FrontPoint Partners LLC - s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Renewal of previous order (granted May 2, 2003) providing an exemption from the adviser registration requirements of subsection 22(1)(b) of the CFA in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles established outside of Canada in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada, subject to certain terms and conditions.
Fees waived as application only required because amendments to or a rule under the CFA that would have a similar effect as section 7.10 of Rule 35-502 have not yet been adopted.
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., s. 22(1)(b), 80.
Securities Act, R.S.O. 1990, c. S.5, as am. -- s. 7.10 of Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, CHAPTER C.20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
FRONTPOINT PARTNERS LLC, ET AL
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of FrontPoint Partners LLC (the Applicants, as more fully defined below) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, renewing the exemption order granted by the Commission on May 2, 2003 pursuant to subsection 38(1) of the CFA which provided that each of the Applicants and their respective directors, partners, officers, principals, members and employees acting on their behalf as advisers (collectively, the Representatives), be exempted, for a period of three years, from the registration requirements of paragraph 22(1)(b) of the CFA in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles (the Funds), established outside of Canada in respect of trades in commodity futures and options contracts principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicants having represented to the Commission that:
1. FrontPoint Partners LLC is a limited liability company organized under the laws of the State of Delaware. Each of the Applicants is organized under the laws of a jurisdiction other than Canada or the provinces or territories thereof. The Applicants may also include affiliates of, or entities organized by, the Applicants which may subsequently execute and submit to the Commission a verification certificate confirming the truth and accuracy of the information set out in this Application with respect to that particular Applicant.
2. The Applicants currently provide or may in the future provide advice with respect to commodity futures and options contracts to the Funds.
3. Each of the Applicants, where required, is or will be registered or licensed or is or will be entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction. In particular, FrontPoint Partners LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser under the U.S. Advisers Act of 1940 and the Applicants have filed claims for exemption under Commodity Futures Trading Rule 4.13(a)(4) from the requirement to register as commodity pool operators under Section 4m(1) of the Commodity Exchange Act.
4. None of the Applicants are registered in any capacity under the CFA or the Ontario Securities Act (the OSA).
5. The Applicants are, or in the future may be, the investment advisers for the Funds. As the investment advisers for the Funds, the Applicants are or will be responsible for, inter alia, providing certain administrative services, investment advice and other investment management services to the Funds and arranging for the execution of the Funds' securities transactions.
6. All of the Funds issue securities which are primarily offered abroad. Securities of the Funds are or will only be offered to certain Ontario residents who are institutional investors or high net worth individuals that qualify as an "accredited investor" under National Instrument 45-106 -- Prospectus and Registration Exemptions.
7. The Funds may, as part of their investment program, invest in commodity futures and options contracts principally traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada.
8. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures contracts and commodity futures options that is similar to the exemption from the adviser registration requirement in clause 25(1)(b) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of Rule 35-502 -- Non-Resident Advisers (Rule 35-502).
9. As would be required under section 7.10 of Rule 35-502, the securities of the Funds are, or will be:
(a) primarily offered outside of Canada;
(b) only distributed in Ontario through one or more registrants under the OSA; and
(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the OSA.
10. Prospective investors in the Funds who are Ontario residents will receive disclosure that includes:
(a) a statement that there may be difficulty in enforcing any legal rights against the Funds and/or the Applicant which advises the relevant Funds, because such entities are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and
(b) a statement that the Applicant advising the Funds is not, or will not be, registered with or licensed by any securities regulatory authority in Canada and accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Funds.
11. None of the Funds is, and none has any current intention of becoming a reporting issuer in Ontario or in any other Canadian jurisdiction.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed,
IT IS ORDERED pursuant to section 80 of the CFA that the Applicants and the Representatives be exempted from the requirements of paragraph 22(1)(b) of the CFA in respect of their advisory activities in connection with the Funds, for a further period of three years, provided that:
(a) the Applicants, where required, are or will be registered or licensed, or are or will be entitled to rely on appropriate exemptions from such registrations or licences, to provide advice to the Funds pursuant to the applicable legislation of their principal jurisdiction;
(b) the Funds invest, or may in the future invest, in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside of Canada and cleared through clearing corporations located outside of Canada;
(c) securities of the Funds are or will be
(i) offered primarily outside of Canada;
(ii) only be distributed in Ontario through Ontario-registered dealers,
(iii) distributed in Ontario in reliance on an exemption from the prospectus requirements of the OSA and upon an exemption from the adviser registration requirement of the OSA under Section 7.10 of Rule 35-502;
(d) prospective investors who are Ontario residents will receive disclosure that includes:
(i) a statement that there may be difficulty in enforcing legal rights against the Funds and/or the Applicants which advise the relevant Funds, because such entities are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and
(ii) a statement that the Applicants advising the Funds are not registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Funds.
(e) any Applicant whose name does not specifically appear in this Order and who proposes to rely on the exemption granted under this Order, shall, as a condition to relying on such exemption, have executed and filed with the Commission a verification certificate referencing this Order and confirming the truth and accuracy of the Application with respect to that particular Applicant.
April 28, 2006
"Robert L. Shirriff"
"Suresh Thakrar"