Friedberg Advisors LP et al.
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. An individual dealing representative is applying for registration as advising representative of an affiliated firm. The individual's additional sponsoring firm will carry on portions of the current business of his present sponsoring firm. The current and additional sponsoring firms have policies in place to handle potential conflicts of interest. The disclosure of relationships will be made to clients. 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.
October 31, 2011
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
FRIEDBERG ADVISORS LP
(FALP)
AND
FRIEDBERG MERCANTILE GROUP LTD.
(FMGL)
AND
ALBERT FRIEDBERG
(the Filers)
DECISION
Background
The regulator in the Jurisdiction (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the regulator (the Legislation) for relief from the requirement under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit Albert Friedberg to be registered as both a dealing representative of FMGL and as an advising representative of FALP (the Dual Registration) upon the registration of FALP under the Legislation in the category of portfolio manager (the Requested Relief).
Interpretation
Terms defined in National Instrument 14-101 Definitions and Multilateral Instrument 11-102 Passport System have the same meaning in this decision unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
1. FMGL is registered under NI 31-103 in each of the jurisdictions of Canada in the category of investment dealer. FMGL is also registered in Ontario in the category of futures commission merchant, and in Manitoba as a dealer (futures commission merchant). FMGL is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and has its head office in Ontario. FMGL has provided portfolio management services for many years for Canadian and non-Canadian investment funds.
2. FALP has applied for registration in the category of portfolio manager in Ontario.
3. FALP is indirectly wholly owned by FMGL.
4. FMGL is not in default of any requirements of securities legislation in any jurisdiction of Canada.
5. Albert Friedberg is currently registered as a dealing representative and ultimate designated person under the category of investment dealer and as a salesperson under the category of futures commission merchant with FMGL. He also carries out the activities of an advising representative under FMGL but is exempt from registration in such capacity under section 8.24 of NI 31-103. Mr. Friedberg is also an officer and director of FMGL, and a trust established for beneficiaries including members of Mr. Friedberg's immediate family is the beneficial shareholder of FMGL. Mr. Friedberg's duties with FALP will be as ultimate designated person and advising representative, on the same basis that he is ultimate designated person and dealing representative with FMGL.
6. FALP was established for the purpose of providing portfolio management services, to Canadian investment funds in respect of which the sole investors are existing Canadian investment funds for which FMGL has served as portfolio manager (the Friedberg Advised Funds), in order to benefit from significant potential tax efficiencies resulting in part from having the brokerage activities and portfolio management activities separated. FALP may in the future provide portfolio management services to additional Canadian investment funds. Because FALP will be carrying on certain parts of the current business of FMGL, and because FALP is wholly-owned by FMGL, their interests will, in all respects, be aligned, and any actions by, or decisions made in respect of FALP will be identical to those which would have been made by FMGL were it to have itself continued to provide such services. Therefore the potential for conflicts of interest and client confusion is remote.
7. FALP is an indirect wholly-owned subsidiary of FMGL and, accordingly, the Dual Registration will not give rise to the conflicts of interest present in a similar arrangement involving unrelated, arm's length firms.
8. The Filers have in place policies and procedures to address conflicts of interest that may arise as a result of the Dual Registration, and believe that they will be able to appropriately deal with these conflicts.
9. The Filers are subject to the restrictions and requirements of Part 13 of NI 31-103 regarding conflict of interest matters.
10. The Friedberg Advised Funds and their manager are subject to the requirements of National Instrument 81-107 Independent Review Committee for Investment Funds and therefore must comply with the requirements relating to conflict of interest issues.
11. The unitholders of the Friedberg Advised Funds have been advised that FALP will be the Friedberg Advised Funds' new portfolio manager and of the Dual Registration.
12. In the absence of the Requested Relief, Albert Friedberg would be prohibited under paragraph 4.1(1)(b) of NI 31-103 from acting as an advising representative of FALP while also registered as a dealing and advising representative of FMGL, even though FMGL is an affiliate of FALP.
Decision
The Decision Maker 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 Maker under the Legislation is that the Requested Relief is granted.