Canada Pension Plan Investment Board et al. – s. 74(1)

Headnote

Subsection 74(1) of the Securities Act (Ontario) -- International advisers exempted from the adviser registration requirement in section 25(1)(c) of the Securities Act where such advisers act as an adviser in respect of securities for certain crown corporations or wholly owned entities of the Government of Canada -- Terms and conditions on exemption ruling correspond to the relevant terms and conditions on the comparable exemption from the adviser registration requirement available to international advisers set out in proposed NI 31-103 Registration Requirements -- Exemption also subject to a "sunset clause" condition.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 1(1), 74(1), 25(1)(c).

Commodity Futures Act, R.S.O. 1990, c. C.20. as am., s. 22.

Instruments Cited

Proposed National Instrument 31-103 Registration Requirements, (2008) 31 OSCB 2279, Part 8 -- Exemptions from Registration, Division 1: General, s. 8.16.

National Instrument 45-106 Prospectus and Registration Exemptions.

Rules Cited

Ontario Securities Commission Rule 35-502 Non Resident Advisers, sss. 7.3, 7.10.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

CANADA PENSION PLAN INVESTMENT BOARD,

UNIVERSA INVESTMENTS L.P.

AND

KEYWISE CAPITAL MANAGEMENT (HK) LIMITED

RULING

(Subsection 74(1) of the Act)

UPON the application (the Application) of the Canada Pension Plan Investment Board (the CPP Investment Board), Universa Investments L.P. (Universa) and Keywise Capital Management (HK) Limited (together with Universa, the International Advisers, as defined in greater detail below) to the Ontario Securities Commission (the Commission) for a ruling (the Ruling), pursuant to subsection 74(1) of the Act, that the adviser registration requirement in the Act (as defined below) shall not apply to the International Advisers (including their respective directors, officers, representatives and employees acting as advisers on their behalf) where the International Advisers act as an adviser in respect of securities (as defined below) for the CPP Investment Board and/or the Subsidiaries (as defined below) in connection with managing certain assets of the CPP (as defined below), subject to certain terms and conditions;

AND WHEREAS, for the purposes hereof, the following terms shall have the following meanings:

"adviser registration requirement in the Act" means the provisions of section 25 of the Act that prohibit a person or company from acting as an adviser, as defined in the Act, unless the person or company satisfies the applicable provisions of section 25 of the Act;

"adviser registration requirement in the CFA" means the provisions of section 22 of the CFA that prohibit a person or company from acting as an adviser unless the person or company satisfies the applicable provisions of section 22 of the CFA;

"CFA" means the Commodity Futures Act, R.S.O. 1990, c. C. 20, as amended;

"Contract" means a commodity futures contract or a commodity futures option (in each case, as defined in the CFA) that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;

"CPP" means the Canada Pension Plan and is described in greater detail in paragraph 1 below;

"CPP Act" means the Canada Pension Plan Act;

"CPP Investment Board Act" means the Canada Pension Plan Investment Board Act;

"Foreign Security" means (a) a security issued by an issuer incorporated, formed or created under the laws of a foreign jurisdiction, and (b) a security issued by a government of a foreign jurisdiction;

"Fund" means any foreign domiciled investment fund established or advised by an International Adviser in which the CPP Investment Board and/or a Subsidiary is the sole participating shareholder;

"International Advisers" means those entities listed and described in Schedule "A" of this ruling;

"NI 31-103" means proposed National Instrument 31-103 Registration Requirements, which was published for comment in the February 29, 2008 Ontario Securities Commission Bulletin;

"NI 45-106" means National Instrument 45-106 Prospectus and Registration Exemptions;

"Rule 35-502" means Ontario Securities Commission Rule 35-502 Non Resident Advisers;

"securities" has the meaning set out in the definition of "security" in subsection 1(1) of the Act;

"Shares" means participating, non-voting, redeemable shares of the Funds; and

"Subsidiary" means a corporation, incorporated under an Act of Parliament or the legislature of Ontario, that is resident of or carries on business in Ontario, and is wholly owned, directly or indirectly, by the CPP Investment Board;

AND WHEREAS any other terms used in the Ruling that are defined in National Instrument 14-101 Definitions shall have the same meaning, unless herein otherwise specifically defined, or the context otherwise requires;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the CPP Investment Board, the Subsidiaries and the International Advisers having represented to the Commission that:

The CPP

1. The CPP is a contributory, earnings related social insurance program for Canadian employees in all provinces and territories of Canada (other than Québec) established pursuant to the CPP Act. The CPP provides basic benefits to employees who have contributed to the plan upon the retirement, disability or death of such employees.

The CPP Investment Board

2. The CPP Investment Board is a crown corporation established under the CPP Investment Board Act by the Government of Canada and is a wholly owned entity of the Government of Canada. The principal office of the CPP Investment Board is located in Toronto, Ontario.

3. The CPP Investment Board was established by the Government of Canada as a separate corporation that is governed and managed independently of the CPP. The mandate of the CPP Investment Board is set out in the CPP Investment Board Act as follows:

(a) to manage the assets of the CPP allocated to the CPP Investment Board in the best interests of the contributors and beneficiaries under the CPP;

(b) to assist the CPP in meeting its obligations to contributors and beneficiaries under the CPP; and

(c) to invest the assets of the CPP with a view to achieving a maximum rate of return, without undue risk of loss, having regard to the factors that may affect the funding of the CPP and the ability of the CPP to meet its financial obligations.

4. Pursuant to the CPP Investment Board Act, the CPP Investment Board is authorized to establish the Subsidiaries. The CPP Investment Board makes the determination of whether to have securities, Contracts and/or other instruments purchased either held by the CPP Investment Board or by one of the Subsidiaries. Where a Subsidiary is used, the Subsidiary is the entity that purchases such securities, Contracts and/or other instruments and retains third party advisers, if any. All investment decisions for the Subsidiary are made by the CPP Investment Board or delegated to retained third party advisers, if any.

5. The CPP Investment Board and the Subsidiaries are not registered in any capacity under either the Act or the CFA.

6. As at December 31, 2008, the CPP Investment Board, including its Subsidiaries, had approximately $108 billion in assets under management. In light of its mandate and its growing assets under management, the CPP Investment Board is continuously investing and in some cases, retaining others to advise the CPP Investment Board and/or the Subsidiaries in respect of certain assets of the CPP.

The International Advisers

7. The identity and relevant particulars of the International Advisers are set out in Schedule "A", including the applicable regulatory authority under which each International Adviser is licensed or registered (or exempt from licensing or registration) to act as an adviser in its home jurisdiction.

8. None of the International Advisers are registered under the Act as an adviser.

Advising by the International Advisers

9. By advising the CPP Investment Board and/or the Subsidiaries, the International Advisers trigger the adviser registration requirement in the Act and, in the absence of an exemption, are required to register under the Act.

10. The International Advisers are not able to rely on the exemptions available to foreign advisers provided under Rule 35-502. For example, the International Advisers cannot rely on:

(a) section 7.3 of Rule 35-502, because neither the CPP Investment Board nor any of the Subsidiaries are "an investment counsel or portfolio manager or broker or investment dealer acting as portfolio manager" (as required by section 7.3 of Rule 35-502); or

(b) section 7.10 of Rule 35-502, because the International Advisers advise Funds where securities of such Funds are offered only to the CPP Investment Board or a Subsidiary, and accordingly, securities of such Funds are "not primarily offered outside of Canada" (as required by subsection 7.10(i) of Rule 35-502).

11. Under an exemption from the adviser registration requirement in the Act set out in section 8.16 of NI 31-103 (the International Adviser Exemption), each of the International Advisers would be able to act as an adviser in respect of securities for the CPP Investment Board and/or the Subsidiaries without having to obtain registration under the Act as an adviser, subject to satisfying certain additional requirements specified in NI 31-103.

12. The International Adviser Exemption provides that the adviser registration requirement in the Act does not apply to an international adviser that is acting as an adviser in respect of securities for a "permitted client"(as such term is defined in NI 31-103) if certain conditions are met.

13. In accordance with the International Adviser Exemption:

(a) each of the International Advisers,

(i) has its head office or principal place of business in a foreign jurisdiction;

(ii) is registered, or is exempt from registration, under the securities legislation of the foreign jurisdiction in which its head office or principal place of business is located in a category of registration that permits it to carry on the activities in that jurisdiction that a registered adviser is permitted to carry on in the local jurisdiction;

(iii) engages in the business of an adviser in the foreign jurisdiction in which its head office or principal place of business is located;

(iv) does not advise clients in Canada with respect to securities of Canadian issuers, unless providing that advice is incidental to its providing advice on Foreign Securities; and

(v) during its most recent fiscal year, derived not more than ten percent of the aggregate consolidated gross revenue of the International Adviser, its affiliates and its affiliated partnerships from the portfolio management activities of the International Adviser, its affiliates and its affiliated partnerships in Canada; and

(b) the CPP Investment Board and the Subsidiaries are crown corporations or, directly or indirectly, wholly owned entities of the Government of Canada which meet the proposed definition of "permitted client" set out in Section 1.1(1) of NI 31-103.

14. The International Adviser Exemption is premised on the policy that where certain highly sophisticated Canadian investors are advised by foreign advisers (who are appropriately registered in their home jurisdiction), such Canadian investors may not require all the protections afforded by having the foreign adviser register in Canada.

15. The CPP Investment Board and the Subsidiaries are highly sophisticated investors who fit within the contemplated definition of "permitted client" in NI 31-103 and the International Advisers are appropriately registered, or exempt from registration, in their home jurisdictions.

16. Pursuant to the CPP Investment Board Act, every investment manager who advises the CPP Investment Board and/or the Subsidiaries regarding assets of the CPP is required to do so in accordance with the CPPIB Act and the investment policies, standards and procedures established by the CPP Investment Board.

17. To the extent the investment arrangement involves an investment in a Fund, Shares will be distributed in Ontario to the CPP Investment Board or a Subsidiary (as the case may be) on a private placement basis. The distribution of Shares to the CPP Investment Board or a Subsidiary shall:

(a) be made through a registered dealer under the Act;

(b) be in accordance with the Act and the regulations and rules pursuant thereto, including the requirements under NI 45-106;

(c) meet all the filing requirements required when making a private placement; and

(d) meet the applicable participation fees requirements.

18. In addition to this Application, Universa has also applied to the Commission for relief from the adviser registration requirement in the CFA when it acts as an adviser, with respect to Contracts, for the CPP Investment Board and/or the Subsidiaries in connection with certain assets of the CPP.

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

IT IS RULED, pursuant to subsection 74(1) of the Act, that the International Advisers shall not be subject to the adviser registration requirement in the Act where the International Advisers act as an adviser in respect of securities for the CPP Investment Board and/or the Subsidiaries in connection with managing certain assets of the CPP, provided that, at the relevant time:

(a) the International Adviser is unable to rely on any of the existing exemptions contained in Part 7 of Rule 35-502;

(b) the CPP Investment Board and the Subsidiaries are crown corporations or, directly or indirectly, wholly owned entities of the Government of Canada that meet the proposed definition of "permitted client" as set out in paragraph (g) of the definition of "permitted client" under section 1.1(1) of NI 31-103;

(c) the International Adviser:

(i) has its head office or principal place of business in a foreign jurisdiction;

(ii) is registered, or is exempt from registration, under the securities legislation of the foreign jurisdiction in which its head office or principal place of business is located in a category of registration that permits it to carry on the activities in that jurisdiction that a registered adviser is permitted to carry on in the local jurisdiction;

(iii) engages in the business of an adviser in the foreign jurisdiction in which its head office or principal place of business is located;

(iv) during its most recent fiscal year, derived less than ten percent of the aggregate consolidated gross revenue of the International Adviser, its affiliates and its affiliated partnerships from the portfolio management activities of the International Adviser, its affiliates and its affiliated partnerships in Canada;

(v) before advising the CPP Investment Board and/or any of the Subsidiaries,

(A) will notify the CPP Investment Board or the Subsidiaries (as the case may be):

(I) that it is not registered in Canada;

(II) its jurisdiction of residence;

(III) the name and address of its agent for service of process in Ontario; and

(IV) that there may be difficulty enforcing legal rights against it because the International Adviser is resident outside Canada and all or substantially all of its assets are situated outside Canada; and

(B) will deliver to the Commission a submission to jurisdiction and appoints an agent for service in a form acceptable to the Commission; and

(vi) does not advise clients in Canada with respect to securities of Canadian issuers, unless providing advice on securities of a Canadian issuer is incidental to its providing advice on Foreign Securities;

(d) this Ruling, in respect of each International Adviser, will terminate upon the earlier of:

(i) the International Adviser being registered as an adviser under the Act;

(ii) the coming into force of NI 31-103 containing a rule or provision as contemplated by the International Adviser Exemption;

(iii) 90 days after the Commission publishes in its Bulletin a notice or a statement to the effect that it does not propose to make NI 31-103; or

(iv) 90 days after the coming into force of NI 31-103 if NI 31-103 does not contain a rule or provision substantially similar to the International Adviser Exemption.

May 29, 2009

SCHEDULE "A"