Manning & Napier Advisors, LLC – s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Foreign adviser exempted from the adviser registration requirement in paragraph 22(1)(b) of the CFA where such adviser acts as an adviser in respect of foreign commodity futures contracts or foreign commodity futures options (commodities) for certain institutional investors in Ontario who meet the definition of "permitted client" in NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- Commodities are primarily traded on commodity futures exchanges outside of Canada and primarily cleared outside of Canada.
Terms and conditions on exemption correspond to the relevant terms and conditions on the comparable exemption from the adviser registration requirement available to international advisers in respect of foreign securities set out in section 8.26 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- Exemption also subject to a "sunset clause" condition.
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 13-502 Fees.
Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss. 1(1), 22(1)(b), 80.
Instruments Cited
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1, 8.26.
National Instrument 33-109 Registration Information, Form 33-109F6.
IN THE MATTER OF THE COMMODITY FUTURES ACT, R.S.O. 1990, CHAPTER C.20, AS AMENDED (the OCFA) AND IN THE MATTER OF MANNING & NAPIER ADVISORS, LLC
ORDER (Section 80 of the OCFA)
UPON the application (the Application) of Manning & Napier Advisors, LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the OCFA that the Applicant and any individuals engaging in, or holding themselves out as engaging in, the business of advising others as to trading in Contracts (as defined below) on the Applicant's behalf (the Representatives) be exempt from the adviser registration requirement in paragraph 22(1)(b) of the OCFA, subject to certain terms and conditions;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND WHEREAS for the purposes of this Order;
"CFTC" means the United States Commodity Futures Trading Commission;
"Contract" has the meaning ascribed to that term in subsection 1(1) of the OCFA;
"CPO" means the commodity pool operator;
"CTA" means commodity trading adviser;
"Foreign Contract" means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;
"International Adviser Exemption" means the exemption set out in section 8.26 of NI 31-103 from the OSA Adviser Registration Requirement;
"NI 31-103" means National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;
"OCFA Adviser Registration Requirement" means the requirement in the OCFA that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under the OCFA;
"OSA" means the Securities Act (Ontario);
"OSA Adviser Registration Requirement" means the requirement in the OSA that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under the OSA;
"Permitted Client" means a client in Ontario that is a "permitted client", as that term is defined in section 1.1 of NI 31-103, except that for purposes of the Order such definition shall exclude a person or company registered under the securities or commodities legislation of a jurisdiction of Canada as an adviser or dealer;
"SEC" means the United States Securities and Exchange Commission;
"specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information; and
"U.S. Advisers Act" means the United States Investment Advisers Act of 1940.
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a limited liability company organized under the laws of the State of Delaware, United States. The Applicant's principal place of business is located in Fairport, New York.
2. The Applicant is listed on the New York Stock Exchange and is registered in the United States with the SEC as an investment adviser under the U. S. Advisers Act and as a commodity trading adviser and commodity pool operator with the National Futures Association. The Applicant has claimed exemptions from certain CTA and CPO requirements under CFTC Regulation 4.7. The Applicant is registered under the Securities Act (Ontario) as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer.
3. The Applicant engages in the business of an adviser with respect to securities and with respect to Contracts in New York and its other offices in the United States. As of September 30, 2014, the Applicant managed approximately US $51.1 billion in assets.
4. The Applicant provides a broad range of investment services through separately managed accounts, mutual funds, and collective investment trust funds, as well as a variety of consultative services that complement its investment process. Founded in 1970, the Applicant offers equity and fixed income portfolios as well as a range of blended asset portfolios, such as life cycle funds, that use a mix of stocks and bonds. The Applicant serves a diversified client base of high-net-worth individuals and institutions, including 401(k) plans, pension plans, Taft-Hartley plans, endowments and foundations. Depending on the particular strategy, the Applicant may invest in a variety of securities and other investments, including in certain cases derivatives, and employ various methods of analysis and investment techniques. In the United States, the Applicant advises on exchange traded futures contracts and exchange traded options on futures contracts for a variety of strategies. It is for this reason that the Applicant would like to be able to provide the advisory services contemplated by this Application.
5. Permitted Clients seek to access certain specialized portfolio management services provided by the Applicant, including advice as to trading in Foreign Contracts.
6. The Applicant is not registered in any capacity under the OCFA.
7. In addition to providing advice in respect of securities as described in paragraph 4 above, the Applicant proposes to act also as an adviser to Permitted Clients in Ontario in respect of Foreign Contracts in connection principally with respect to foreign currency and interest rate futures, options and forwards. It will provide its advice on a fully discretionary basis.
8. There is currently no exemption from the OCFA Adviser Registration Requirement that is equivalent to the International Adviser Exemption. Consequently, in order to advise Permitted Clients as to trading in Foreign Contracts, in the absence of this Order, the Applicant would be required to satisfy the OCFA Adviser Registration Requirement and would have to apply for, and obtain, registration in Ontario as an adviser under the OCFA in the category of commodity trading manager.
9. To the best of the Applicant's knowledge, the Applicant confirms that there are currently no regulatory actions of the type contemplated by the Notice of Regulatory Action attached as Appendix "B", except as otherwise disclosed to the Commission, in respect of the Applicant or any predecessors or specified affiliates of the Applicant.
10. The Applicant will not maintain an office, sales force or physical place of business in Ontario.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested;
IT IS ORDERED, pursuant to section 80 of the OCFA, that the Applicant and its Representatives are exempt from the adviser registration requirement in paragraph 22(1)(b) of the OCFA in respect of providing advice to Permitted Clients as to the trading of Contracts, provided that:
1. At the relevant time that such activity is engaged in:
(a) the Applicant provides advice to Permitted Clients only as to trading in Foreign Contracts and does not advise any Permitted Client as to trading in Contracts that are not Foreign Contracts, unless providing such advice is incidental to its providing advice on Foreign Contracts;
(b) the Applicant's head office or principal place of business remains in the United States;
(c) the Applicant is registered or operates under an exemption from registration, under the applicable securities or commodity futures legislation in the United States, in a category of registration that permits it to carry on the activities in the United States that registration under the OCFA as an adviser in the category of commodity trading manager would permit it to carry on in Ontario;
(d) the Applicant continues to engage in the business of an adviser, as defined in the OCFA, in the United States;
(e) as at the end of the Applicant's most recently completed financial year, not more than 10% of the aggregate consolidated gross revenue of the Applicant, its affiliates and its affiliated partnerships (excluding the gross revenue of an affiliate or affiliated partnership of the Applicant if the affiliate or affiliated partnership is registered under securities legislation, commodities legislation or derivatives legislation in a jurisdiction of Canada) is derived from the portfolio management activities of the Applicant, its affiliates and its affiliated partnerships in Canada (which, for greater certainty, includes both securities-related and commodity-futures-related activities);
(f) before advising a Permitted Client with respect to Foreign Contracts, the Applicant notifies the Permitted Client of all of the following:
(i) the Applicant is not registered in the local jurisdiction to provide the advice described under paragraph (a) of this Order;
(ii) the foreign jurisdiction in which the Applicant's head office or principal place of business is located;
(iii) all or substantially all of the Applicant's assets may be situated outside of Canada;
(iv) there may be difficulty enforcing legal rights against the Applicant because of the above; and
(v) the name and address of the Applicant's agent for service of process in Ontario;
(g) the Applicant has submitted to the Commission a completed Submission to jurisdiction and appointment of agent for service in the form attached as Appendix "A";
(h) the Applicant notifies the Commission of any regulatory action initiated after the date of this Order with respect to the Applicant or any predecessors or specified affiliates of the Applicant by completing and filing Appendix "B" within 10 days of the commencement of each such action; and
(i) the Applicant shall, if it ceases to be a registrant in Ontario, comply with the filing and fee payment requirements applicable to an unregistered exempt international firm under Ontario Securities Commission Rule 13-502 Fees.
2. This Order shall expire on the earlier of:
(a) five years after the date hereof; and
(b) the date of the coming into force in Ontario of legislation or a rule that specifically governs dealer, adviser or other registration requirements applicable to market participants in connection with transactions in derivatives, Contracts or securities.
Dated this 24th [day] of April, 2015.
Appendix "A"
SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE
INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO
INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO
1. Name of person or company ("International Firm");
2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm;
3. Jurisdiction of incorporation of the International Firm;
4. Head office address of the International Firm;
5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent:
Name:
E-mail address:
Phone:
Fax:
6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):
[ ] Section 8.18 [international dealer]
[ ] Section 8.26 [international adviser]
[ ] Other [specify];
7. Name of agent for service of process (the "Agent for Service");
8. Address for service of process on the Agent for Service;
9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding;
10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction;
11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator:
(a) a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated; and
(b) an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service;
12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.
Dated: ____________________
______________________________
(Signature of the International Firm or authorized signatory)
______________________________
(Name of signatory)
______________________________
(Title of signatory)
Acceptance
The undersigned accepts the appointment as Agent for Service of __________ [Insert name of International Firm] under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.
Dated: ____________________
______________________________
(Signature of the Agent for Service or authorized signatory)
______________________________
(Name of signatory)
______________________________
(Title of signatory)
This form is to be submitted to the following address:
Ontario Securities Commission22nd Floor20 Queen Street WestToronto, ON M5H 3S8
Appendix "B"
NOTICE OF REGULATORY ACTION
1. Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ No _____
If yes, provide the following information for each settlement agreement:
Name of entity
Regulator/organization
Date of settlement (yyyy/mm/dd)
Details of settlement
Jurisdiction
2. Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:
Yes
No
(a)
Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?
_____
_____
(b)
Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?
_____
_____
(c)
Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(d)
Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(e)
Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?
_____
_____
(f)
Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(g)
Issued an order (other than en exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?
_____
_____
If yes, provide the following information for each action:
Name of Entity
Type of Action
Regulator/organization
Date of action (yyyy/mm/dd)
Reason for action
Jurisdiction
3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?
Yes _____ No _____
If yes, provide the following information for each investigation:
Name of entity
Reason or purpose of investigation
Regulator/organization
Date investigation commenced (yyyy/mm/dd)
Jurisdiction
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
Name of witness
Title of witness
Signature
Date (yyyy/mm/dd)
This form is to be submitted to the following address:
Ontario Securities Commission22nd Floor20 Queen Street WestToronto, ON M5H 3S8
{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.