TD Asset Management Inc.
Headnote
Pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Variation of relief from the prohibition on the use of corporate officer titles by certain registered individuals in respect of institutional clients to include certain accounts of affiliated non-individual non-permitted clients -- Relief does not extend to interactions by registered individuals with retail clients.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1, 13.18(2)(b) and 15.1(2).
June 2, 2022
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 TD ASSET MANAGEMENT INC. (THE FILER)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), the Filer and its Registered Individuals (as defined below) are exempt from the prohibition in paragraph 13.18(2)(b) of NI 31-103 that a registered individual may not use a corporate officer title when interacting with clients, unless the individual has been appointed to that corporate office by their sponsoring firm pursuant to applicable corporate law, in respect of Permitted Institutional Clients (as defined below) and clients holding Overflow Accounts (as defined below) (the Exemption Sought). The Exemption Sought revokes and replaces the Original Decision (as defined below).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11102Passport System (MI 11-102) is intended to be relied upon by the Filer and its Registered Individuals (as defined below) in each of the other provinces and territories of Canada (together with the Jurisdiction, the Jurisdictions) in respect of the Exemption Sought.
Interpretation
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of Ontario with its head office located in Toronto, Ontario. The Filer is a wholly owned subsidiary of The Toronto-Dominion Bank (TD Bank), which is a Schedule I bank formed and existing under the Bank Act (Canada).
2. The Filer is registered as a portfolio manager and an exempt market dealer in each of the provinces and territories of Canada, and is registered in Ontario in the category of commodity trading manager and in Québec as a derivatives portfolio manager. The Filer is also registered as an investment fund manager in Ontario, Saskatchewan, Québec and Newfoundland and Labrador.
3. Other than with respect to the subject of this decision as it relates to Overflow Accounts, the Filer is not in default of securities legislation in any of the Jurisdictions.
4. TD Bank and its subsidiaries, including the Filer, comprise a worldwide group of banks and financial services companies (collectively, TD Bank Group). Within TD Bank Group, there are several asset management firms and related subsidiaries that provide investment management services to institutional clients globally, including the Filer and Epoch Investment Partners Inc. (collectively, the TD Asset Management Affiliates).
5. The Filer offers managed accounts exclusively to sophisticated institutional investors, including pension funds, insurance companies, charitable organizations and corporations, as well as mutual funds and exchange-traded funds for which it acts as portfolio manager. The vast majority of the Filer's institutional clients are non-individual "permitted clients" as defined in NI 31-103 and the Filer's institutional clients also include non-individual "institutional clients" as defined in Rule 1201 of the Investment Industry Regulatory Organization of Canada (IIROC) (together, thePermitted Institutional Clients).
6. The Filer also has a small amount of accounts that it has opened at the request of certain Permitted Institutional Clients for related entities that are not individuals and which have the characteristics of an institutional investor except that they do not qualify as "permitted clients" under NI 31-103 or "institutional clients" under IIROC Rule 1201 only because they fall short of the applicable financial tests (each, an Overflow Account) and it anticipates that it may open additional Overflow Accounts for such entities in the future.
7. The individuals who make decisions on behalf of a Permitted Institutional Client also form the majority of the individuals who make decisions on behalf of each Overflow Account that is a related entity of the Permitted Institutional Client.
8. Overflow Accounts in aggregate do not exceed 5% of the Filer's total assets under management as at the date of this decision.
9. The Filer is the sponsoring firm for registered individuals that interact with clients and use a corporate officer title without being appointed to the corporate office of the Filer pursuant to applicable corporate law (the Registered Individuals). The number of Registered Individuals may increase or decrease from time to time as the business of the Filer changes. As of the date of this decision, the Filer has approximately 108 Registered Individuals. Other registered representatives of the Filer who interact with clients include individuals who are appointed to corporate offices pursuant to applicable corporate law.
10. The current titles used by the Registered Individuals include the words "Vice President", "Director" and "Managing Director", and the Registered Individuals may use additional corporate officer titles in the future (collectively, the Titles). The Titles used by the Registered Individuals are consistent with the titles used across the TD Asset Management Affiliates.
11. The Filer has a process in place for awarding the Titles, which sets out the criteria for each of the Titles. The Titles are based on criteria including seniority and experience, and a Registered Individual's sales activity or revenue generation is not a primary factor in the decision by the Filer to award one of the Titles.
12. The Registered Individuals will interact only with Permitted Institutional Clients and clients holding the Overflow Accounts.
13. Section 13.18 of NI 31-103 prohibits registered individuals in their client-facing relationships from, among other things, using titles or designations that could reasonably be expected to deceive or mislead existing and prospective clients. Paragraph 13.18(2)(b) of NI 31-103 specifically prohibits the use of corporate officer titles by registered individuals who interact with clients unless the individuals have been appointed to those corporate offices by their sponsoring firms pursuant to applicable corporate law.
14. There would be significant operational and human resources challenges for the Filer to comply with the prohibition in paragraph 13.18(2)(b). In addition, the Titles are widely used and recognized throughout the institutional segment of the financial services industry within Canada and globally, and being unable to use the Titles has the potential to put the Filer and its Registered Individuals at a competitive disadvantage as compared to non-Canadian firms that are not subject to the prohibition and who compete for the same institutional clients.
15. Given their nature and sophistication, the use of the Titles by the Registered Individuals would not be expected to deceive or mislead existing and prospective Permitted Institutional Clients or clients holding Overflow Accounts.
16. By a decision dated December 31, 2021, the Filer was granted the Exemption Sought with respect to Permitted Institutional Clients (the Original Decision). The Exemption Sought with this decision expands the Original Decision to allow interactions by Registered Individuals with clients holding Overflow Accounts.
17. For the reasons provided above, it would not be prejudicial to the public interest to grant the Exemption Sought and to revoke and replace the Original Decision with this decision.
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 and the Original Decision is revoked and replaced by this decision, provided that,
(a) when using the Titles, the Filer and its Registered Individuals interact only with existing and prospective clients that are exclusively Permitted Institutional Clients and clients holding Overflow Accounts; and
(b) the Overflow Accounts in aggregate do not exceed 5% of the Filer's total assets under management at the end of each fiscal year of the Filer.
This decision will terminate six months, or such other transition period as may be provided by law, after the coming into force of any amendment to NI 31-103 or other applicable securities law that affects the ability of the Registered Individuals to use the Titles in the circumstances described in this decision.