Sun Life Global Investments (Canada) Inc. et al. -- 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 granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).
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
SUN LIFE GLOBAL INVESTMENTS (CANADA) INC.
AND
SUN CAPITAL ADVISERS LLC
AND
MFS INSTITUTIONAL ADVISORS, INC.
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of Sun Life Global Investments (Canada) Inc. (the Principal Adviser) and Sun Capital Advisers LLC and MFS Institutional Advisors Inc. (each a Sub-Adviser and collectively the Sub-Advisers) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that the Sub-Advisers and any individuals engaging in or holding themselves out as engaging in the business of advising others when acting on behalf of the Sub-Advisers in respect of the Proposed Advisory Services (as defined below) be exempt, for a period of five years, from the adviser registration requirements of paragraph 22(1)(b) of the CFA when acting as an adviser for the Principal Adviser in respect of Clients (as defined below) in respect of commodity futures contracts and commodity futures options (collectively, Contracts) traded on commodity futures exchanges and cleared through clearing corporations.
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Sub-Advisers and the Principal Adviser having represented to the Commission that, as the case may be:
Principal Adviser
1. The Principal Adviser is a corporation established under the federal laws of Canada and its principal business office is in Toronto, Ontario.
2. The Principal Adviser is registered with the Commission as an adviser in the category of portfolio manager pursuant to the Securities Act (Ontario) ("OSA"). The Principal Adviser is, or will be, registered with the Commission as an adviser in the category of commodity trading manager pursuant to the CFA.
Sub-Advisers
Sun Capital Advisers LLC
3. Sun Capital Advisers LLC, an affiliate of the Principal Adviser, is a limited liability company formed under the laws of the State of Delaware, United States, with its principal office and place of business in Wellesley Hills, Massachusetts.
4. Sun Capital Advisers LLC is currently:
a) registered as an investment adviser with the United States Securities and Exchange Commission;
b) exempt from registration as a commodity trading adviser and not required to register as a commodity pool operator with the U.S. Commodity Futures Trading Commission;
c) appropriately registered or licensed, or is entitled to rely on appropriate exemptions from such registrations or licences, to provide advice pursuant to the applicable legislation of its principal jurisdiction; and
d) not resident of any province or territory of Canada.
MFS Institutional Advisors, Inc
5. MFS Institutional Advisors, Inc., an affiliate of the Principal Adviser, is a corporation formed under the laws of the State of Delaware, United States, with its principal office and place of business in Boston, Massachusetts.
6. MFS Institutional Advisors, Inc. is currently:
a) registered as an investment adviser with the United States Securities and Exchange Commission;
b) exempt from registration as a commodity trading adviser and not required to register as a commodity pool operator with the U.S. Commodity Futures Trading Commission;
c) appropriately registered or licensed, or is entitled to rely on appropriate exemptions from such registrations or licences, to provide advice pursuant to the applicable legislation of its principal jurisdiction; and
d) not resident of any province or territory of Canada.
The Clients
7. The Principal Adviser may provide discretionary portfolio management services in Ontario with respect to Contracts to (i) investment funds, the securities of which are qualified by prospectus for distribution to the public in Ontario and the other provinces of Canada (the "Investment Funds"); (ii) pooled funds, the securities of which are sold on a private placement basis in Ontario and the other provinces and territories of Canada pursuant to prospectus exemptions and registration exemptions (where available) contained in National Instrument 45-106 -- Prospectus and Registration Exemptions (the "Pooled Funds"); and (iii) managed accounts of clients who have entered into investment management agreements with the Principal Adviser (the "Managed Accounts") (each of the Investment Funds, Pooled Funds and Managed Accounts is referred to individually as a "Client" and collectively as the "Clients").
Proposed Advisory Services
8. In connection with the Principal Adviser acting as an adviser to Clients in respect of the purchase or sale of Contracts, the Principal Adviser may from time to time retain one or both of the Sub-Advisers to act in each case as an adviser to the Principal Adviser under the terms of a written agreement made between the Principal Adviser and the Sub-Adviser so retained (the "Proposed Advisory Services") by exercising discretionary authority on behalf of the Principal Adviser, in respect of the investment portfolio of Clients, including discretionary authority to buy or sell Contracts for the Clients, provided that:
(a) in each case, the Contract must be cleared through an acceptable clearing corporation; and
(b) such investments are consistent with the investment objectives and strategies of the applicable Client.
9. 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 partner or an officer of a registered adviser and is acting on behalf of a registered adviser. 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.
10. By providing the Proposed Advisory Services, each Sub-Adviser and any individuals acting on behalf of such Sub-Adviser in respect of the Proposed Advisory Services (the "Sub-Adviser Individuals") will be engaging in or holding themselves out as engaging in the business or advising others with respect to commodity futures contracts and commodity futures options and, in the absence of being granted the requested relief, would be required to register as an adviser under the CFA.
11. 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 similar to the exemption from the adviser registration requirement in section 25(3) of the OSA provided under section 7.3 of OSC Rule 35-502 Non-Resident Advisers (Rule 35-502).
12. The relationship among the Principal Adviser, each Sub-Adviser and the Clients will satisfy the requirements of section 7.3 of Rule 35-502.
13. As would be required under section 7.3 of Rule 35-502, in each case:
(a) the duties and obligations of the Sub-Adviser will be set out in a written agreement with the Principal Adviser;
(b) the Principal Adviser will contractually agree with each Client to be responsible for any loss that arises out of the 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 Principal Adviser and the relevant Client; or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (together with (i), the "Assumed Obligations"); and
(c) the Principal Adviser cannot be relieved by the Client from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet its Assumed Obligations.
14. Each Sub-Adviser will only provide the Proposed Advisory Services so long as the Principal Adviser is, and remains, registered under the CFA as an adviser in the category of commodity trading manager (or a successor category of registration or is exempt from such registration).
15. The prospectus for each Investment Fund will include the following disclosure:
(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of a Sub-Adviser to meet its Assumed Obligations; and
(b) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser advising the Investment Fund, because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
16. Prior to purchasing Contracts for a Pooled Fund or Managed Account that resides in Ontario, the Client will receive written disclosure that includes:
(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of a Sub-Adviser to meet its Assumed Obligations; and
(b) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser advising the relevant Pooled Fund or Managed Account, because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
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 each Sub-Adviser and its Sub-Adviser Individuals are exempted from the adviser registration requirement in paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided to the Principal Adviser for a period of five years, provided that at the relevant time that such activities are engaged in:
(a) the Principal Adviser is registered under the CFA as an adviser in the category of commodity trading manager;
(b) the Sub-Adviser and its Sub-Adviser Individuals are appropriately registered or licensed, or are entitled to rely on appropriate exemptions from such registrations or licences, to provide advice pursuant to the applicable legislation of their principal jurisdiction;
(c) the obligations and duties of the Sub-Adviser are set out in a written agreement with the Principal Adviser;
(d) the Principal Adviser has contractually agreed with each Client to be responsible for any loss that arises out of any failure of the Sub-Adviser to meet its Assumed Obligations;
(e) the Principal Adviser cannot be relieved by the Clients from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet its Assumed Obligations;
(f) the prospectus for each Investment Fund will include the following disclosure:
(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet its Assumed Obligations; and
(ii) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser advising the Investment Fund, because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and
(g) prior to purchasing any Contracts for a Pooled Fund or a Managed Account that are Ontario residents, such Pooled Fund or Managed Account will receive written disclosure that includes:
(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the Sub-Adviser to meet its Assumed Obligations; and
(ii) a statement that there may be difficulty in enforcing any legal rights against the Sub-Adviser advising the relevant Pooled Fund or Managed Account, because the Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
September 3, 2010