Morgan Guaranty Trust Company of New York

Headnote

Section 80 of the Commodity Futures Act - relief for Schedule III bank from requirementto register as an adviser where the performance of the service is incidental to principalbanking business.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c.S.20, as am., sections 22(1)(b), 80.

UPON application (the "Application") by Morgan Guaranty Trust Company of NewYork ("Morgan Guaranty") to the Ontario Securities Commission (the "Commission") foran order pursuant to section 80 of the Act exempting Morgan Guaranty from therequirement to obtain registration as an adviser under clause 22(1)(b) of the Act;

AND UPON considering the Application and the recommendation of staff of theCommission;

AND UPON Morgan Guaranty having represented to the Commission that:

1. Morgan Guaranty is the principal bank subsidiary of J P Morgan & Co. Incorporated("J P Morgan") in the United States. J P Morgan is a bank holding company formedunder the laws of the United States for holding subsidiaries engaged globally inproviding a wide range of financial services, including finance and advisory, salesand trading, and asset management services;

2. Morgan Guaranty currently conducts business in Canada through J.P. MorganCanada ("Morgan Canada"), the Schedule II bank subsidiary of Morgan Guarantylisted in Schedule II to the Bank Act (Canada) (the "Bank Act"), J.P. MorganSecurities Canada Inc., a registered investment dealer, and J.P. Morgan InvestmentManagement, which maintains a representative office in Canada;

3. Morgan Canada is involved in wholesale deposit-taking, commercial lending andrelated treasury functions;

4. Morgan Canada only accepts deposits from the following:

(a) Her Majesty in right of Canada or in right of a province or territory, an agentof Her Majesty in either of those rights and includes a municipal or publicbody empowered to perform a function of government in Canada, or an entitycontrolled by Her Majesty in either of those rights;

(b) the government of a foreign country or any political subdivision thereof, anagency of the government of a foreign country or any political subdivisionthereof, or an entity that is controlled by the government of a foreign countryor any political subdivision thereof;

(c) an international agency of which Canada is a member, including aninternational agency that is a member of the World Bank Group, the InterAmerican Development Bank, the Asian Development Bank, the CaribbeanDevelopment Bank and the European Bank for Reconstruction andDevelopment and any other international regional bank;

(d) a financial institution (i.e.: (a) a bank or an authorized foreign bank under theBank Act; (b) a body corporate to which the Trust and Loan Companies Act(Canada) applies, (c) an association to which the Cooperative CreditAssociation Act (Canada) applies, (d) an insurance company or a fraternalbenefit society to which the Insurance Companies Act (Canada) applies, (e)a trust, loan or insurance corporation incorporated by or under an Act of thelegislature of a province or territory in Canada, (f) a cooperative creditsociety incorporated and regulated by or under an Act of the legislature ofa province or territory in Canada; (g) an entity that is incorporated or formedby or under an Act of Parliament or of the legislature of a province and thatis primarily engaged in dealing in securities, including portfolio managementand investment counseling, and is registered to act in such capacity underthe applicable legislation, and (h) a foreign institution that is (i) engaged inthe banking, trust, loan or insurance business, the business of a cooperativecredit society or the business of dealing in securities or is otherwiseengaged primarily in the business of providing financial services, and (ii) isincorporated or formed otherwise than by or under an Act of Parliament orof the legislature of a province or territory in Canada);

(e) a pension fund sponsored by an employer for the benefit of its employeesor employees of an affiliate that is registered and has total plan assets underadministration of greater than $100 million;

(f) a mutual fund corporation that is regulated under an Act of the legislature ofa province or territory in Canada or under the laws of any other jurisdictionand has total assets under administration of greater than $10 million;

(g) an entity (other than an individual) that has, for the fiscal year immediatelypreceding the initial deposit, gross revenues on its own books and recordsof greater than $5 million; or

(h) any other person if the trade is in a security which has an aggregateacquisition cost to the purchaser of greater than $150,000;

collectively referred to for purposes of this Decision as "Authorized Purchasers".

5. Morgan Canada participates in the primary and secondary market in the followingmoney market products: commercial paper, certificates of deposit, repurchaseagreements and bankers' acceptances;

6. Morgan Canada engages in foreign exchange trading;

7. The only advising activities which Morgan Canada undertakes are incidental to itsprimary business and it has not and will not, nor will Morgan Guaranty, advertiseitself as an adviser or allow itself to be advertised as an adviser;

8. In June of 1999 amendments to the Bank Act were proclaimed that permit foreigncommercial banks to establish direct branches in Canada. These amendments havecreated a new Schedule III listing foreign banks permitted to carry on bankingactivities through branches in Canada;

9. Morgan Guaranty has been granted an order under the Bank Act on April 17, 2000permitting it to establish a full service branch under the Bank Act and designatingit on Schedule III to the Bank Act. Morgan Guaranty will take over the wholesaledeposit-taking, corporate lending and treasury functions currently conducted byMorgan Canada;

10. The Act refers to "Schedule I and Schedule II banks" in connection with certainexemptions however no reference is made in the Act to entities listed on ScheduleIII to the Bank Act;

11. In order to ensure that Morgan Guaranty, as an entity listed on Schedule III to theBank Act, is able to provide banking services to businesses in Ontario it requiressimilar exemptions enjoyed by banking institutions incorporated under the Bank Actto the extent that the current exemptions applicable to such banking institutions arerelevant to the business being undertaken by Morgan Guaranty in Ontario;

12. Morgan Guaranty will engage in foreign exchange advisory activities in respect ofsuch activities as hedging arrangements and management of exchange rates;

AND UPON the Commission being satisfied that to do so would not be prejudicialto the public interest;

IT IS RULED pursuant to section 80 of the Act that Morgan Guaranty is exempt fromthe requirement of clause 22(1)(b) of the Act where the performance of the service as anadviser is solely incidental to Morgan Guaranty's principal banking business.

September 6th, 2000.

"J. A. Geller"      "R. Stephen Paddon"