SINOPIA Asset Management S.A. - s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirements of subsection 22(1)(b) of the CFA in respect of acting as an adviser to certain non-Canadian investment funds and similar investment vehicles primarily offered outside of Canada in respect of trades in commodity futures contracts and commodity futures options primarily traded on commodity futures exchanges outside Canada and primarily cleared through clearing corporations outside Canada, subject to certain terms and conditions. Relief mirrors exemption available in section 7.10 of Ontario Securities Commission Rule 35-502 -- Non Resident Advisers.
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
SINOPIA ASSET MANAGEMENT S.A.
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of SINOPIA Asset Management S.A. (the Applicant) to the Ontario Securities Commission (the Commission or OSC) for an order, pursuant to section 80 of the CFA, that the Applicant (including its directors, officers and employees) be exempt, for a period of five years, from the adviser registration requirement in paragraph 22(1)(b) of the CFA in connection with the Applicant acting as an adviser to certain non-Canadian mutual funds, non-redeemable investment funds and similar investment vehicles (the Funds, as defined below) primarily offered outside of Canada in respect of trades in commodity futures contracts and commodity futures options primarily traded on commodity futures exchanges outside Canada and primarily cleared through clearing corporations outside Canada;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a corporation organized under the laws of France, with a head office located in Paris le Defense, France. The Applicant does not have an office in Canada and has no directors, officers or employees resident in Canada.
2. The Applicant is registered or otherwise qualified under the applicable laws of France to provide investment counselling and portfolio management services. The Applicant is not registered and has no current intention of becoming registered in any capacity under the CFA or under the Securities Act (Ontario) (OSA).
3. HSBC Global Asset Management (Canada) Limited (AMCA), formerly HSBC Investments (Canada) Limited, is a corporation organized under the Canada Business Corporations Act, with its head office located in Vancouver, British Columbia. AMCA is an affiliate of the Applicant. AMCA is registered under the OSA as an adviser in the categories of investment counsel and portfolio manager and in equivalent categories in all other Canadian provinces, other than Prince Edward Island. AMCA is also registered under the OSA as a dealer in the category of limited market dealer.
4. The Applicant acts as an investment adviser in respect of certain mutual funds, non-redeemable investment funds or similar investment vehicles, including the Oblig Inflation World Fund (Global Inflation Limited Bond Fund), and may in the future establish or advise certain other non-Canadian mutual funds, non-redeemable investment funds or similar investment vehicles (collectively, the Funds).
5. The Funds advised by the Applicant are and will be established outside of Canada. Securities of the Funds are and will be primarily offered outside of Canada to institutional investors and high net worth individuals. To the extent the securities of the Funds are offered to Canadian investors, such investors will each qualify as an "accredited investor" for the purposes of National Instrument 45-106 -- Prospectus and Registration Exemptions, and will only be distributed in Ontario through one or more registrants under the OSA, in reliance upon an exemption from the prospectus requirements of the OSA.
6. None of the Funds has any intention of becoming a reporting issuer under the OSA or under the securities legislation of any other jurisdiction in Canada.
7. The Funds may, as a part of their investment program, invest in commodity futures contracts and commodity futures options primarily traded on commodity futures exchanges outside Canada and primarily cleared through clearing corporations outside Canada.
8. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a representative or as a partner or an officer of a registered adviser and is acting on behalf of such registered adviser, and otherwise satisfies the applicable requirements specified in section 22 of the CFA. Under the CFA, "adviser" means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to trading in "contracts", and "contracts" means commodity futures contracts and commodity futures options.
9. Where securities of the Funds are offered by the Funds to an Ontario resident, and the Applicant engages in the business of advising the Funds as to the investing in or the buying or selling of securities, the Applicant may, by so acting, be interpreted as acting as an adviser, as defined in the OSA, to the Ontario resident who acquires the securities offered by the Funds, as suggested in the Notice of the Commission dated October 2, 1998, requesting comments on the then-proposed OSA Rule 35-502. Similarly, where securities of the Funds are offered to an Ontario resident, and the Applicant engages in the business of advising the Funds as to trading in commodity futures contracts or commodity futures options, the Applicant may, by so acting, also be interpreted as acting as an adviser (as defined in the CFA) to the Ontario resident who acquires the securities offered by the Funds.
10. 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 in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in section 25(1)(c) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 of Rule 35-502.
11. As would be required under section 7.10 of Rule 35-502, securities of the Funds are or will be:
(a) primarily offered outside of Canada;
(b) only distributed in Ontario through one or more registrants under the OSA; and
(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the OSA.
12. The Applicant, where required, is or will be appropriately registered or licensed or is, or will be, entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction.
13. Prior to purchasing any securities in one or more of the Funds, all investors in the Funds who are Ontario residents will receive disclosure that includes:
(a) a statement that there may be difficulty in enforcing any legal rights against the Funds or the Applicant (or the individual representatives of the Applicant) advising the Funds because such entity is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and
(b) a statement that the Applicant advising the Funds is not, or will not be, registered with or licensed by any regulatory authority in Canada and, accordingly, the protections that might otherwise be available to clients of a registered adviser under the OSA and the CFA will not be available to purchasers of securities of the Funds.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;
IT IS ORDERED pursuant to section 80 of the CFA, that the Applicant (including its directors, officers and employees) is exempted, for a period of five years, from the adviser registration requirement in paragraph 22(1)(b) of the CFA in connection with the Applicant acting as an adviser to the Funds provided that at the relevant time that such activities are engaged in:
(a) the Applicant is not ordinarily resident in Ontario;
(b) the Applicant is appropriately registered or licensed, or entitled to rely upon appropriate exemptions from registration or licensing requirements, in order to provide advice to the Funds pursuant to the applicable legislation of the Applicant's principal jurisdiction;
(c) the Funds invest in commodity futures contracts and commodity futures options primarily traded on commodity futures exchanges outside Canada and primarily cleared through clearing corporations outside Canada;
(d) securities of the Funds are:
(i) primarily offered outside of Canada,
(ii) only distributed in Ontario through one or more registrants under the OSA; and
(iii) distributed in Ontario, in reliance on an exemption from the prospectus requirements of the OSA; and
(e) prior to purchasing any securities in one or more of the Funds, all investors in the Funds who are Ontario residents shall have received disclosure that includes:
(i) a statement that there may be difficulty in enforcing any legal rights against the Funds or the Applicant (or the individual representatives of the Applicant) advising the Funds because such entity is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and
(ii) a statement that the Applicant advising the Funds is not, or will not be, registered with or licensed by any regulatory authority in Canada and, accordingly, the protections that might otherwise be available to clients of a registered adviser under the OSA and the CFA will not be available to purchasers of securities of the Funds.
October 31, 2008