RBC Direct Investing Inc. et al.

Headnote

Multilateral Instrument 11-102 Passport System, National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, National Instrument 33-109 Registration Information -- Bulk transfers of individual registrants and business locations between affiliated entities within the same jurisdiction and registration category, upon the acquisition and reorganization of various affiliated entities.

March 19, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF RBC DIRECT INVESTING INC. (RBC DI), RBC DOMINION SECURITIES INC. (RBC DS), ROYAL MUTUAL FUNDS INC. (RMFI), RBC PHILLIPS, HAGER & NORTH INVESTMENT COUNSEL INC. (RBC PH&N) (collectively, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the principal regulator (the Legislation) for relief from sections 2.2, 2.3, 2.5, 3.2 and 4.2 of National Instrument 33-109 Registration Information (NI 33-109) pursuant to section 7.1 of NI 33-109 to allow the bulk transfer (the Bulk Transfer) of permitted individuals, registered individuals and business locations, as applicable, of each of HSBC Investment Funds (Canada) Inc. (HIFC), HSBC Private Investment Counsel (Canada) Inc. (HPC) and HSBC Securities (Canada) Inc. (HSCI and together with HIFC and HPC, the HSBC Canada-Affiliated Registrants) in connection with the proposed acquisition (the Proposed Transaction) by Royal Bank of Canada (RBC) of HSBC Bank Canada (HSBC Canada), in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for this application in respect of each of the Filers, and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each jurisdiction of Canada outside of Ontario in respect of each of the Filers (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning in this decision, unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

Background to the Proposed Transaction, the Filers and the HSBC-Canada Affiliated Registrants

1. Under the Proposed Transaction, expected to close on or about March 28, 2024, RBC will purchase all of the issued and outstanding shares in the capital of HSBC Canada, resulting in RBC owning HSBC Canada.

2. At the closing of the Proposed Transaction, RBC will be combined with HSBC Canada and other HSBC entities and, as a result, the HSBC Canada-Affiliated Registrants will become subsidiaries of RBC.

3. Immediately thereafter, HSCI will be combined with RBC DI and RBC DS, HIFC will be combined with RMFI, and HPC will be combined with RBC PH&N.

4. Each of RBC DI, RBC DS, RMFI and RBC PH&N is incorporated and existing under the Canada Business Corporations Act (CBCA).

5. The head offices of RBC DI and RBC PH&N are located at 155 Wellington Street West, Toronto, Ontario. The head office of RBC DS is located at 200 Bay Street, Toronto, Ontario. The head office of RMFI is located at 88 Queen's Quay, Toronto, Ontario.

6. The Filers are not in default of any requirements of the securities legislation, commodity futures legislation or derivatives legislation in any of the Jurisdictions.

7. Each of HIFC and HPC are incorporated and existing under the CBCA. HSCI is incorporated and existing under the Business Corporations Act (Ontario).

8. The head offices of HIFC and HPC are located at 885 West Georgia Street, Vancouver, British Columbia. The head office of HSCI is located at 16 York Street, Toronto, Ontario.

Bulk Transfer from HSCI to RBC DI and RBC DS

9. HSCI is registered as an investment dealer in all of the provinces and territories of Canada, and in Québec as a derivatives dealer. The NRD number of HSCI is 17220. HSCI has approximately 63 registered dealing representatives. HSCI has 6 business locations.

10. RBC DI is registered as an investment dealer in all of the provinces and territories of Canada and as a derivatives dealer in Québec.

11. RBC DS is registered as an investment dealer in all of the provinces and territories of Canada, as a futures commission merchant in Ontario and Manitoba and as a derivatives dealer in Québec.

12. As a result of the Proposed Transaction, all individuals that fall within clause (a) of the definition of "registered individual" under National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) currently registered with HSCI, as well as the business locations of HSCI, will be transferred to RBC DI or RBC DS, as applicable. All of the current registrable activities of HSCI will become the responsibility of either RBC DI or RBC DS, as applicable. RBC DI and RBC DS will assume all of the existing registrations and approvals for all of the registered individuals and all of the business locations transferred from HSCI. The registered individuals transferred to RBC DI and RBC DS will carry on the same registrable activities carried on by them at HSCI.

Bulk Transfer from HIFC to RMFI

13. HIFC is registered as a mutual fund dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Québec and Saskatchewan. The NRD number of HIFC is 1680. HIFC has approximately 1084 registered dealing representatives. HIFC has 137 business locations.

14. RMFI is registered as a mutual fund dealer in all of the provinces and territories of Canada.

15. As a result of the Proposed Transaction, all individuals that fall within clause (a) of the definition of "registered individual" under NI 31-103 currently registered with HIFC, as well as the business locations of HIFC, will be transferred to RMFI. All of the current registrable activities of HIFC will become the responsibility of RMFI, except for a limited number of accounts that will be transferred to RBC DS. RMFI will assume all of the existing registrations and approvals for all of the registered individuals and all of the business locations transferred from HIFC. The registered individuals transferred to RMFI will carry on the same registrable activities carried on by them at HIFC.

Bulk Transfer from HPC to RBC PH&N

16. HPC is registered as a portfolio manager in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Québec and Saskatchewan. The NRD number of HPC is 45230. HPC has approximately 22 advising representatives and associate advising representatives. HPC has 4 business locations.

17. RBC PH&N is registered as a portfolio manager in all of the provinces and territories of Canada.

18. As a result of the Proposed Transaction, all individuals that fall within clause (a) of the definition of "registered individual" under NI 31-103 currently registered with HPC, as well as the business locations of HPC, will be transferred to RBC PH&N. All of the current registrable activities of HPC will become the responsibility of RBC PH&N. RBC PH&N will assume all of the existing registrations and approvals for all of the registered individuals and all of the business locations transferred from HPC. The registered individuals transferred to RBC PH&N will carry on the same registrable activities carried on by them at HPC. RBC PH&N will ensure compliance with all terms and conditions of registration applicable to all representatives whose registration is currently subject to terms and conditions at HPC.

Impact of the Bulk Transfers

19. From a registration perspective, the Filers do not anticipate a disruption to the Filers' ability to advise and/or trade on behalf of their clients as well as the HSBC Canada-Affiliated Registrants' clients upon closing of the Proposed Transaction and combination of their respective businesses. Clients of the HSBC Canada-Affiliated Registrants have been notified by way of a joint notice (i.e., between HSBC Canada-Affiliated Registrants and the Filers) of the Proposed Transaction and the integration with the respective Filer.

20. Given the significant number of business locations and individuals that are associated on the National Registration Database with the HSBC Canada-Affiliated Registrants and the Filers, it would be extremely difficult and unduly time-consuming to transfer each individual registration from the HSBC Canada-Affiliated Registrants to the Filers in accordance with the requirements set out in NI 33-109 in a manner so as not to interrupt the Filers' business activities as registrants if the Exemption Sought is not granted.

21. It is important that the transfers of the affected business locations and individuals occur on the date that the respective businesses of the Filers and the HSBC Canada-Affiliated Registrants are combined, in order to ensure that there is no lapse in registration. The Exemption Sought will provide for an efficient and timely transfer of information and reduce the risk of inadvertent errors caused by a large number of separate transactions and entries on the National Registration Database, thus reducing administrative costs.

22. The Filers acknowledge that the decision of the principal regulator to grant the Exemption Sought will not prejudice the authority of the regulators or securities regulatory authorities of the Jurisdictions (collectively, the Regulatory Authorities) to revoke, suspend or impose terms and conditions on the registration of one or more of the registered or permitted individuals covered by the Bulk Transfer. If, at any time before or after the completion of the Bulk Transfer, it is determined that a registered or permitted individuals covered by the Bulk Transfer is not suitable for registration or has failed to comply with applicable securities legislation or the registration of the individual is otherwise objectionable, the Filers will not rely on the decision granting the Exemption Sought to challenge or seek remedy against the authority or jurisdiction of any of the Regulatory Authorities to revoke, suspend or impose terms and conditions on the registration of one or more of the registered or permitted individuals covered by the Bulk Transfer.

23. The Exemption Sought will not be contrary to the public interest and will have no negative consequence on the ability of the Filers or the HSBC Canada-Affiliated Registrants to comply with all applicable regulatory requirements or the ability to satisfy obligations to their clients.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.