BMO Harris Investment Management Inc. - s. 147
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- Registered dealer exempted from the requirements of section 36 of the Act, subject to certain conditions, to send trade confirmations for trades that the dealer executes on behalf of client where: client's account is fully managed by the dealer; account fees paid by the client are based on the amount of assets, and not the trading activity in the account; trades in the account are only made on the client's adviser's instructions; the client agreed in writing that confirmation statements will not be delivered to them; confirmations are provided to the client's adviser; and, the client is sent monthly statements that include the confirmation information.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 36, 147.
IN THE MATTER OF
THE SECURITIES ACT (ONTARIO)
R.S.O. 1990, c. S.5, AS AMENDED (the Act)
AND
IN THE MATTER OF
BMO HARRIS INVESTMENT MANAGEMENT INC.
ORDER
(Section 147 of the Act)
WHEREAS the Ontario Securities Commission (the OSC) has received an application from BMO Harris Investment Management Inc. (the Filer) for an order pursuant to section 147 of the Act exempting the Filer from the requirement in section 36 of the Act that a registered dealer send to its clients a written confirmation of any trade in securities for transactions that the Filer conducts on behalf of its Clients with respect to transactions under the Filer's managed accounts programs (the Programs) (the Confirmation Relief).
AND WHEREAS the Filer has represented to the OSC that:
1. the Filer is a corporation incorporated under the federal laws of Canada with its head office located in Toronto, Ontario. The Filer is an indirect, majority-owned subsidiary of Bank of Montreal;
2. the Filer is registered under the Act as a limited market dealer and as an adviser in the categories of investment counsel and portfolio manager;
3. the Filer offers to its Clients, from time to time, Programs that consist of accounts that will be managed by a Sub-Adviser that has entered into a sub-advisory agreement with the Filer whereby the Filer has given that Sub-Adviser discretionary authority to manage all or a portion of a Client's account;
4. to participate in the Filer's Programs, the Client:
(a) enters into a written agreement (the Managed Account Agreement) with the Filer establishing an account and setting out the terms and conditions and the respective rights, duties and obligations of the Client and the Filer; and
(b) with the assistance of the Filer, completes an investment policy statement that outlines the Client's investment objectives and level of risk tolerance;
5. under the Managed Account Agreement:
(a) the Client grants full discretionary trading authority to the Filer and the Filer is authorized to make investment decisions and to trade in securities on behalf of the Client's account without obtaining the specific consent of the Client to individual trades, provided such investment decisions and trades are made in accordance with the Client's investment policy statement referred to in paragraph 4(b) hereof;
(b) the Client participating in a Program authorizes the Filer to contract with Sub-Advisers to give the Sub-Advisers discretionary authority to manage all or a portion of the Client's account;
(c) the Client agrees to pay a fee calculated on the basis of the assets in the Client's account, which will be payable monthly or quarterly in arrears and will not be based on transactions effected in the Client's account; and
(d) unless otherwise requested, the Client waives receipt of trade confirmations as required under the Act;
6. in retaining the Sub-Advisers in respect of the Programs, the Filer complies with the requirements of section 7.3 of OSC Rule 35-502 Non-Resident Advisers and accordingly the Filer
(a) will agree under each Managed Account Agreement to be responsible for any loss that arises out of the failure of each Sub-Adviser:
(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Filer and the Client(s) for whose benefit the investment counseling or portfolio management services are to be provided, or
(ii) to exercise the degree of care, diligence or skill that a reasonably prudent person would exercise in the circumstances,
(b) will not be relieved by the Clients from this responsibility under 6(a) above;
7. the Filer will send each Client participating in its Programs, who has waived receipt of trade confirmations, a statement of account not less than once a month;
8. the monthly statement of account will identify the assets being managed on behalf of that Client, including for each trade made during that month the information that the Filer would otherwise have been required to provide to that Client in a trade confirmation in accordance with the Legislation, except for the following information (the Omitted Information):
(a) the day and the stock exchange or commodity futures exchange upon which the trade took place;
(b) the fee or other charge, if any, levied by any securities regulatory authority in connection with the trade;
(c) the name of the salesman, if any, in the transaction;
(d) the name of the dealer, if any, used by the Filer as its agent to effect the trade; and
(e) if acting as agent in a trade upon a stock exchange the name of the person or company from or to or through whom the security was bought or sold; and
9. the Filer will maintain the Omitted Information with respect to a Client in its books and records and will make the Omitted Information available to the Client on request;
AND WHEREAS the OSC is satisfied that it would not be prejudicial to the public interest to make this Order.
IT IS HEREBY ORDERED pursuant to section 147 of the Act that the Confirmation Relief is granted provided that
(a) the Client has previously informed the Filer that the Client does not wish to receive trade confirmations for the Client's accounts under the Programs; and
(b) in the case of each trade for an account under the Programs, the Filer sends to the Client the corresponding statement of account that includes the information referred to in paragraph 8.
January 17, 2006
"Carol S. Perry"
"Robert L. Shirriff"