MaRS VX
Headnote
Application by not-for-profit entity (the Filer) for an interim extension order -- Filer operates an online portal bringing together accredited investors with issuers that aim to solve social or environmental challenges -- Filer registered as restricted dealer in Ontario -- previous decision granted Filer relief from certain know-your-client (KYC) and suitability requirements contained in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) subject to certain conditions -- interim extension order granted.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System (MI 11-102).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.2(2)(c), 13.3, and Part 15.
June 17, 2015
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
MaRS VX
(the Filer)
DECISION
Background
The Filer has made an application (the Application) to the Director (the Director) in the Jurisdiction for a decision, pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), to vary a previous decision under the securities legislation of the Jurisdiction of the regulator made under section 15.1 of NI 31-103 entitled In the Matter of MaRS VX dated June 17, 2013 (the Original Decision) and varied March 6, 2014 (the Amending Decision, collectively with the Original Decision, the Previous Decision) in accordance with the Requested Interim Relief (as described below).
Interpretation
Defined terms contained in National Instrument 14-101 Definitions or the Previous Decision have the same meaning in this decision unless they are otherwise defined in this decision (the Decision).
Representations
This Decision is based on the following facts represented by the Filer:
1. The Filer is a not-for-profit entity and is a wholly owned subsidiary of MaRS Discovery District (MaRS).
2. MaRS is a registered charity and a not-for-profit entity without share capital created by letters patent under the Canada Corporations Act. It carries on its operations without pecuniary gain. Its head office is located in Toronto, Ontario.
3. The Filer's current objective is to facilitate impact investing by bringing together through an online platform (the Platform) accredited investors (as such term is defined in section 1.1 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) and in subsection 73.3(1) of the Securities Act (Ontario) (the Act)) in Ontario and Quebec and issuers that are social impact issuers and/or environmental impact issuers in Ontario and Quebec aiming to solve social or environmental challenges in these jurisdictions.
4. The Filer is registered as a restricted dealer in Ontario and in Quebec.
5. On June 17, 2013, the Filer was granted relief from certain requirements under NI 31-103 that would otherwise be applicable to the Filer in connection with the operation of the Platform, subject to certain terms and conditions. Specifically, the Original Decision required the Filer to comply with all of the registration requirements of an exempt market dealer under the Act and NI 31-103, except for the know-your-client and suitability requirements in sections 13.2(2)(c) and 13.3 of NI 31-103 on the basis that the following terms and conditions will apply to investors that have access to the Private Portal:
(a) if the investor is a permitted client that has waived the know-your-client and suitability requirements of sections 13.2(2)(c) and 13.3 of NI 31-103 under sections 13.2(6) and 13.3(4) of NI 31-103, respectively, there will be no maximum amount that such an investor may subscribe for on the Private Portal; and
(b) if the investor is either (i) an accredited investor that is not a permitted client; or (ii) a permitted client that has not waived the know-your-client suitability requirements of sections 13.2(2)(c) and 13.3 of NI 31-103:
(A) The investor shall be limited to investing a maximum of $25,000 in a single offering on the Private Portal in a calendar year and a maximum of $50,000 in total in all offerings on the Private Portal in a calendar year; or
(B) There will be no maximum amount that the accredited investor may subscribe for in a particular offering on the Private Portal if the investor provides the Filer with a letter from a registered dealer confirming that such dealer has fulfilled the know-your-client and suitability requirements of NI 31-103 with respect to that particular offering on the Private Portal and that the said offering is a suitable investment for the investor.
6. On March 6, 2014, the Filer was granted relief to amend the Original Decision in order to be able to rely on the passport system described in Multilateral Instrument 11-102 Passport System (MI 11-102) in the province of Quebec, all as described in the Amending Decision.
7. A condition in the Previous Decision is that the relief is subject to a sunset clause which expires on June 17, 2015.
8. The Filer carries on a very unique business with a special focus on social impact issuers and environmental impact issuers, and is still in the early stages of development, having operated the Platform for less than two years. Based on a compliance review, Ontario Securities Commission (Commission) staff have identified deficiencies and areas for improvement with the Filer's compliance with Ontario securities laws, and has requested a remedial action plan (the Immediate Remediation Plan) from the Filer to address immediate concerns.
9. The Filer is in the process of preparing the Immediate Remediation Plan. The Immediate Remediation Plan will be subject to review and approval by Commission staff.
10. In addition to the Immediate Remediation Plan, the Director will impose terms and conditions on the Filer's registration and the Filer agrees with the imposition of such terms and conditions by the Director. Such terms and conditions will include, but will not be limited to, the preparation of a plan to rectify the deficiencies and areas for improvement not addressed in the Immediate Remediation Plan (which will also be subject to review and approval by Commission staff).
11. The Filer is cooperating with Commission staff to address all deficiencies and areas for improvement identified by Commission staff.
12. The Filer wishes for the relief granted in the Previous Decision to be extended to December 17, 2015 in order to address the deficiencies and areas of improvement in the Filer's compliance systems as identified by Commission staff (the Requested Interim Relief).
13. The Filer will immediately implement sufficient remedial procedures to ensure that it will not be in default of securities legislation in respect of the registerable activity in which the Filer engages while this Decision is effective.
14. The Filer also wishes to rely on the passport system described in Multilateral Instrument 11-102 Passport System (MI 11-102) in the province of Quebec. Upon the granting of the Requested Interim Relief, the Filer intends to file a notice pursuant to section 4.7(1) of MI 11-102 to passport this Decision into Quebec.
15. This Decision is based on the same representations made by the Filer in the Previous Decision, to the extent not amended by this Decision, and which remain true and complete, except in respect of those deficiencies identified by Commission staff and to be addressed in the Immediate Remediation Plan and in the terms and conditions to be imposed on the Filer's registration.
Decision
The Director is satisfied that the decision meets the test set out in the Legislation for the Director to make the decision.
It is the decision of the Director that the Requested Interim Relief is granted provided that:
1. Unless otherwise granted relief by this Decision or by a further decision of the Director, the Filer complies with all of the registration requirements of an exempt market dealer under the Act and NI 31-103, subject to paragraph 2 below, with all remedial plans to be established by the Filer and approved by Commission staff, and with the terms and conditions to be imposed by the Director;
2. The Filer is exempt from the know-your-client and suitability requirements in paragraph 13.2(2)(c) and in section 13.3 of NI 31-103 on the basis that the following terms and conditions will apply to investors that have access to the Private Portal:
(a) if the investor is a permitted client that has waived the know-your-client and suitability requirements of paragraph 13.2(2)(c) and section 13.3 of NI 31-103 under subsections 13.2(6) and 13.3(4) of NI 31-103, respectively, there will be no maximum amount that such an investor may subscribe for on the Private Portal;
(b) if the investor is either: (i) an accredited investor that is not a permitted client; or (ii) a permitted client that has not waived the know-your-client and suitability requirements of paragraph 13.2(2)(c) and section 13.3 of NI 31-103, the investor shall be limited to investing a maximum of $25,000 in a single offering on the Private Portal in a calendar year and a maximum of $50,000 in total in all offerings on the Private Portal in a calendar year; and
3. Terms and conditions will be imposed on the Filer's registration within thirty (30) days of the date of this Decision.
4. The period of reporting to Commission staff as set out in paragraph 45 of the Previous Decision will be monthly (to be submitted within 10 days of the end of each month) and paragraphs 45(a) and (e) of the Previous Decision be deleted and replaced by the following new paragraphs (a) and (e):
(a) the investment transactions made in the month by investors that have access to the Private Portal in offerings of issuers on the Private Portal, including the following information for each investor who has invested in an investment transaction:
(i) the name of investor;
(ii) the name of the issuer;
(iii) the date the investment in the issuer was purchased by the investor;
(iv) the type of securities purchased by the investor;
(v) the dollar amount of the investment in the issuer by the investor; and
(vi) the total dollar amount invested by the investor in all offerings on the Private Portal (including the investment transaction(s) reported upon in the month) in the calendar year;
(b) all investors who have been granted access to the Private Portal or whose access to the portal has been revoked during the month, including for each investor:
(i) the name of the investor;
(ii) the type of accredited investor (e.g., permitted clients (as defined in section 1.1 of NI 31-103) and non-permitted clients, and the clause they are relying on in section 1.1 of NI 45-106 or in subsection 73.3(1) of the Act that qualified them as an accredited investor), along with a reference of the documentation that supports such classification;
(ii) the date the investor was granted access to the Private Portal, if applicable; and
(iv) where the investor was initially granted access but access was subsequently revoked, the date of the revocation and the reason for the denial of access, if applicable.
This Decision shall expire on the earlier of:
(a) December 17, 2015; and
(b) Sixty (60) days after any material changes in the Filer's business, operations or capital.
This Decision may be amended by the Commission from time to time upon prior written notice to the Filer.