RBC Dominion Securities Inc. - s. 74(1)
Headnote
Subsection 74(1) of the Securities Act (Ontario) -- relief from the registration requirements of paragraph 25(1)(a) of the Act granted to non-Ontario registered salespersons of the Applicant trading on behalf of an Ontario charitable foundation in connection with a charitable gift program.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1)(a), 74(1).
IN THE MATTER OF
THE SECURITIES ACT
R.S.O 1990, CHAPTER S.5, AS AMENDED
(the Act)
AND
IN THE MATTER OF
RBC DOMINION SECURITIES INC.
ORDER
(Subsection 74(1))
UPON the application (the Application) of RBC Dominion Securities Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 74(1) of the Act that the registration requirements contained in paragraph 25(1)(a) of the Act (the Dealer Registration Requirements) shall not apply to the salespersons of the Applicant (the Salespersons) in respect of trading on behalf of a public foundation (the Foundation, as described below) in connection with the Applicant's charitable gift program (the Charitable Gift Program, as described below).
AND UPON considering the Application and the recommendation of the Staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
The Applicant
1. The Applicant is a corporation governed by the laws of Canada and is registered as a dealer in the category of investment dealer in Ontario and in all other provinces and territories in Canada. The Applicant is also a member of the Investment Dealers Association of Canada (the IDA).
The Salespersons
2. Each Salesperson is employed by the Applicant and is registered in one or more provinces or territories in Canada as a salesperson of the Applicant. Each Salesperson is also approved by the IDA as a registered representative.
The Foundation
3. The Foundation is an independent non-profit charitable organization with registered charitable status as a public foundation under the Income Tax Act (Canada) (the Tax Act). The head office of the Foundation is in Ontario.
4. The purpose of the Foundation is to support charities and other permitted entities as defined under the Tax Act (Qualified Donees) through charitable gifts received from donors. The Foundation specializes in the management and administration of donor-advised charitable gift funds and has entered into an agreement with the Applicant in connection with its Charitable Gift Program.
The Charitable Gift Program
5. Prospective charitable donors to the Foundation will, prior to making a donation, receive a program guide (a Program Guide) which will outline the details of the operation of the Charitable Gift Program and its fees.
6. Donors make an irrevocable charitable gift of cash and/or securities to the Foundation (a Donor) and receive a tax receipt generally equal to the cash, or fair market value of securities, donated to the Foundation. Securities donated to the Foundation will be liquidated by the Applicant.
7. The Foundation will deposit the proceeds of each Donor's gift into an individual account which it will open with the Applicant (each, an Account). Donors may also make subsequent gifts to the Foundation under the Charitable Gift Program from time-to-time.
8. Each Account will be opened in the name of the Foundation in a manner in which the Donor can be identified. The Donor, or his/her successor or designate, will be responsible for providing the Foundation with recommendations regarding the disbursements from the Account to Qualified Donees.
9. In order to comply with the Tax Act, the Charitable Gift Program will require that 95% of each donation be subject to a ten year hold period by the Foundation. During the hold period, each Account will have an annual disbursement percentage determined by the Foundation, which must be disbursed to Qualified Donees each year. After the hold period, if the Donor wishes, the annual disbursement percentage may be increased by the Foundation.
10. Legislation applicable to the Foundation requires that all donated assets be invested in accordance with the "prudent investor" standard. In accordance with this requirement, the Foundation will pre-select a list of mutual funds and portfolio mandates for managed accounts offered by the Applicant under the Charitable Gift Program (the Eligible Investment Vehicles). Every Account opened as a result of a donation under the Charitable Gift Program will be restricted to investments in one or more Eligible Investment Vehicles. Each of the Eligible Investment Vehicles is expected to be managed on either a fixed income or balanced portfolio basis. The Donor will be provided an opportunity to express to the Foundation his or her preference (if any) regarding which Eligible Investment Vehicles the Account should be invested in from time to time.
11. In the event that an Eligible Investment Vehicle is a mutual fund, the mutual fund will be qualified by way of a prospectus in accordance with National Instrument 81-101 and available for distribution in Ontario and the province or territory in which the Donor resides.
12. The Salesperson that solicits the Donor's gift to the Foundation will initially service the Account set up with the proceeds of that Donor's gift and may also have an ongoing relationship with the Donor. The Salesperson may make a recommendation to the Donor as to the initial choice of Eligible Investment Vehicle and may subsequently recommend changes to the choice of Eligible Investment Vehicle.
13. The Foundation will have final authority over all investment decisions in each Account, except Accounts that are opened as managed accounts. In particular, after receiving the preferences of a Donor, the Foundation will make all final decisions on investments for the Account, and will send trading instructions to the Salesperson servicing that Account.
14. In the case where an Account is a managed account, investment decisions will be made by the Salesperson responsible for the Account, in accordance with the investment objectives of the Account pursuant to the portfolio mandate(s) selected by the Donor as an Eligible Investment Vehicle. The Foundation has the ability to select another Salesperson to manage the managed account. Each Salesperson exercising discretionary authority over an Account that is a managed account will be appropriately qualified to provide portfolio management services.
15. The Applicant will deliver trade confirmations and account statements (Account Statements) to the Foundation with respect to each Account as required under the securities legislation in the jurisdiction where such Account is located. The Applicant will make a copy of any or all Account Statements available to the applicable Donor upon request. Further, regardless of whether a Donor requests copies of Account Statements, the Foundation will deliver a quarterly Account Statement to each Donor.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS HEREBY ORDERED, pursuant to subsection 74(1) of the Act, that the Dealer Registration Requirements shall not apply to the Salespersons in respect of registrable activities undertaken on behalf of the Foundation in connection with the Applicant's Charitable Gift Program, provided that:
(i) each Salesperson undertaking registrable activities on behalf of the Foundation is registered in one or more provinces or territories in Canada as a salesperson of the Applicant and is approved by the IDA as a registered representative;
(ii) each Salesperson exercising discretionary authority over a managed account in connection with the Charitable Gift Program will be appropriately qualified to provide portfolio management services;
(iii) all fees, expenses and commissions related to the Charitable Gift Program will be fully disclosed in the Program Guide, or equivalent document, and the Program Guide, or equivalent document, shall be provided to every Donor by the Applicant or the applicable Salesperson prior to the Donor making a gift to the Foundation;
(iv) the Donor making a gift to the Foundation receives a duplicate copy of any or all Account Statements delivered to the Foundation by the Applicant upon request; and
(v) the Foundation delivers a quarterly Account Statement to each Donor.
July 25, 2006