National Bank Financial Inc.
Headnote
Pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the prohibition on the use of corporate officer titles by certain registered individuals in respect of institutional clients -- Relief does not extend to interactions by registered individuals with retail clients.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.18(2)(b) and 15.1(2).
COURTESY TRANSLATION
December 31, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (THE JURISDICTIONS) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF NATIONAL BANK FINANCIAL INC. (the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), the Filer and its Registered Individuals (as defined below) are exempt from the prohibition in paragraph 13.18(2)(b) of NI 31-103 that a registered individual may not use a corporate officer title when interacting with clients, unless the individual has been appointed to that corporate office by their sponsoring firm pursuant to applicable corporate law, in respect of Clients (as defined below) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers is the principal regulator for this application,
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filer and its Registered Individuals (as defined below) in each of the other provinces and territories of Canada (the Other Jurisdictions) in respect of the Exemption Sought, and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation formed under the laws of Canada and has its head office in Montréal, Québec.
2. The Filer is registered in the category of "investment dealer" in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, the Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon. The Filer is also registered in the category of "futures commission merchant" in each of Manitoba and Ontario, and in the category of "derivatives dealer" in Québec.
3. The Filer is a "participating organization" of the Toronto Stock Exchange, an "approved participant" of the Montréal Exchange, a member of each of the TSX Venture Exchange and the Canadian National Stock Exchange, and a "dealer member" of the Investment Industry Regulatory Organization of Canada (IIROC).
4. The Filer is not in default of securities or commodity futures legislation in any of the Jurisdictions.
5. The Filer is an indirect wholly-owned subsidiary of National Bank of Canada (National Bank), a Schedule I Canadian chartered bank.
6. The Filer is a legal entity comprising four business units: National Bank Independent Network, National Bank Direct Brokerage, National Bank Financial Wealth Management (NBFWM) and National Bank Financial Markets (NBFM). NBFWM carries out the retail brokerage activities, and NBFM carries out the institutional brokerage business and corporate and investment banking business, respectively, of the Filer.
7. NBFM has offices in Montréal, Toronto, Calgary, Vancouver, and London, England, with the employees across the various offices operating as one team, to ensure that it provides the needed expertise to NBFM's broad client base. NBFM offers a wide range of financial products and services, including research, investment banking services (including mergers and acquisitions advisory services), equities, fixed income, options, futures, sales, and trading.
8. The Filer is the sponsoring firm for registered individuals that interact with clients of NBFM and use a corporate officer title without being appointed to the corporate office of the Filer pursuant to applicable corporate law (the Registered Individuals). The number of Registered Individuals may increase or decrease from time to time as the business of the Filer changes. As of the date of this decision, the Filer has approximately 130 Registered Individuals.
9. The current titles used by the Registered Individuals include the words "Vice-President", "Director", and variations thereof such as "Associate Director", "Managing Director" and "Managing Director and (Co-)Head", and the Registered Individuals may use additional corporate officer titles in the future (collectively, the Titles).
10. The Filer has a process in place for awarding the Titles, which sets out the criteria for each of the Titles. The Titles are based on criteria including seniority and experience, and a Registered Individual's sales activity or revenue generation is not a primary factor in the decision by the Filer to award one of the Titles.
11. The Registered Individuals interact only with institutional clients that are, each, a non-individual "institutional client", as defined in IIROC Rule 1201 (the Clients).
12. Section 13.18 of NI 31-103 prohibits registered individuals in their client-facing relationships from, among other things, using titles or designations that could reasonably be expected to deceive or mislead existing and prospective clients. Paragraph 13.18(2)(b) of NI 31-103 specifically prohibits the use of corporate officer titles by registered individuals who interact with clients unless the individuals have been appointed to those corporate offices by their sponsoring firms pursuant to applicable corporate law.
13. There would be significant operational and human resources challenges for the Filer to comply with the prohibition in paragraph 13.18(2)(b). In addition, the Titles are widely used and recognized throughout the institutional segment of the financial services industry within Canada and globally, and being unable to use the Titles has the potential to put the Filer and its Registered Individuals at a competitive disadvantage as compared to non-Canadian firms that are not subject to the prohibition and who compete for the same institutional clients.
14. Given their nature and sophistication, the use of the Titles by the Registered Individuals would not be expected to deceive or mislead existing and prospective Clients.
15. For the reasons provided above, it would not be prejudicial to the public interest to grant the Exemption Sought.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that, when using the Titles, the Filer and its Registered Individuals interact only with existing and prospective clients that are exclusively non-individual "institutional clients", as defined in IIROC Rule 1201.
This decision will terminate six months, or such other transition period as may be provided by law, after the coming into force of any amendment to NI 31-103 or other applicable securities law that affects the ability of the Registered Individuals to use the Titles in the circumstances described in this decision.
French version signed by:
"Éric Jacob"
Superintendent
Client Services and Distribution Oversight
Autorité des marchés financiersOSC File #: 2021-0581