SSGA Funds Management, Inc. – s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) – Foreign adviser exempted from the adviser registration requirement in paragraph 22(1)(b) of the CFA where such adviser acts as an adviser in respect of commodity futures contracts or commodity futures options (Contracts) for certain investors in Ontario who meet the definition of “permitted client” in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations – Contracts are primarily traded on commodity futures exchanges outside of Canada and primarily cleared outside of Canada
Terms and conditions of exemption correspond to the relevant terms and conditions of the comparable exemption from the adviser registration requirement available to international advisers in respect of securities set out in section 8.26 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations – Exemption also subject to a “sunset clause” condition
Applicable Legislative Provisions
Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss. 1(1), 22(1)(b), 78(1) and 80.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 25(3).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1 and 8.26.
Ontario Securities Commission Rule 13-502 Fees.
Applicable Order
In the Matter of SSGA Funds Management, Inc., dated June 18, 2013.
IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, CHAPTER C.20, AS AMENDED
(THE CFA)
AND
IN THE MATTER OF
SSGA FUNDS MANAGEMENT, INC.
ORDER
(SECTION 80 OF THE CFA)
UPON the application (the Application) of SSGA Funds Management, Inc. (the Filer) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that the Filer and any individuals engaging in, or holding themselves out as engaging in, the business of advising others as to trading in Contracts (as defined below) on the Filer's behalf (the Representatives) be exempt, for a specified period of time, from the adviser registration requirement in paragraph 22(1)(b) of the CFA, subject to certain terms and conditions;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND WHEREAS for the purposes of this Order :
“CFA Advisor Registration Requirement” means the advisor registration requirement set forth in section 22(1)(b) of the CFA that prohibit a person or company from acting as an advisor with respect to trading in Contracts unless the person or company is registered in the appropriate category of registration under the CFA;
“CFAM” means the Commodity Futures Act (Manitoba);
“Contracts” has the meaning ascribed to that term in subsection 1(1) of the CFA;
“Foreign Contracts” means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;
“International Advisor Exemption” means the exemption from the securities advisor registration requirement provided in Section 8.26 of NI 31-103;
“NI 31-103” means National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations;
“OSA” means the Securities Act, R.S.O. 1990, c. S.5, as amended from time to time;
“OSA Adviser Registration Requirement” means the provisions of section 25 of the OSA that prohibit a person or company from acting as an adviser with respect to investing in, buying or selling securities unless the person or company is registered in the appropriate category of registration under the OSA;
“Permitted Clients” means a client in Ontario that is a "permitted client", as that term is defined in Section 1.1 of NI 31-103, except that for the purposes of this Order such definition shall exclude a person or company registered as an advisor or dealer under the securities legislation or derivatives legislation, including commodity futures legislation, of a jurisdiction of Canada;
“Representative” means any individual engaging in or holding himself or herself out as engaging in, the business of advising others as to trading in Contracts on the Filer’s behalf; and
“specified affiliate” has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.
AND UPON the Filer having represented to the Commission that:
1. The Filer is a corporation duly incorporated under the laws of the United States and is an indirect wholly owned subsidiary of State Street Corporation. The head office of the Filer is in Boston, Massachusetts, United States of America (U.S.A.).
2. The Filer is registered as an investment advisor under the Investment Advisers Act of 1940 (U.S. Advisers Act), as amended, and as a commodity trading advisor with the United States Commodity Futures Trading Commission (CFTC).
3. The Filer provides investment advisory and portfolio management services in respect of futures, options on futures and swaps to its clients generally traded on a U.S. Exchange and/or with a U.S. counterparty to certain of its clients.
4. State Street Global Advisors Trust Company (SSGA Trust Co.), successor to State Street Bank and Trust Company (SSBTC), an affiliate of the Filer, is a bank regulated in the conduct of its investment advisory business by the U.S. Federal Reserve Board and the Commonwealth of Massachusetts Commissioner of Banks and is a bank within the meaning of the U.S. Advisers Act. As such, it is not subject to the U.S. Advisers Act as the definition of an 'Investment Adviser" under that Act, excludes "a bank, or any bank holding company as defined in the Bank Holding Act of 1956".
5. SSGA Trust Co.’s head office is located in Boston, Massachusetts, U.S.A.
6. SSBTC, now SSGA Trust Co., historically provided asset management services to certain institutional clients in both the U.S. and abroad. Following passage into law on July 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a decision was made to register the Filer as a commodity trading adviser with the CFTC and delegate all advice regarding futures, options on futures and swaps (as defined in the United States) from SSBTC, now SSGA Trust Co., to the Filer. The personnel providing the advice did not change as a result of the regulatory administrative decision to register the Filer and delegate the advice. The personnel at SSGA Trust Co. who provide advice relating to securities are the same as those at the Filer who provide commodity trading advisory services.
7. SSGA Trust Co. offers its advisory services to clients in a broad array of fixed income, equity and other investment strategies.
8. Certain SSGA Trust Co. clients may desire commodity trading advice in connection with their overall strategy. To that end, SSGA Trust Co. delegates to the Filer all discretionary commodity trading advice, with all ancillary permissions and authorities necessary for the Filer to carry out such activities.
9. SSGA Trust Co. is not registered in Canada as an advisor with any securities regulatory authority. In all provinces, SSGA Trust Co. can only provide advice to permitted clients (as that term is defined in Section 1.1. of NI 31-103), in respect of foreign securities in reliance on the International Advisor Exemption, except in Ontario it is also permitted to provide advice through its Canadian branch to Ontario clients, in which case it can rely on the exemption from registration as an advisor available for Schedule III banks contained in section 35.1 of the OSA, although it has no current intention to do so.
10. In addition to SSGA Trust Co. providing advice in respect of securities, certain investors that are Permitted Clients, which may notably include managed accounts, investment funds, pension plans, registered charities and insurance companies, may seek to engage the Filer as an investment adviser for the purposes of implementing certain investment strategies, including providing advice as to trading in Foreign Contracts and managing trading in Foreign Contracts through discretionary authority.
11. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser in respect of Contracts unless the person or company is registered as an adviser under the CFA, or is registered as a representative or as partner or an officer of a registered adviser and is acting on behalf of a registered adviser.
12. The Filer is not registered in any capacity under the CFA.
13. In respect of clients in Ontario, the Filer acted as an advisor in respect of Contracts in reliance on a decision by the Commission dated as of June 18, 2013 (the Previous Decision), granting an order, pursuant to Section 80 of the CFA exempting the Filer, and its Representatives, for a period of five years that expired on June 18, 2018, from the CFA Advisor Registration Requirement, subject to certain terms and conditions. The Filer has not acted as an advisor for any Canadian clients in respect of Contracts since the expiration of the Previous Decision
14. The Filer is not in default of securities legislation, commodity futures legislation or derivatives legislation of any jurisdiction in Canada. The Filer is in compliance in all material respects with the securities laws, commodity futures laws and derivatives laws of United States.
15. Were the proposed advisory services limited to securities (as defined in subsection 1(1) of the OSA), the Filer would be able to rely on the International Advisor Exemption and carry out such activities for Permitted Clients on a basis that would be exempt from the OSA Adviser Registration Requirement.
16. There is currently no exemption from the CFA Advisor Registration Requirement that is equivalent to the International Advisor Exemption. Consequently, in order to advise Permitted Clients as to trading in Foreign Contracts, in the absence of this Order, the Filer would be required to satisfy the CFA Adviser Registration Requirement by applying for and obtaining registration in Ontario as an adviser under the CFA in the category of commodity trading manager.
17. The Filer confirms that there are currently no regulatory actions of the type contemplated by the Notice of Regulatory Action attached as Appendix "B" hereto, except as otherwise disclosed to the OSC.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to make this Order;
IT IS ORDERED, pursuant to section 80 of the CFA, that the Filer and its Representatives are exempt from the adviser registration requirement in paragraph 22(1)(b) of the CFA in respect of providing advice to Permitted Clients as to the trading of Foreign Contracts provided that:
a) the Filer provides advice to Permitted Clients only as to trading in Foreign Contracts and does not advise any Permitted Client as to trading in Contracts that are not Foreign Contracts, unless providing such advice is incidental to its providing advice on Foreign Contracts;
b) the Filer’s head office or principal place of business remains in the United States;
c) the Filer is registered in a category of registration, or operates under an exemption from registration, under the applicable securities or derivatives legislation, including commodity futures legislation of the United States that permits it to carry on the activities in the United States that registration under the CFA as an adviser in the category of commodity trading manager would permit it to carry on in Ontario;
d) the Filer continues to engage in the business of an advisor (as defined in the CFA) in the United States;
e) as at the end of the Filer's most recently completed financial year, not more than 10% of the aggregate consolidated gross revenue of the Filer, its affiliates and its affiliated partnerships (excluding the gross revenue of an affiliate or affiliated partnership of the Applicant if the affiliate or affiliated partnership is registered under securities legislation, commodity futures legislation or derivatives legislation of a jurisdiction of Canada) was derived from the portfolio management activities of the Filer, its affiliates and its affiliated partnerships in Canada (which, for greater certainty, includes both securities-related and commodity futures related activities);
f) before advising a Permitted Client with respect to Foreign Contracts, the Filer notifies the Permitted Client of all of the following:
i. the Filer is not registered in Ontario to provide the advice described in paragraph (a), of this Order;
ii. the foreign jurisdiction in which the Filer's head office or principal place of business is located;
iii. all or substantially all of the Filer's assets may be situated outside of Canada;
iv. there may be difficulty enforcing legal rights against the Filer because of the above; and
v. the name and address of the Filer 's agent for service of process in Ontario;
g) the Filer has submitted to the Commission a completed Submission to Jurisdiction and Appointment of Agent for Service in the form attached as Appendix "A" hereto;
h) the Filer notifies the Commission of any regulatory action initiated after the date of this Order with respect to the Filer or, to the best of the Applicant’s knowledge and after reasonable inquiry, any predecessors or specified affiliates of the Filer, by completing and filing Appendix "B" hereto within 10 days of the commencement of each such action;
i) if the Filer is not subject to the requirement to pay a participation fee in Ontario because it is not registered under the OSA and does not rely on the International Advisor Exemption, by December 31st of each year, the Filer pays a participation fee based on its specified Ontario revenues for its previous financial year in compliance with the requirements of Part 3 and section 6.4 of Ontario Securities Commission Rule 13-502 Fees as if the Filer relied on the International Adviser Exemption; and
IT IS FURTHER ORDERED that this Order will terminate on the earliest of:
a) the expiry of any transition period as may be provided by law, after the effective date of the repeal of the CFA;
b) six months, or such other transition period as may be provided by law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) or Ontario securities law (as defined in the OSA) that affects the ability of the Filer to act as an advisor to a Permitted Client; and
c) five years after the date of this Order.
Dated at Toronto this 28th day of August, 2018
“Deborah Leckman” “Poonam Puri”
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission
APPENDIX “A”
SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE
INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM
REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO
1. Name of person or company ("International Firm"):
2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:
3. Jurisdiction of incorporation of the International Firm:
4. Head office address of the International Firm:
5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.
Name:
E-mail address:
Phone:
Fax:
6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):
Section 8.18 [international dealer]
Section 8.26 [international adviser]
Other [specify]:
7. Name of agent for service of process (the "Agent for Service"):
8. Address for service of process on the Agent for Service:
9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.
10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.
11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator
a. a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated;
b. an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service;
c. a notice detailing a change to any information submitted in this form, other than the name or above address of the Agent for Service, no later than the 30th day after the change.
12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.
Dated: _______________
________________________________________________
(Signature of the International Firm or authorized signatory)
________________________________________________
(Name of signatory)
________________________________________________
(Title of signatory)
Acceptance
The undersigned accepts the appointment as Agent for Service of SSGA Funds Management, Inc. under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.
Dated: ____________________
STATE STREET GLOBAL ADVISORS, LTD.
________________________________________________
(Signature of the Agent for Service or authorized signatory)
________________________________________________
(Name of signatory)
________________________________________________
(Title of signatory)
This form, and notice of a change to any information submitted in this form, is to be submitted through the Ontario Securities Commission’s Electronic Filing Portal:
https://www.osc.gov.on.ca/filings
APPENDIX “B”
NOTICE OF REGULATORY ACTION
1. Settlement Agreements
Has the firm, or any predecessors or specified affiliates[1] of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ No _____
If yes, provide the following information for each settlement agreement:
|
Name of entity |
|
Regulator/organization |
|
Date of settlement (yyyy/mm/dd) |
|
Details of settlement |
|
Jurisdiction |
2. Disciplinary History
Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:
|
Yes |
No |
|
|
a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization? |
___ |
___ |
|
(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission? |
___ |
___ |
|
(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm? |
___ |
___ |
|
(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm? |
___ |
___ |
|
(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm? |
___ |
___ |
|
(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm? |
___ |
___ |
|
(g) Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)? |
___ |
___ |
If yes, provide the following information for each action:
|
Name of entity |
|
|
Type of action |
|
|
Regulator/organization |
|
|
Date of action (yyyy/mm/dd) |
Reason for action |
|
Jurisdiction |
|
3. Ongoing Investigations
Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliates is the subject?
Yes _____ No _____
If yes, provide the following information for each investigation:
|
Name of entity |
|
Reason or purpose of investigation |
|
Regulator/organization |
|
Date investigation commenced (yyyy/mm/dd) |
|
Jurisdiction |
Authorized signing officer or partner
|
Name of firm: |
|
Name of firm’s authorized signing officer or partner |
|
Title of firm’s authorized signing officer or partner |
|
Signature |
|
Date (yyyy/mm/dd) |
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
|
Name of witness |
|
Title of witness |
|
Signature |
|
Date (yyyy/mm/dd) |
This form is to be submitted through the Ontario Securities Commission’s Electronic Filing Portal:
[1] In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.