Merrill Lynch Financial Assets Inc. & Merrill Lynch Canada Inc. - MRRS Decision
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF ONTARIO, BRITISH COLUMBIA,
ALBERTA, QUÉBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
MERRILL LYNCH FINANCIAL ASSETS INC.
(formerly MERRILL LYNCH MORTGAGE LOANS INC.)
AND MERRILL LYNCH CANADA INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Ontario, BritishColumbia, Alberta, Québec and Newfoundland (the "Jurisdictions") has received an application from Merrill LynchFinancial Assets Inc. (formerly Merrill Lynch Mortgage Loans Inc.) (the "Issuer") and Merrill Lynch Canada Inc. ("MLCanada") (the Issuer and ML Canada are collectively referred to herein as the "Filer") for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation") that the provision contained in the Legislation mandatingindependent underwriter involvement shall not apply to ML Canada and the Issuer in respect of the proposed offeringof Canada 5 Pass-Through Certificates (as defined below);
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"MRRS") the Ontario Securities Commission is the principal regulator for this Application;
AND WHEREAS it has been represented by the Filer to the Decision Makers that:
1. the Issuer was incorporated under the laws of Canada on March 13, 1995; effective March 15, 2001, the Issuerchanged its name from Merrill Lynch Mortgage Loans Inc. to Merrill Lynch Financial Assets Inc.; the head officeof the Issuer is located in Toronto, Ontario;
2. the authorized share capital of the Issuer consists of an unlimited number of common shares, of which 1,000common shares are issued and outstanding, all of which are held by Merrill Lynch & Co., Canada Ltd. ("ML &Co.");
3. to date the Issuer has issued 600,000,000 S&P BULLS (the "S&P 500 Bulls"); $182,083,237 (initial certificatebalance) of pass-through certificates of which $163,874,000 (initial certificate balance) were designated asExchangeable Commercial Mortgage Pass-Through Certificates, Series 1998 - Canada 1 (the "OfferedCertificates"); $163,874,000 (initial certificate balance) Commercial Mortgage Pass-Through Certificates, Series1998-Canada 1 (the "C-1 Certificates"); $193,741,000 (initial certificate balance) of Commercial Mortgage Pass-Through Certificates, Series 1999-Canada 2 (the "C-2 Certificates"); $220,000,000 (initial certificate balance)of 1st Street Tower Pass-Through Certificates (the "Tower Certificates"); approximately $227,324,000 (initialcertificate balance) of Commercial Mortgage Pass-Through Certificates, Series 2000-Canada 3 (the "C-3Certificates"); approximately $115,500,000 (initial certificate balance) of BMCC Corporate Centre Pass-ThroughCertificates, Series 2000-BMCC (the "BMCC Certificates"); approximately $255,981,000 (initial certificatebalance) of Commercial Mortgage Pass-Through Certificates, Series 2000-Canada 4 (the "C-4 Certificates");and approximately $187,680,000 (initial certificate balance) of Commercial Mortgage Pass-Through Certificates,Series 2001-LBC (the "LBC Certificates");
4. on May 19, 2000 the Issuer filed a revised annual information form and received an acceptance thereof onbehalf of the Canadian securities administrators dated August 31, 2000;
5. the Issuer is and has been a "reporting issuer" pursuant to the securities legislation in certain of the provincesof Canada for over 12 calendar months. Pursuant to a decision dated November 30, 2000 of the DecisionMakers of Ontario, British Columbia, Alberta, Newfoundland, Nova Scotia and Saskatchewan (the "November30, 2000 Decision"), the Issuer has been granted certain relief in connection with the requirement in thesecurities legislation of such jurisdictions to make continuous disclosure of its financial results, and from otherforms of continuous disclosure required under such legislation, provided that the Issuer complies with theconditions set out in the November 30, 2000 Decision;
6. the Issuer currently has no assets or liabilities other than its rights and obligations under certain of the materialcontracts related to the S&P 500 BULLS, the C-1 Certificates, the C-2 Certificates, the C-3 Certificates, the C-4Certificates, the LBC Certificates, the Tower Certificates and the BMCC Certificates transactions and does notpresently carry on any activities except in relation to the S&P 500 Bulls, the C-1 Certificates, the C-2Certificates, the C-3 Certificates, the C-4 Certificates, the LBC Certificates, the Tower Certificates and theBMCC Certificates;
7. the officers and directors of the Issuer are employees of ML Canada;
8. ML Canada was continued and amalgamated under the laws of Canada on August 26, 1998; the authorizedshare capital of ML Canada consists of an unlimited number of common shares; the common shares of MLCanada are owned by ML & Co. and Midland Walwyn Inc; the head office of ML Canada is located in Toronto,Ontario;
9. ML Canada is not a reporting issuer in any Canadian province;
10. ML Canada is registered as a dealer in the categories of "broker" and "investment dealer" and is a member ofthe Investment Dealers Association of Canada;
11. the Issuer proposes to offer Commercial Mortgage Pass-Through Certificates, Series 2001-Canada 5 (the"Canada 5 Pass-Through Certificates"), issuable in classes, with an Approved Rating by an Approved RatingOrganization, as those terms are defined in the Legislation with respect to short form prospectus distributions,to the public in Canada (the "Offering"), to finance the purchase by the Issuer from Merrill Lynch Capital CanadaInc. and from other originators of mortgage loans of ownership interests in particular mortgage loans depositedwith Montreal Trust Company of Canada as custodian; each Canada 5 Pass-Through Certificate of a particularclass will represent an undivided co-ownership interest in a particular pool of mortgage loans;
12. ML Canada proposes to act as the underwriter in connection with the distribution of 100% of the dollar valueof the distribution for the proposed Offering;
13. the Filers expect that approximately 90% of the Offering, in which the minimum subscription will be $500,000,will be made to Canadian institutions, pension funds, endowment funds or mutual funds based upon theexperience of the Canada 1, Canada 2, Canada 3 and Canada 4 offerings and ML & Co.'s U.S. experience;
14. the only financial benefits which ML Canada will receive as a result of the proposed Offering are the normalarm's length underwriting commission and reimbursement of expenses associated with a public offering inCanada, which commissions and reimbursements shall for purposes of this Decision be deemed to include theincreases or decreases contemplated by Section 3.5(a)(1) of National Policy No. 44 and by the applicablesecurities legislation in Québec;
15. ML Canada administers the ongoing operations and pays the ongoing operating expenses of the Issuer, forwhich ML Canada receives no additional compensation;
16. the Issuer may be considered to be a related issuer (as defined in the Legislation) and therefore a connected(or equivalent) issuer (as defined in the Legislation) of ML Canada for the purposes of the proposed Offeringbecause:
(a) both ML Canada and the Issuer are subsidiaries of ML & Co.;
(b) the officers of the Issuer are employees of ML Canada;
(c) ML Canada administers the on-going operations of the Issuer;
17. in connection with the proposed distribution by ML Canada of 100% of the Canada 5 Pass-Through Certificatesof the Issuer, the preliminary and final prospectus of the Issuer shall contain the following information:
(a) on the front page of each such document,
(i) a statement, naming ML Canada, in bold type which states that the Issuer is a related orconnected issuer of ML Canada in connection with the distribution,
(ii) a summary, naming ML Canada, stating that the Issuer is a related or connected issuer ofML Canada based on, among other things, the common ownership of ML Canada and theIssuer,
(iii) a cross-reference to the applicable section in the body of the document where furtherinformation concerning the relationship between the Issuer and ML Canada is provided, and
(iv) a statement that the minimum subscription amount is $500,000;
(b) in the body of each such document,
(i) a statement, naming ML Canada, that the Issuer is a related or connected issuer of MLCanada in connection with the distribution,
(ii) the basis on which the Issuer is a related or connected issuer to ML Canada, includingdetails of the common ownership by ML & Co. of ML Canada and the Issuer, and otheraspects of the relationship between ML Canada and the Issuer,
(iii) disclosure regarding the involvement of ML Canada in the decision to distribute the Canada5 Pass-Through Certificates being offered and the determination of the terms of thedistribution, and
(iv) details of the financial benefits described in paragraph 14 of this Decision Document whichML Canada will receive from the proposed Offering;
AND WHEREAS pursuant to the MRRS this Decision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the requirement contained in theLegislation mandating independent underwriter involvement shall not apply to ML Canada and the Issuer in connectionwith the Offering provided that the Issuer complies with Paragraph 17 hereof.
April 5, 2001.
"Howard I. Wetston" "R. Stephen Paddon"