funds and similar investment vehicles established outside of Canada in respect of trades in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. Bear Stearns Asset Management Inc. is a corporation organized under the laws of the State of New York. Each of the Applicants is organized under the laws of a jurisdiction other than Canada or the provinces or territories thereof. The Applicants may also include affiliates of, or entities organized by, the Applicants which may subsequently execute and submit to the Commission a verification certificate confirming the truth and accuracy of the information set out in the Application with respect to that particular Applicant.
2. The Applicants serve as investment advisers for, and may in the future provide advice to, certain investment funds and similar investment vehicles (the Funds) which are, or may in the future be, established outside of Canada in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges located outside of Canada and cleared through clearing corporations located outside of Canada.
3. Each of the Applicants and Representatives, where required, is or will be registered or licensed or is, or will be, entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction. In particular, Bear Stearns Asset Management Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser under the U.S. Advisers Act of 1940. Bear Stearns Asset Management Inc. is also registered with the U.S. Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor and is currently a member of the U.S. National Futures Association.
4. Bear Stearns Asset Management Inc. is registered as an international adviser (in the categories of investment counsel and portfolio manager) under the Ontario Securities Act (the OSA). None of the Applicants is registered in any capacity under the CFA.
5. The Applicants are, or in the future may be, the investment advisers for the Funds. As the investment advisers for the Funds, the Applicants are or will be responsible for, inter alia, providing certain administrative services, investment advice and other investment management services to the Funds and arranging for the execution of the Funds' securities transactions.
6. The Funds may, as part of their investment program, invest in commodity futures contracts and commodity futures options principally traded on commodity exchanges outside of Canada and cleared through clearing corporations located outside of Canada.
7. Securities of the Funds are, or will be, offered to certain Ontario residents who are institutional investors or high net worth individuals that qualify as "accredited investors" under National Instrument 45-106 -- Prospectus and Registration Exemptions.
8. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in clause 25(1)(b) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of Commission Rule 35-502 -- Non-Resident Advisers (Rule 35-502).
9. As would be required under section 7.10 of Rule 35-502, the securities of the Funds are or will be:
(a) primarily offered outside of Canada;
(b) only distributed in Ontario through one or more registrants under the OSA; and
(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the OSA.
10. Prospective investors in the Funds who are Ontario residents will receive disclosure that includes:
(a) a statement that there may be difficulty in enforcing legal rights against the applicable Funds or any of the Applicants advising the relevant Funds because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and;
(b) a statement that the Applicants advising the Funds are not registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Funds.
11. The Funds do not have any current intention of becoming reporting issuers in Ontario or in any other Canadian jurisdiction.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;
IT IS ORDERED pursuant to section 80 of the CFA that the Applicants and the Representatives be exempted from the requirements of paragraph 22(1)(b) of the CFA in respect of their advisory activities in connection with the Funds, for a period of three years, provided that:
(a) the Applicants, where required, are or will be registered or licensed or are or will be entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of their principal jurisdiction;
(b) the Funds invest, or may in the future invest, in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside of Canada and cleared through clearing corporations located outside of Canada;
(c) securities of the Funds are or will be offered primarily outside of Canada and securities of the Funds will only be distributed in Ontario through Ontario registered dealers, in reliance on an exemption from the prospectus requirements of the OSA and, when required, upon an exemption from the adviser registration requirement of the OSA under section 7.10 of Rule 35-502;
(d) prospective investors who are Ontario residents will receive disclosure that includes:
(i) a statement that there may be difficulty in enforcing legal rights against the applicable Funds or any of the Applicants advising the relevant Funds because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and
(ii) a statement that the Applicants advising the Funds are not registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Funds.
(e) any Applicant whose name does not specifically appear in this Order and who proposes to rely on the exemption granted under this Order, shall, as a condition to relying on such exemption, have executed and filed with the Commission a verification certificate referencing this Order and confirming the truth and accuracy of the Application with respect to that particular Applicant.
July 25, 2006
"David L. Knight"
"Harold P. Hands"