Pyramis Global Advisors, LLC et al. - s. 78(1)
Headnote
Order under section 78(1) of the Commodity Futures Act (Ontario) to revoke previous orders and replace with amended order granting relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to a sub-adviser not ordinarily resident in Ontario in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles, subject to certain terms and conditions.
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 80.
Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF
THE COMMODITY FUTURES ACT, R.S.O. 1990,
CHAPTER C. 20, AS AMENDED (the CFA)
AND
IN THE MATTER OF
PYRAMIS GLOBAL ADVISORS, LLC,
FMR CO., INC.
AND
FIDELITY INVESTMENTS CANADA LIMITED
ORDER
(Section 78(1))
UPON the application of Pyramis Global Advisors, LLC (Pyramis), FMR Co., Inc. (the Sub-Adviser) and Fidelity Investments Canada Limited (Fidelity) (each of Pyramis and Fidelity is a Principal Adviser and collectively they are Principal Advisers) to the Ontario Securities Commission (the Commission) for an order, pursuant to subsection 78(1) of the CFA, to revoke two orders of the Commission dated April 6, 2001 and June 19, 2001 (the Initial Orders) and revoke an amending order of the Commission dated April 6, 2004 made under section 78(1) of the CFA (the Amending Order)(the Initial Orders and the Amending Order are collectively referred to as the Previous Orders), in the matter of Pyramis, the Sub-Adviser and Fidelity;
AND WHEREAS the Previous Orders provide that neither the Sub-Adviser nor any of its directors, officers or employees (Sub-Adviser Representatives) acting on its behalf as an adviser, is subject to paragraph 22(1)(b) of the CFA in respect of their acting as an adviser to Fidelity in its capacity as the principal adviser in connection with Fidelity acting as an adviser to (a) certain mutual funds offered from time to time to the public in Canada, and (b) certain pooled funds offered from time to time to pension plans and other institutional investors (Private Clients) (each such mutual fund or pooled fund, a Fund and collectively, the Funds);
AND WHEREAS Fidelity is to be replaced by Pyramis as the principal adviser to certain of the Funds and Fidelity is to remain as principal adviser to the other Funds;
AND WHEREAS the Amending Order is scheduled to expire on April 6, 2007;
AND WHEREAS Pyramis, the Sub-Adviser and Fidelity seek to revoke the Previous Orders and replace them with this consolidated and restated order which incorporates the change in the principal adviser to the Funds, and sets a new expiry date;
AND UPON considering the application and the recommendation of staff of the Commission;
AND UPON it having been represented to the Commission that:
1. Pyramis is a limited liability company organized under the laws of the State of Delaware and is resident in the United States of America. Pyramis is registered as an investment adviser with the United States Securities and Exchange Commission.
2. The Sub-Adviser is a corporation organized under the laws of the Commonwealth of Massachusetts in the United States and is resident in the U.S.
3. The Sub-Adviser is not registered under the CFA as either an adviser or dealer.
4. The Sub-Adviser is not required under applicable commodity futures legislation in the U.S. to be registered as a commodity trading adviser with the U.S. Commodity Futures Trading Commission, nor is the Sub-Adviser required to be a member of the National Futures Association, in order to provide the services to the Principal Adviser described in paragraph 8 below.
5. Fidelity was incorporated under the laws of Canada, thereafter continued under the laws of Ontario and subsequently amalgamated under the laws of Ontario. Fidelity is resident in Ontario.
6. Fidelity is registered with the Commission as a dealer in the category of mutual fund dealer and as an adviser in the categories of investment counsel and portfolio manager under the Securities Act (Ontario) (the OSA), and as an adviser in the category of commodity trading manager under the CFA.
7. Each Principal Adviser may, pursuant to a written agreement to be entered into between the Principal Adviser and a Fund or Private Client:
(a) act as an adviser (as defined in the OSA) to the Fund or Private Client, in respect of securities, and
(b) act as an adviser to the Fund or Private Client, in respect of trading commodity futures contracts and commodity futures options,
by exercising discretionary authority in respect of the investment portfolio of the Fund, with discretionary authority to purchase or sell on behalf of the Fund:
(i) securities, and
(ii) commodity futures contracts and commodity futures options.
8. In connection with a Principal Adviser acting as an adviser to a Fund or Private Client, in respect of the purchase or sale of commodity futures contracts and commodity futures options, that Principal Adviser may, from time to time, pursuant to a written agreement made between the Principal Adviser and the Sub-Adviser, retain the Sub-Adviser to act as an adviser to it, by exercising discretionary authority on behalf of the Principal Adviser, in respect of the investment portfolio of the Fund, with discretionary authority to buy or sell commodity futures options and commodity futures contracts for the Fund, provided that:
(a) in each case, the option or contract must be cleared through an acceptable clearing corporation; and
(b) in no case will any trading in commodity futures options or commodity futures contracts constitute the primary focus or investment objective of the Fund.
9. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA, for a person or company acting as an adviser to another registered adviser in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in clause 25(1)(b) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities, in section 7.3 of Commission Rule 35-502 - Non-Resident Advisers.
AND UPON the Commission being of the opinion that to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to section 80 of the CFA, that the Previous Orders are revoked;
IT IS FURTHER ORDERED, pursuant to section 80 of the CFA, that neither the Sub-Adviser, nor any Sub-Adviser Representative acting on behalf of the Sub-Adviser, is subject to paragraph 22(1)(b) of the CFA, in respect of their acting as an adviser to a Principal Adviser, in connection with that Principal Adviser acting as an adviser to one or more Funds or Private Clients, provided that, at the relevant time and in the case of each Fund:
(a) the relevant Principal Adviser is registered under the CFA as an adviser in the category of commodity trading manager;
(b) the duties and obligations of the Sub-Adviser are set out in a written agreement with the relevant Principal Adviser;
(c) the relevant Principal Adviser has contractually agreed with the Fund to be responsible for any loss that arises out of any failure of the Sub-Adviser:
(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Fund and its securityholders, or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;
(d) the relevant Principal Adviser cannot be relieved by the Fund or its securityholders (including Private Clients) from its responsibility for any loss referred to in paragraph (c), above;
(e) the securityholders of the Fund (including Private Clients) have received written disclosure, in a prospectus or other offering document to the extent applicable, disclosing:
(i) the responsibility of the relevant Principal Adviser for losses arising out of any failure of the Sub-Adviser referred in paragraph (c), above, and
(ii) that there may be difficulty in enforcing legal rights against the Sub-Adviser because it is resident outside Canada and all or substantially all of the Sub-Adviser's assets may be situated outside of Canada; and
(f) this Order shall terminate on the day that is three years after the date of the Order.
Dated at Toronto, Ontario, this 30th day of December, 2005.