Fédération des caisses Desjardins du Québec

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- The filer, a federation of financial services cooperatives, applied for relief from the basic eligibility criteria to file a short form prospectus in paragraph 2.2(e) of National Instrument 44-101 Short Form Prospectus Distributions and the basic eligibility criteria to file a base shelf prospectus in subsections 2.2(1) and (2) and subparagraph 2.2(3)(b)(iii) of National Instrument 44-102 Shelf Distributions. Relief required so filer could file a base shelf prospectus that would qualify offerings of market-linked notes that have no principal protection. Relief granted on terms and conditions set out in decision document.

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions, s. 2.2(e) and Part 8.

National Instrument 44-102 Shelf Distributions, ss. 2.2(1) and (2), 2.2(3)(b)(iii), and Part 11.

February 17, 2023

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the "Jurisdictions") AND THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC (the "Filer")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the qualification criteria in section 2.2(e) of Regulation 44-101 respecting Short Form Prospectus Distributions, CQLR, c. V 1.1, r. 16 (Regulation 44-101) and subsections 2.2(1) and 2.2(2) and subparagraph 2.2(3)(b)(iii) of Regulation 44-102 respecting Shelf Distributions, CQLR, V 1.1, r. 17 (Regulation 44-102), under which the equity securities of the Filer be listed and posted for trading on an eligible exchange, not apply to the Filer (the Exemption Sought), the whole pursuant to part 8 of Regulation 44-101 and part 11 of Regulation 44-102, respectively.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application (the Principal Regulator);

(b) the Filer has provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System, CQLR, c. V 1.1, r. 1 (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

(c) the decision is the decision of the Principal Regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V 1.1, r. 3, Regulation 11-102, Regulation 44-101 and Regulation 44-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The Filer is a federation of financial services cooperatives amalgamated under the Act respecting financial services cooperatives (Québec), CQLR, c. C 67.3 (Cooperatives Act).

2. The Filer's head office is located in Québec.

3. The cooperative group to which the Filer belongs is called the Groupe coopératif Desjardins, and the financial group to which the Filer belongs is called the Mouvement Desjardins. The Mouvement Desjardins is comprised of the Filer, the Filer's subsidiaries, the Desjardins caisses in Québec (the Desjardins Caisses), Caisse Desjardins Credit Union Inc. in Ontario and the Fonds de sécurité Desjardins. The Groupe coopératif Desjardins is comprised of the Filer, the Desjardins Caisses and the Fonds de sécurité Desjardins.

4. Each of the Desjardins Caisses is a financial services cooperative governed by the Cooperatives Act and is a member of the Filer, a federation of financial services cooperatives governed by the Cooperatives Act. The Filer is also a financial services cooperative governed by the Cooperatives Act.

5. The Filer is a reporting issuer in all of the provinces of Canada and is not in default of securities legislation in any of those jurisdictions.

6. Founded in 1900, the Mouvement Desjardins is the largest financial cooperative group in North America, with assets of $408.1 billion as at September 30, 2022. The Mouvement Desjardins employs more than 58,300 employees as at September 30, 2022. On June 19, 2013, the Principal Regulator designated the Mouvement Desjardins as a domestic systemically important financial institution (a D-SIFI).

7. The mission of the Filer is to look after the capital and risk management of the Mouvement Desjardins and to see to the financial health of the Groupe coopératif Desjardins and its sustainability. The Filer is a seasoned issuer in the Canadian and global markets, and the Mouvement Desjardins' funding totaled more than $51 billion as of September 30, 2022, on a combined basis, and included, among others, multiple series of notes and covered bonds as well as commercial paper.

8. In addition, the Filer acts as the control and supervisory body over the Desjardins Caisses. The Desjardins Caisses are required to finance the Filer by way of contributions fixed by the latter. The Filer also provides the Desjardins Caisses and Caisse Desjardins Credit Union Inc. with a variety of services, including certain technical, financial and administrative services. As at December 31, 2022, there were 212 Desjardins Caisses in Québec.

9. The Filer is also the treasurer and official representative of the Mouvement Desjardins with the Bank of Canada and within the Canadian banking system.

10. The Filer's share capital is composed of various classes of capital shares, all of which are owned or controlled by members and auxiliary members of the Filer or members and auxiliary members of the Desjardins Caisses.

11. Because of the cooperative nature of the Filer and the Groupe coopératif Desjardins, the Filer's constating documents do not allow for the issuance of capital shares of the Filer to the public (i.e., outside of members and auxiliary members of the Filer or of the Desjardins Caisses), except in remote, extraordinary circumstances.

12. As a result thereof, the currently issued and outstanding capital shares of the Filer cannot be listed and posted for trading on a short-form eligible exchange.

13. All domestic systemically important banks have filed base shelf prospectuses that are currently effective, and which qualify the issuance of, inter alia, debt securities with terms substantially similar to those of the Securities (as defined below).

14. The Filer obtained credit ratings for its medium and long term senior notes, medium and long term senior notes subject to Bail-in Powers, short term senior debt and subordinated notes that are non-viability contingent capital. The Filer is not aware of any pending downgrades of such ratings. The ratings are assigned generally and not to any specific issuances of Securities. In May 2010, Fitch Ratings, Inc. (Fitch) announced that it will no longer rate market-linked notes which have variable principal protection. Moody's Canada Inc. (Moody's) and S&P Global Ratings Canada (S&P) had each previously announced in June and December 2009, respectively, that it would no longer rate market-linked notes which have variable principal protection. Similarly, DBRS Limited (DBRS) no longer rates market-linked notes which have variable principal protection.

15. The Filer expects to file a base shelf prospectus for the issuance of the Securities up to $2,000,000,000 (together with the applicable shelf prospectus supplements, the Prospectus).

16. Except (i) for the requirement that its equity securities be listed on a short-form eligible exchange, the Filer meets all requirements in order to qualify under the "Basic Qualification Criteria" to file a prospectus in the form of a short form prospectus, as set forth under section 2.2 of Regulation 44-101 (and in the form of a base shelf prospectus, as set forth under section 2.2 of Regulation 44-102) and (ii) for the requirement that the Securities have received a designated rating, the Filer meets all requirements in order to qualify under the "Alternative Qualification Criteria for Issuers of Designated Rating Non-Convertible Securities" to file a prospectus in the form of a short form prospectus (and in the form of a base shelf prospectus, as set forth under section 2.3 of Regulation 44-102), as:

(a) the Securities are non-convertible securities;

(b) the Filer is an electronic filer under Regulation 13-101 respecting System for Electronic Document Analysis and Retrieval (SEDAR), CQLR, c. V-1.1, r. 2;

(c) the Filer is a reporting issuer in each of the provinces of Canada;

(d) the Filer has filed with the securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction (i) under applicable securities legislation, (ii) pursuant to any order issued by the securities regulatory authorities in such jurisdiction, and (iii) pursuant to any undertaking to the securities regulatory authorities in such jurisdiction, namely in compliance with decision no. 2021-FS-0091 of the Principal Regulator (the FS Decision);

(e) the Filer has, in all provinces of Canada, filed current annual financial statements and a current AIF, namely as required by the FS Decision; and

(f) the Filer is not an issuer whose operations have ceased or whose principal asset is cash, cash equivalents or its exchange listing.

17. The Filer does not plan to seek ratings for any specific issuance of Securities under the Prospectus.

18. The securities to be offered by the Filer under the Prospectus will be unsubordinated debt securities that are not convertible in accordance with their terms, that are not non-viability contingent capital, that are not eligible for internal recapitalization and that are market-linked notes with no principal protection (principal at risk notes) (collectively, the Securities).

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Filer complies with the applicable requirements, procedures and qualification criteria of Regulation 44-101, other than the requirement of Section 2.2(e) of Regulation 44-101 that the Filer's equity securities be listed and posted for trading on a short-form eligible exchange;

(b) the Filer is not an issuer whose operations have ceased or whose principal asset is cash, cash equivalents or an exchange listing;

(c) the Mouvement Desjardins continues to be recognized by the Principal Regulator as a D-SIFI under applicable financial institutions legislation in the province of Québec;

(d) each base shelf prospectus supplement qualifying Securities distributed under the Final Prospectus includes cover page disclosure that:

(i) the Securities qualified under such shelf prospectus supplement are not rated;

(ii) any non issue specific credit rating applicable to Securities issued under such shelf prospectus supplement only applies to credit-related factors such as the Filer's ability to make any payments it would be obligated to make under the Securities;

(iii) any non issue specific credit rating applicable to Securities issued under such shelf prospectus supplement does not apply to non-principal protected indexed Notes and, for so long as Fitch, Moody's, S&P and DBRS continue not to rate non-principal protected indexed Securities, an explanation to that effect; and

(iv) an investor's principal is at risk as a result of non credit-related factors such as the performance of the underlying reference asset;

(e) the Filer complies with its undertaking filed concurrently with the Final Prospectus that it will not distribute in any local jurisdiction under the Final Prospectus specified derivatives, that, at the time of distribution, are novel without pre-clearing with the regulator the disclosure contained in a shelf prospectus supplement pertaining to the distribution of the novel specified derivatives, in accordance with subsection 4.1(2) of Regulation 44-102; and

(f) the Exemption Sought will cease to have effect upon expiry of the receipt issued for the first Prospectus filed after the date hereof.