Manulife Investment Management Limited and Manulife Investment Management Distributors Inc.
Headnote
Pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) -- relief from the requirements in section 11.2 and 11.3 of NI 31-103 to designate one individual as chief compliance officer (CCO) and one individual as ultimate designated person (UDP), such that each Filer may instead be permitted to designate two individuals as CCO and three individuals as UDP in respect of each Filers' three distinct operating divisions.
Applicable Legislative Provisions
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, s. 5.4.
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 11.2, 11.3 and 15.1.
May 31, 2024
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF MANULIFE INVESTMENT MANAGEMENT LIMITED (MIML) AND MANULIFE INVESTMENT MANAGEMENT DISTRIBUTORS INC. (MIMDI)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from MIML and its subsidiary, MIMDI (each a Filer and, collectively with MIML, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an Order exempting each Filer from the requirement contained in section 11.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the CCO Requirement) to permit each Filer to designate and register two individuals as chief compliance officers (each of them a CCO) (the CCO Decision) and for an order exempting each Filer from the requirement contained in section 11.2 of NI 31-103 (the UDP Requirement) to permit each Filer to designate and register three individuals as ultimate designated person (UDP) (the UDP Decision) in respect of each Filer's distinct lines of business (the CCO Decision and the UDP Decision are collectively the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions for a passport application:
(a) the Ontario Securities Commission (OSC) is the principal regulator (the Principal Regulator) for this application as the head office of each Filer is located in Toronto, Ontario; and
(b) The Filers have provided notice that section 4.7 of Multilateral Instrument 11-102 Passport System (MI 11-102) is to be relied upon by the Filers in Alberta, British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (the Non-Principal Jurisdictions, and together with Ontario, the Jurisdictions).
Interpretation
Terms defined in the securities legislation of the jurisdiction of the Principal Regulator (the Legislation), National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
MIML
1. MIML is a corporation amalgamated under the laws of Canada, with its head office located in Toronto, Ontario.
2. MIML is registered in the following categories: portfolio manager in all provinces and territories of Canada; investment fund manager in Ontario, Newfoundland and Labrador, and Quebec; commodity trading manager in Ontario; and derivatives portfolio manager in Quebec.
3. MIML is not in default of any of the requirements of the securities legislation in any jurisdiction of Canada.
MIMDI
4. MIMDI is a corporation existing under the laws of Canada, with its registered head office located in Toronto, Ontario.
5. MIMDI is a wholly-owned subsidiary of MIML.
6. MIMDI is registered as an exempt market dealer in each province and territory of Canada.
7. MIMDI is not in default of any of the requirements of the securities legislation in any jurisdictions of Canada.
Operational Structure
8. MIML carries on its Canadian wealth and asset management operations through all three of its divisions, namely the Institutional Division, Retail Division and Wealth Division. MIML is distributing funds to Canadian institutional and high-net worth investors, across the same divisional structure. MIML and MIMDI are highly intertwined entities, with overlapping directors and officers, shared personnel, premises, and equipment, and overlapping clientele.
9. Each Division generally functions independently, as stand-alone operations within each Filer. Each Division generally has separate and distinct operating models and management structures, with exceptions such as certain shared functional support.
Institutional -- MIML
10. MIML's Institutional Division offers a broad array of equity, fixed income and multi-asset investment solutions to non-individual institutional clients that are "permitted clients" in Canada (e.g., pension funds, financial institutions, endowments, foundations, investment funds, etc.) and in select other jurisdictions around the world. MIML's Institutional Division does so as a portfolio manager to separately managed accounts, investment funds and non-investment funds, and as an investment fund manager to investment funds.
11. MIML's Institutional Division investment fund management activity currently principally consists of acting as investment fund manager to the Manulife Investment Management Pooled Funds, a group of pooled funds offered principally to institutional investors on a private placement basis that MIML is trustee or general partner and portfolio advisor to.
12. MIML's Institutional Division portfolio management activities can be further described as: (i) portfolio management for its life insurance company affiliates, referred to as the General Account; and (ii) portfolio management principally for institutional clients, including investment funds.
Institutional -- MIMDI
13. MIMDI's Institutional Division offers a broad array of affiliated public and private market funds to non-individual institutional clients that are "permitted clients" in Canada (e.g., pension funds, financial institutions, endowments, foundations, investment funds, etc.). MIMDI's Institutional Division does so as an exempt market dealer.
Retail Division -- MIML and MIMDI
14. MIML's Retail Division provides investment fund management to investment funds that are primarily offered to Canadian retail investors. Its offering of mutual funds and exchange traded funds are subject to National Instrument 81-102 Investment Funds, and a pooled fund is available for exempt individual investors. MIMDI's Retail Division provides exempt market dealer services for these same retail investment funds to institutional investors.
Wealth Division -- MIML and MIMDI
15. MIML's Wealth Division offers portfolio management services via MIML primarily to high-net-worth individuals under its own distinct brand, currently the Manulife Private Wealth brand. MIMDI's Wealth Division via MIMDI similarly offers exempt market dealer services to the same clientele.
The UDP Decision
16. Currently, the Filers each have one UDP (the Filers' UDP) responsible for all divisions, namely the Institutional Division, Retail Division and Wealth Division (each a Division and collectively, the Divisions).
17. Effective upon the Exemption Sought being granted, the Filers will each appoint a new UDP for each of its Institutional Division (the Institutional UDP), its Retail Division (the Retail UDP) and its Wealth Division (the Wealth UDP) (collectively, the New UDPs). Each of the New UDPs would be the most senior officer of the respective Division and a senior officer of the respective Filer (each a Division Head).
18. The New UDPs, regardless of their titles, will be the most senior executive decision maker for his or her respective Division and will fulfill the following roles for his or her Division:
a. supervise, oversee, and otherwise be responsible for running the Division;
b. provide clear leadership and promote a culture of compliance within the Division;
c. be accountable, along with other members of each Filer's senior management, for the performance of the Division;
d. be accountable for reporting to the respective Filer's Board of Directors with respect to the Division; and
e. be responsible, along with other members of each Filer's senior management, for the organizational structure and succession planning for the Division.
19. There will be no line of reporting between the New UDPs and each New UDP will have direct access to the respective Filer's Board of Directors, present independently and routinely to the Board at their quarterly meetings and ad hoc meetings, as applicable.
The CCO Decision
20. Currently, the Filers each have one CCO responsible for all Divisions.
21. Upon the Exemption Sought being granted, the Wealth Division of each Filer will have its own new CCO (the Wealth CCO). The Institutional Division and the Retail Division will retain their existing CCO (the Institutional and Retail CCO).
22. Each of the CCOs will oversee a compliance system that is reasonably designed to ensure that the Division(s) for which they are the CCO, and each person acting on its behalf, comply with applicable securities legislation and will manage the risks associated with their respective Division(s) in accordance with prudent business practices.
23. Upon the Exemption Sought being granted, each of the CCOs will have direct access to the respective Filer's Board of Directors, present independently and routinely to the Board at their quarterly meetings and ad hoc meetings, as applicable.
Reasons For Exemption Sought
UDP Requirement
24. Under the UDP Requirement, a registered firm is required to designate and have registered an individual to be the UDP and the UDP must be one of the following: (a) the chief executive officer of the registered firm or, if the firm does not have a chief executive officer, an individual acting in a capacity similar to a chief executive officer; (b) the sole proprietor of the registered firm; (c) the officer in charge of a division of the registered firm, if the activity that requires the firm to register occurs only within the division and the firm has significant other business activities. Applications to designate and register UDPs must be submitted pursuant to the process set out in National Instrument 33-109, Registration Information.
25. Allowing each Filer to designate and have registered a separate UDP for each of its Divisions would be consistent with the policy objectives of the UDP Requirement as the Divisions within each Filer are independent operations that are distinct from each other and are conducted on a very large scale with separate and distinct senior management structures in which each of the new UDPs will be the most senior executive officer of their respective Division(s).
CCO Requirement
26. Under the CCO Requirement, a registered firm is required to designate and have registered an individual to be the CCO. Applications to designate and register CCOs must be submitted pursuant to the process set out in National Instrument 33-109, Registration Information.
27. Allowing each Filer to designate and have registered a separate CCO for some of its Divisions would be consistent with the policy objectives of the CCO Requirement as the Institutional and Retail Divisions of each Filer are generally overseen independently from the Wealth Division, the compliance structures are distinct from each other, and are conducted on a very large scale with generally separate and distinct management structures in which each of the CCOs is the most senior compliance officer in their respective Division(s).
Decision
28. The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
29. The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
A. with respect to the UDP Decision:
(i) each Division of each Filer will have its own UDP who shall be the most senior executive officer of the Division for which he or she is appointed as UDP;
(ii) each UDP fulfills the responsibilities set out in section 5.1 of NI 31-103, or any successor provision, in respect of the Division(s) for which he or she is designated as UDP; and
(iii) each UDP of the Filers has direct access to the respective Filer's Board of Directors;
B. with Respect to the CCO Decision:
(iv) the Filers Institutional and Retail Divisions will have the same CCO, and the Filers Wealth Divisions will have their own CCO;
(v) each CCO reports to the UDP of the Division(s) of the respective Filer for which he or she is designated as CCO;
(vi) each CCO fulfills the responsibilities set out in section set out in section 5.2 of NI 31-103, or any successor provision thereto, in respect of the Division of the respective Filer for which he or she is designated as CCO; and
(vii) each CCO of the Filers has direct access to the respective Filer's Board of Directors.
OSC File #: 2024/0067