Goldman, Sachs & Co. - s. 127(2)(h) of the Regulation and s. 31. of the Rule
Headnote
Decision pursuant to to section 3.1 of Rule 31-501 Registrant Relationships (the Rule) and subsection 127(2)(h) of the Regulation made under the Securities Act (Ontario) exempting salespersons of the applicants, which are affiliated companies, from certain of the dual registration restrictions out in the Rule, and exempting their salespersons from the provisions of subsection 127(1) of the Regulation, to the extent that those provisions would prohibit salespersons of one applicant from also being salespersons of the other applicant.
Statutes Cited
Regulation 1015 made under the Securities Act (Ontario), as am., ss.127(1), 127(2).
Rules Cited
Ontario Securities Commission Rule 31-501 Registrant Relationships, ss. 1.1(1), 3.1.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
(the Act)
AND
IN THE MATTER OF
R.R.O. 1990, REGULATION 1015, AS AMENDED
(the Regulation)
AND
IN THE MATTER OF
ONTARIO SECURITIES COMMISSION RULE 31-501
REGISTRANT RELATIONSHIPS (the Rule)
AND
IN THE MATTER OF
GOLDMAN, SACHS & CO.
DECISION
(Section 127(2)(h) of the Regulation and Section 3.1 of the Rule)
UPON the Director (as defined in the Act) having received an application (the Application) from Goldman, Sachs & Co. (the Applicant) for a decision (or its equivalent) pursuant to section 3.1 of the Rule, exempting the employees of the Applicant who are, or will be, performing registerable activities on behalf of Goldman Sachs Canada Inc. (GS Canada) and, as such, who are, or will be, registered with the Ontario Securities Commission (the Commission) as salespersons of GS Canada (the Representatives) from the dual registration restrictions of section 1.1(1) of the Rule so as to permit the registration of such Representatives with the Applicant (the Dual Registration Relief) and that a determination be made under section 127(2)(h) of the Regulation that the Representatives are carrying on activities which will not in the circumstances interfere with their duties and responsibilities as salespersons and that there are no conflicts of interest arising from the individuals' duties as salespersons and their outside activities despite the fact that they are not employed full-time for either the Applicant or GS Canada as required by section 127(1) of the Regulation (the Full-Time Salesperson Determination);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Director that:
1. The Applicant is a limited partnership formed under the laws of the state of New York. The head office of the Applicant is located in New York, New York, United States of America (U.S.).
2. The Applicant is a wholly-owned subsidiary of The Goldman Sachs Group, Inc. (GS Group) and is one of the principal U.S. broker-dealer affiliates of GS Group in the U.S.
3. The Applicant is registered as a broker-dealer and investment adviser with the U.S. Securities and Exchange Commission (the SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). The Applicant is a direct member of all major U.S. stock exchanges and U.S. commodity futures exchanges. In Ontario, the Applicant is registered with the Commission as a limited market dealer, as an international dealer and as an international adviser.
4. GS Canada is a corporation governed by the laws of Ontario. GS Canada is a wholly-owned subsidiary of GS Group and its principal and executive office is in Toronto, Ontario. GS Canada is registered as an investment dealer in Ontario and is a member of the Investment Industry Regulatory Organization of Canada (IIROC).
5. The GS Group relies on GS Canada to access, and trade on, Canadian marketplaces.
6. GS Canada does not conduct business activities outside of Canada, is not a member of any foreign marketplaces, is not a participant in any foreign clearing or depository organizations, and does not have the ability to settle trades in foreign securities that are not listed on a Canadian marketplace.
7. Currently, GS Canada's Ontario resident clients are all "institutional customers" within the meaning of IIROC Rule 2700.
8. Currently, the Representatives are registered in Canada exclusively with GS Canada.
9. GS Canada does not maintain a standalone group of sales and trading personnel due to the limited and specialized role of GS Canada within the GS Group. Rather, to serve GS Canada's Ontario clients, GS Canada relies on other entities within the GS Group, particularly the Applicant, to provide trading and sales personnel, technical support, and other business functions.
10. The Applicant proposes that the Representatives be duly registered with GS Canada and the Applicant.
11. The Representatives will be registered with the Commission as salespersons or trading officers of the Applicant in order to provide trading services to institutional clients of the Applicant who are resident in the Province of Ontario.
12. Trading services provided to Ontario clients by the Representatives on behalf of GS Canada currently involve trading in securities of Canadian domiciled issuers and related derivatives (Canadian Securities). All other trading services currently provided to Ontario clients are provided on behalf of the Applicant. In the future, it is anticipated that all or substantially all of the trading services provided to Ontario clients with respect to Canadian Securities will be provided by the Representatives on behalf of the Applicant. However, it is expected that the Representatives will continue to act for GS Canada in its capacity as a trading or clearing member on Canadian marketplaces.
13. Each dually registered Representative will be registered with the Commission, the SEC and FINRA.
14. A dually registered Representative will not provide trading services to the same Ontario client on behalf of both GS Canada and the Applicant.
15. The dual registration of the Representatives will not be a source of any client confusion, and there is no conflict of interest as a result of the dual registration of the Representatives, because:
(a) a Representative, when acting on behalf of GS Canada for an Ontario client, will not deal with the same Ontario client when acting on behalf of the Applicant;
(b) a Representative, when acting on behalf of the Applicant for an Ontario client, will not deal with the same Ontario client when acting on behalf of GS Canada;
(c) both GS Canada and the Applicant are wholly owned by GS Group and each provides different trading services;
(d) for the purpose of maintaining their status as representatives of the Applicant, the Representatives are under the supervision and control of the Applicant and are subject to all securities-related and conflict of interest policies and procedures of the Applicant;
(e) for the purpose of maintaining their status as representatives of GS Canada, the Representatives are under the supervision and control of GS Canada and subject to all securities-related and conflict of interest policies and procedures of GS Canada;
(f) appropriate policies and procedures of both GS Canada and the Applicant are currently in place and will continue in effect, with changes made to the extent required to address any potential conflicts of interest that may arise;
(g) if any conflicts of interest for GS Canada or the Applicant were to arise in the future, such conflicts will be promptly assessed by compliance and/or legal staff of GS Canada or the Applicant, as applicable, and would be addressed through disclosure and, where appropriate, consent;
(h) Ontario clients who conduct business with both GS Canada and the Applicant have distinct and separate accounts with the two firms;
(i) Ontario clients who conduct business with both GS Canada and the Applicant will receive written disclosure of the dual registration of the Representatives and that they will not receive trading or sales services from the same dually registered Representative on behalf of both GS Canada and the Applicant;
(j) account opening documents, trade confirmations and monthly statements are clearly marked to identify the particular firm with which the Ontario client is dealing in respect of any particular trading or other business activity;
(k) the Representatives have met and will maintain all the proficiency requirements that apply to their roles in the businesses, or will obtain exemptions therefrom;
(l) the dual registration of the Representatives will not hinder GS Canada or the Applicant in complying with the conditions of registration applicable to them;
(m) the trading services provided to Ontario clients by the Representatives in their capacity with GS Canada will not interfere with their duties or responsibilities on behalf of the Applicant;
(n) the trading services provided to Ontario clients by the Representatives in their capacity with the Applicant will not interfere with their duties or responsibilities on behalf of GS Canada;
(o) the Representatives who act on behalf of Ontario clients in respect of trades will comply with all requirements of applicable securities laws; and
(p) the Representatives shall act in the best interest of clients of GS Canada and Ontario clients of the Applicant and will deal fairly, honestly and in good faith with such clients.
16. Section 127(1) of the Regulation provides that (subject to section 127(2)) no individual may be registered as a salesperson unless he or she is employed full-time as a salesperson. Although not explicit, it may be implicit that such section is intended to require such full-time employment with one registrant.
17. Section 127(2) of the Regulation permits the Director to exempt a person from the full-time requirement under section 127(1) of the Regulation where the other activities of the subject salesperson will not interfere with his or her duties and responsibilities as a salesperson and there is no conflict of interest arising from his or her duties as a salesperson and his or her outside activity.
18. Section 1.1(1) of the Rule provides that no person registered as a salesperson of a registrant may act or be registered as a director, partner or officer of the registrant or as a salesperson, officer, partner or director of another registrant.
19. Section 3.1 of the Rule provides that the Director may grant an exemption from the Rule, in whole or in part.
20. IIROC Rule 18.14 permits registered representatives or investment representatives to have, and continue in, another gainful occupation provided the conditions outlined in IIROC Rule 18.14 are met.
21. GS Canada and the Representatives are in compliance with IIROC Rule 18.14.
AND UPON the Director being satisfied, based on the representations set forth above, that registration of individuals as Representatives of both GS Canada and the Applicant would not result in interference with their duties and responsibilities as salespersons to either registrant and that there is no conflict of interest which would arise as a result of their dual registration;
AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;
IT IS THE DECISION of the Director pursuant to section 3.1 of the Rule and section 127(2)(h) of the Regulation that, effective the date of the Decision:
(a) the Dual Registration Relief is granted; and
(b) the Full-Time Salesperson Determination is granted,
for so long as
(a) GS Canada and the Representatives remain in compliance with IIROC Rule 18.14;
(b) no dually registered Representative will provide trading services to the same Ontario client on behalf of both GS Canada and the Applicant; and
(c) all Ontario clients of GS Canada are "institutional customers" within the meaning of IIROC Rule 2700.
September 24, 2009