Catalyst Capital Group Inc. and Callidus Capital Management Inc., The -- s. 15.1 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations
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 the individual will have sufficient time to adequately serve both firms. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the prohibition.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 15.1.
December 13, 2012
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
NATIONAL INSTRUMENT 31-103
REGISTRATION REQUIREMENTS, EXEMPTIONS
AND ONGOING REGISTRANT OBLIGATIONS
(NI 31-103)
AND
IN THE MATTER OF
THE CATALYST CAPITAL GROUP INC. (Catalyst),
ND CALLIDUS CAPITAL MANAGEMENT INC.
(Callidus) (collectively, the Filers)
DECISION
(Section 15.1 of NI 31-103)
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filers for a decision pursuant to section 15.1 of NI 31-103 (the Legislation) to exempt Mr. Newton Glassman from the requirements of section 4.1(1)(b) of NI 31-103 to permit him to be dually registered as an advising representative of Catalyst and as a dealing representative of Callidus (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia and Québec (collectively 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
This decision is based on the following facts represented by the Filers:
1. Catalyst is currently registered as a portfolio manager under the Securities Act (Ontario) (the Act).
2. Callidus has applied to become registered as an investment fund manager and exempt market dealer under the Act and as an exempt market dealer under securities legislation in Alberta, British Columbia and Québec.
3. The Filers are not, to the best of their knowledge, in default of any requirement of securities legislation in any of the Jurisdictions.
4. Mr. Glassman is currently registered as the ultimate designated person (UDP), the chief compliance officer (CCO) and an advising representative of Catalyst in Ontario and is a permitted individual of Catalyst.
5. Mr. Glassman has applied to become registered as the UDP, CCO and a dealing representative of Callidus in Ontario, Alberta, British Columbia and Québec and to become approved as a permitted individual of Callidus.
6. Callidus and Catalyst are affiliates as Mr. Glassman is the sole indirect shareholder of the voting securities of Catalyst and Callidus is ultimately controlled by Mr. Glassman.
7. Catalyst's business primarily consists of providing advice to and offering various private equity funds, which are not investment funds (as such term is defined in the Act) (the Non-Investment Funds), to qualified investors.
8. Callidus's business will primarily consist of offering one or more investment funds (as such term is defined in the Act) (the Investment Funds) to qualified investors that will give such investors an opportunity to indirectly participate in a portfolio of asset-backed loans. The current intention is to limit the activities of Callidus to such products, which is a market segment that is not serviced by Catalyst.
9. As the business focus of Catalyst and Callidus is different, the intent of Mr. Glassman's dual registration is to allow him to provide investment advice to the Non-Investment Funds that Catalyst offers to qualified investors, and at the same time to be able to sell the Investment Funds that Callidus will offer to other qualified investors.
10. Mr. Glassman has the necessary proficiency requirements to be registered in his various capacities at Catalyst and Callidus, and has sufficient time to adequately perform his duties and meet his obligations for each company.
11. As Catalyst and Callidus are affiliates, the dual registration of Mr. Glassman is not expected to give rise to any conflicts of interest.
12. Although no conflicts of interest are expected to occur, Catalyst and Callidus each have policies and procedures in place to address any potential conflicts of interest that may arise in the future as a result of Mr. Glassman's dual registration, and believe that they will be able to adequately deal with any such conflicts of interest at that time.
13. The dual registration of Mr. Glassman will be appropriately disclosed to the clients of both Catalyst and Callidus.
14. In the absence of the Exemption Sought, Mr. Glassman would be prohibited under paragraph 4.1(1)(b) of NI 31-103 from acting as an advising representative of Catalyst while also acting as a dealing representative of Callidus.
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.