EDS Canada Inc. and Excelleratehro Canada Co. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Applicants exempted from the dealer registration requirements in the Legislation in respect of trades in securities of mutual funds to Capital Accumulation Plans, subject to terms and conditions.

Statutes Cited

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

Rules Cited

National Instrument 81-102 -- Mutual Funds.

National Instrument 45-106 -- Prospectus and Registration Exemptions.

Published Documents Cited

Amendments to NI 45-106 -- Registration and Prospectus Exemption for Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.

June 2, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, QUEBEC, NEWFOUNDLAND AND

LABRADOR AND THE YUKON

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

EDS CANADA INC. (EDS)

AND

EXCELLERATEHRO CANADA CO.

(ExcellerateHRO and, together with EDS, the Filers)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the dealer registration requirements of the Legislation in respect of certain trading by the Filers and the officers and employees acting on their behalf in the securities of mutual funds to tax assisted investment or savings plans (Capital Accumulation Plans or CAPs) or to a member of a CAP as part of the member's participation in the CAP (the Requested Relief);

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission (the Commission) is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

1. EDS is a corporation governed by the laws of the province of Ontario. Its head office is located in Toronto, Ontario. EDS is a wholly-owned subsidiary of Electronic Data Systems Corporation.

2. ExcellerateHRO LLP is a human resources outsourcing business 85% owned by Electronic Data Systems Corporation and 15% owned by Towers Perrin Forster & Crosby, Inc. ExcellerateHRO LLP conducts business in Canada through its wholly-owned subsidiary ExcellerateHRO, a Nova Scotia company.

3. In Canada, ExcellerateHRO assists clients with various human resource functions including the administration of a variety of pension, savings and benefit plans. EDS provides the support and delivery resources necessary for ExcellerateHRO to fulfill its obligations to clients.

4. ExcellerateHRO's administrative services generally involve recordkeeping of member data, including periodic valuation of member accounts, processing of transactions in respect of member accounts, providing member statements as required under pension standards legislation and/or the applicable administration agreement, and administering member accounts in the context of termination, death, retirement or marriage breakdown.

5. With respect to CAPs, ExcellerateHRO and EDS as its subcontractor assists ExcellerateHRO's clients in the administration of defined contribution pension plans, group RRSPs, employee profit sharing plans, deferred profit sharing plans and other savings arrangements.

6. EDS, on behalf of ExcellerateHRO, also provides direct member contact services through its call centre and a variety of self help tools for members. EDS and ExcellerateHRO are not involved in plan design, discretionary decision making with respect to administered plans or member accounts, selection of investments or the provision of investment advice to plan members.

7. Under certain plans administered by ExcellerateHRO and EDS as its subcontractor, members are able to self-direct investments in their accounts. This includes making initial investment decisions and subsequent changes to those investment decisions.

8. Investment directions are posted to individual accounts electronically, and then a report is sent to the applicable plan trustee by EDS on ExcellerateHRO's behalf. The trustee effects the transaction with the fund manager/broker. EDS does not issue instructions to the fund manager/broker directly.

9. Investments available in the plan administered by ExcellerateHRO and EDS as its subcontractor include securities of mutual funds. Plan members are located across Canada.

10. The Filers, or officers and employees acting on their behalf, intend to trade in the securities of mutual funds to Capital Accumulation Plans, such as defined contribution registered pension plans, group registered retirement savings plans, or deferred profit sharing plans, that are established by a plan sponsor (Plan Sponsor), such as an employer, trustee, trade union or association, and that permit Members to make investment decisions among two or more investment options offered within the Capital Accumulation Plan.

11. The Filers also intend to trade in securities of mutual funds to Members of Capital Accumulation Plans as part of such Members' participation in the Capital Accumulation Plans. In particular, the Members of Capital Accumulation Plans with whom the Filers will trade securities of mutual funds will be current or former employees of an employer, or a person who belongs, or did belong to a trade union or association or,

(a) his or her spouse;

(b) a trustee, custodian or administrator who is acting on his or her behalf, or for his or her benefit, or on behalf of, or for the benefit of, his or her spouse; or

(c) his or her holding entity or a holding entity of his or her spouse,

that has assets in a CAP, and includes a person that is eligible to participate in a CAP (Members).

12. The Filers intend to trade securities of mutual funds to a Capital Accumulation Plan or a Member in accordance with the conditions specified in proposed amendments to National Instrument 45-106 -- Prospectus and Registration Exemptions (the Proposed Amendment) related to CAPs which were published by the Canadian Securities Administrators on October 21, 2005 and adopted in the form of a blanket exemption in each of the provinces and territories other than the Jurisdictions.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met.

The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

1. The relevant Plan Sponsor:

(a) selects the mutual funds that Members will be able to invest in under the Capital Accumulation Plan;

(b) establishes a policy, and provides Members with a copy of the policy and any amendments to it, describing what happens if a Member does not make an investment decision;

(c) provides Members, in addition to any other information that the Plan Sponsor believes is reasonably necessary for a Member to make an investment decision within the CAP, and unless that information has previously been provided, the following information about each mutual fund the Member may invest in:

(i) the name of the mutual fund;

(ii) the name of the manager of the mutual fund and its portfolio advisor;

(iii) the fundamental investment objective of the mutual fund;

(iv) the investment strategies of the mutual fund or the types of investments the mutual fund may hold;

(v) a description of the risks associated with investing in the mutual fund;

(vi) where a Member can obtain more information about each mutual fund's portfolio holdings;

(vii) where a Member can obtain more information generally about each mutual fund, including any continuous disclosure; and

(viii) whether the mutual fund is considered foreign property for income tax purposes, and if so, a summary of the implications of that status for a Member who invested in that mutual fund;

(d) provides Members with a description and amount of fees, expenses and penalties relating to the Capital Accumulation Plan that are borne by Members, including:

(i) any costs that must be paid when the mutual fund is bought or sold;

(ii) costs associated with accessing or using any of the investment information, decision-making tools or investment advice provided by the Plan Sponsor;

(iii) mutual fund management fees;

(iv) mutual fund operating expenses;

(v) record keeping fees;

(vi) any costs of transferring among investment options, including penalties, book and market value adjustments and tax consequences;

(vii) account fees; and

(viii) fees for services provided by service providers,

provided that the Plan Sponsor may disclose the fees, penalties and expenses on an aggregate basis, if the Plan Sponsor discloses the nature of the fees, expenses and penalties, and the aggregated fees do not include fees that arise because of a choice that is specific to a particular Member;

(e) has within the past year, provided Members with performance information about each mutual fund the Members may invest in, including:

(i) the name of the mutual fund for which the performance is being reported;

(ii) the performance of the mutual fund, including historical performance for one, three, five and ten years if available;

(iii) a performance calculation that is net of investment management fees and mutual fund expenses;

(iv) the method used to calculate the mutual fund's performance return calculation, and information about where a Member could obtain a more detailed explanation of that method;

(v) the name and description of a broad-based securities market index, selected in accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure for the mutual fund, and corresponding performance information for that index; and

(vi) a statement that past performance of the mutual fund is not necessarily an indication of future performance;

(f) has, within the past year, informed Members if there were any changes in the choice of mutual funds that Members could invest in and where there was a change, provided information about what Members needed to do to change their investment decision, or make a new investment;

(g) provides Members with investment decision-making tools that the Plan Sponsor reasonably believes are sufficient to assist them in making an investment decision within the Capital Accumulation Plan;

(h) provides the information required by paragraphs (b), (c), (d) and (g) prior to the Member making an investment decision under the CAP; and

(i) if the Plan Sponsor makes investment advice from a registrant available to Members, the Plan Sponsor must provide Members with information about how they can contact the registrant.

2. This Decision, as it relates to the jurisdiction of a Decision Maker, will terminate upon the effective date of a rule dealing with the subject matter of the Proposed Amendment, or 60 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to make such a rule.