United States Steel and Carnegie Pension Fund - s. 74(1)
Headnote
Application for an exemption from the adviser registration requirements of subsection 25(1)(c) of the Securities Act (Ontario) granted to the applicant who, but for its status as a non-share capital membership corporation, would qualify for the adviser registration exemption under section 7.6 of Ontario Securities Commission Rule 35-502 -- Non-Resident Adviser made under the Securities Act (Ontario). Relief mirrors exemption available in section 7.6 of Ontario Securities Commission Rule 35-502 -- Non-Resident Advisers, subject to certain terms and conditions.
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am, ss. 25, 74.
Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED (the Act)
AND
IN THE MATTER OF
UNITED STATES STEEL AND
CARNEGIE PENSION FUND
ORDER
(Section 74(1) of the Act)
UPON the application (the Application) of United States Steel and Carnegie Pension Fund (the Applicant) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 74(1) of the Act, that the Applicant be exempt from the requirement under section 25(1)(c) of the Act to register with the Commission as an adviser;
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a non-profit membership corporation formed under the laws of the state of Pennsylvania, in the United States in 1914.
2. The Applicant was formed by the association of individual incorporators (the Members). Its business is conducted by a board of directors elected or appointed by the Members. Upon a vacancy in membership, new or substitute Members are appointed by the current Members of the Applicant.
3. Currently, and since its incorporation in 1914, the Members and the directors of the Applicant are employees, officers or directors of United States Steel Corporation (USS) and its affiliates or the Applicant.
4. As a Pennsylvania non-profit membership corporation and as provided in its charter, the Applicant cannot issue any securities.
5. The Applicant was established for the sole purpose of administering and maintaining the pension and benefit systems and funds for employees of USS and its affiliates.
6. The Applicant is registered as an investment adviser with the United States Securities and Exchange Commission (the SEC) under the United States Investment Advisers Act of 1940, as amended. Its principal office is located in New York, New York. The Applicant is not ordinarily resident in Ontario and does not have offices or employees in Canada.
7. USS is a corporation formed under the laws of the state of Delaware in the United States. Its principal business is the production of steel and it maintains operations, directly or through subsidiaries, in the United States, Canada and Central Europe. The shares of common stock of USS are registered under Section 12(b) of the U.S. Securities Exchange Act of 1934, as amended, and are listed on the New York Stock Exchange and the Chicago Stock Exchange. Its principal office is located in Pittsburgh, Pennsylvania.
8. USS sponsors certain pension and welfare plans in the United States for the benefit of its employees and the employees of its affiliates (collectively, the USS Pension Plans). The primary plans of USS for which the Applicant provides investment management services are: the United States Steel Corporation Plan for Employee Pension Benefits (Revision of 2003) with total assets as of January 31, 2008 of $7.3 billion and the U.S. Steel VEBA Trust which provides retiree life and medical benefits for employees represented by the United Steelworkers of America with total assets as of January 31, 2008 of $1.1 billion.
9. The Applicant acts as adviser for the USS Pension Plans.
10. U.S. Steel Canada Inc. (U.S. Steel Canada) is a corporation formed under the laws of Canada and its principal business is the production of steel in Canada. Following an acquisition transaction completed in October 2007, U.S. Steel Canada became an indirect, wholly-owned subsidiary of USS.
11. U.S. Steel Canada sponsors unregistered retirement arrangements funded pursuant to the Retirement Compensation Arrangement Trust Agreement between U.S. Steel Canada Inc. and CIBC Mellon dated May 1, 2003 which provide supplemental pension benefits in excess of the maximum pension benefits permitted for registered pension plans under the Income Tax Act (Canada), a group registered retirement savings plan, and the following registered pension plans in Canada for the benefit of the Canadian employees:
(a) U.S. Steel Canada Inc. Retirement Plan for USW Local 1005 Members at Hamilton Works, FSCO & CRA Registration No. 0354878;
(b) U.S. Steel Canada Inc. Retirement Plan for Salaried Employees at Hamilton Works, FSCO & CRA Registration No. 0338509;
(c) U.S. Steel Canada Inc. Retirement Plan for USW Local 8782 Members at Lake Erie Works, FSCO & CRA Registration No. 0698761;
(d) U.S. Steel Canada Inc. Retirement Plan for Salaried Employees at Lake Erie Works, FSCO & CRA Registration No. 0698753;
(e) Welland Pipe Pension Plan for Members of the National Automobile, Aerospace, Transportation and General Workers' Union of Canada (CAW-Canada) , FSCO & CRA Registration No. 1018878;
(f) Welland Pipe Ltd. Retirement Plan for Salaried Employees, FSCO & CRA Registration No. 1017185;
(g) Stelpipe Ltd. Bargaining Unit Pension Plan for Members of the National Automobile Aerospace, Transportation and General Workers' Union of Canada (CAW-Canada) , FSCO & CRA Registration No. 1018860;
(h) Stelpipe Ltd. Retirement Plan for Salaried Employees, FSCO & CRA Registration No. 1017177; and
(i) Retirement Plan for Mark C. Steinman, FSCO & CRA Registration No. 1056738.
(collectively, the Current Registered and Unregistered Plans),
12. U.S. Steel Canada wishes to retain the advisory services (the Proposed Advisory Services) of the Applicant in connection with the management of the investments of the Current Registered and Unregistered Plans and other registered or unregistered pension plans or other retirement savings plans which U.S. Steel Canada or its Canadian affiliates may establish or sponsor from time to time, for the benefit of Canadian employees (collectively, the U.S. Steel Canada Pension Plans).
13. Given the Applicant's experience and expertise in managing the USS Pension Plans, the nature of the Applicant's experience as the pension fund adviser for USS and its affiliates and that the Applicant was established for the sole purpose of acting as an adviser to the USS Pension Plans, it is most efficient and effective for the Applicant to also advise the U.S. Steel Canada Pension Plans.
14. The Applicant, as part of the Proposed Advisory Services to the U.S. Steel Canada Pension Plans, will provide advice with respect to Canadian and foreign securities.
15. Section 25(1)(c) of the Act requires that the Applicant register as an adviser with the Commission in respect of advising the U.S. Steel Canada Pension Plans or rely on appropriate exemptions from the adviser registration requirement.
16. Section 7.6 of the Ontario Securities Commission Rule 35-502 -- Non Resident Advisers (OSC Rule 35-502) provides an exemption from the adviser registration requirement for an adviser, not ordinarily resident in Ontario, in connection with acting as an adviser for a pension fund sponsored by an affiliate of the adviser for the benefit of the employees of the affiliate or affiliates of the affiliate.
17. The Applicant is not deemed to be a subsidiary of USS pursuant to section 1(4) of the Act, nor is it deemed to be an affiliate of U.S. Steel Canada by section 1(2) of the Act because the Applicant is a non-share capital corporation, it does not have any outstanding voting or equity securities and is therefore not owned or controlled by USS.
18. In practice and in substance the relationship between USS and the Applicant is comparable to companies deemed to be affiliates pursuant to section 1(2) of the Act given that:
(a) currently, and since its incorporation in 1914, the Members and the directors of the Applicant are employees, officers or directors of USS and its affiliates or the Applicant;
(b) the employees of the Applicant participate in the employee benefit plans maintained by USS as employees whose services are contracted by USS and, as such, are considered to be within the same control group as USS and its other affiliates for the purposes of those plans;
(c) the Applicant's charter provides that the sole purpose for which it is formed is to administer and maintain a system of benefits, pensions or aids to the employees of USS, or its successors, and of all corporations, partnerships, limited liability companies, and associations in which USS, or its successors, have an indirect or direct or formerly maintained a significant economic interest, and to administer and maintain any fund established in support of a system of benefits, pensions and aids for the employees of the aforementioned entities;
(d) the Applicant is the only company which provides pension fund advisory services to USS and its other affiliates; and
(e) while USS does not have any legal control over or equity ownership of the Applicant, USS and the Applicant consider themselves to be advisory affiliates and report themselves as such to the SEC.
19. The Applicant and U.S. Steel Canada have a relationship tantamount to being affiliates, as U.S. Steel Canada is deemed an affiliate of USS pursuant to section 1(2) of the Act.
20. The Applicant and U.S. Steel Canada are not deemed affiliates within the meaning of the Act because of the Applicant's status as a non-share capital membership corporation which does not issue securities. However, as members of the USS corporate group, the relationship between the Applicant and U.S. Steel Canada have sufficient attributes of affiliate status to be tantamount to being affiliates.
21. But for the affiliate requirement, the adviser registration exemption under Section 7.6 of OSC Rule 35-502 would be available to the Applicant as the Applicant:
(a) is not ordinarily resident in Ontario; and
(b) proposes to act as an adviser solely for the U.S. Steel Canada Pension Plans, sponsored by U.S. Steel Canada.
AND UPON the Commission being satisfied that it would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 74(1) of the Act that the Applicant (including its directors, partners, officers and employees) is exempted from the requirement of paragraph 25(1)(c) of the Act in respect of the Proposed Advisory Services provided to U.S. Steel Canada Pension Plans provided that the Applicant (including its directors, partners, officers and employees) complies with all applicable registration and other regulatory requirements of the securities legislation of the United States and if applicable, the securities legislation of other jurisdictions.
April 8, 2008