AGF Investments Inc. and Highstreet Asset Management Inc.
Headnote
Under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual is registered as a dealing, advising or associate advising representative of another registered firm. The Filers are affiliated entities and have valid business reasons for the individual to be registered with both firms. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the prohibition.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1 and 15.1.
March 20, 2023
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 AGF INVESTMENTS INC. (AGF) AND HIGHSTREET ASSET MANAGEMENT INC. (Highstreet, and together with AGF, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the restriction in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the Dual Registration Restriction), pursuant to section 15.1 of NI 31-103, to permit Mark Stacey (the Representative) to be registered as an advising representative of each of AGF and Highstreet (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
a) the Ontario Securities Commission (OSC) is the principal regulator for this application; and
b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filers in each province and territory of Canada (together with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filers:
1. Highstreet is a wholly owned subsidiary of AGF. Highstreet is registered as a portfolio manager and as an exempt market dealer in each of the Jurisdictions. The head office of Highstreet is in London, Ontario.
2. As a portfolio manager, Highstreet is authorized to provide discretionary investment management services to high-net-worth clients. As an exempt market dealer, Highstreet is authorized to distribute AGF's Highstreet Pooled Funds to high-net-worth clients pursuant to certain prospectus exemptions.
3. AGF is a wholly owned subsidiary of AGF Management Limited and is registered as an exempt market dealer in Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan, as a portfolio manager in each of the Jurisdictions, as an investment fund manager in Alberta, British Columbia, Newfoundland and Labrador, Ontario and Québec, as a mutual fund dealer in British Columbia, Ontario and Québec and as a commodity trading manager in Ontario. The head office of AGF is in Toronto, Ontario.
4. AGF is the Investment Fund Manager, Portfolio Manager and Trustee of the Highstreet Pooled Funds.
5. Since Highstreet is a wholly owned subsidiary of AGF, each such entity is an affiliate of the other and are affiliated registrants.
6. The Representative is a resident of London, Ontario and is a registered advising representative and dealing representative of Highstreet. In his role as Senior Director of Investments, Private Wealth, the Representative works directly with Highstreet Private Client Team, providing insight on macro-economic views and in-depth knowledge of the Highstreet Pooled Funds. The Representative also provides discretionary asset management to a client portfolio and supervisory oversight to the Highstreet relationship managers to help better analyze asset mix, risk tolerance and allocations to Highstreet Pooled Funds. Additionally, the Representative is a member of the Highstreet Private Client Management Committee ("Committee"). The Committee provides guidance and oversight on legal, compliance, governance, product and marketing and other operational matters related to the successful execution of the growth strategy.
7. AGF requires the Representative's investment management capabilities, leadership, and expertise as a member of the various AGF asset allocation committees, including AGF's Highstreet Balanced Fund Committee. The Representative was previously registered as an advising representative of AGF. In his role of Co-CIO AGFiQ Quantitative Investing, Head of Portfolio Management, he led the firm's investment management functions for AGF's quantitative investment platform, AGFiQ and the Highstreet Pooled Funds. The Representative has previously provided asset allocation and investment advice to the Highstreet Pooled Funds and other AGF funds and is intimately familiar with their investment processes and strategies. His continued involvement in the asset allocation committees is in the best interest of the investors of AGF products, including the Highstreet Pooled Funds.
8. Pursuant to exemptive relief granted on January 14, 2022 to AGF and AGFWave Asset Management Inc. (AGFWave), the Representative was dually registered as an advising representative of AGFWave (the January 2022 Decision).
9. The Representative is no longer registered as an advising representative of AGFWave and his registration is no longer in reliance on the January 2022 Decision.
10. If the Exemption Sought is granted, the Representative will register as an advising representative of AGF, while maintaining his registration as an advising representative of Highstreet. The Representative will be appointed to the position of registered advising representative (portfolio manager) with AGF.
11. AGF requires the investment management capabilities and expertise of the Representative to achieve its business objectives. The Representative is familiar with the business model of each of AGF and Highstreet and is in the best position to act in the existing and proposed dual roles with AGF and Highstreet.
12. Dual registration would allow the Representative to continue to act as an advising representative of Highstreet while also acting as an advising representative of AGF.
13. The terms and conditions, if any, on the Representative's registration as an advising representative of Highstreet would be the same as under his advising representative registration with AGF. As of the date hereof, there are no terms and conditions on the Representative's registration as an advising representative of Highstreet.
14. The Representative will be subject to supervision by, and the applicable compliance requirements of, both Filers.
15. Each of the Filers' respective Ultimate Designated Person will ensure that the Representative has sufficient time and resources to adequately serve each Filer and its clients. Each of the Filers' respective Chief Compliance Officers and management will ensure the Representative has sufficient time and resources to adequately serve each Filer and its clients.
16. Neither AGF nor Highstreet is in default of any requirement of securities or derivatives legislation in any of the Jurisdictions.
17. The dual registration of the Representative will not give rise to the conflicts of interest that may be present in a similar arrangement involving unrelated, arm's length firms. The interests of the Filers are aligned, and because the role of the Representative will be incremental to his existing roles with both Highstreet and AGF and to support the business activities and interests of the Filers, the potential for conflicts of interests is remote. Further there is little expected overlap of the business mandates, client base or investment strategies of Highstreet and AGF.
18. Each Filer has adequate policies and procedures in place to address any potential conflicts of interest that may arise because of the dual registration of the Representative and will be able to appropriately deal with any such conflicts, should they arise.
19. There is adequate supervision of any identified potential conflicts of interest to ensure that the Representative, and each of the Filers, can take appropriate measures.
20. The Filers do not expect that the dual registration of the Representative will create significant additional work and are confident that the Representative will have sufficient time to adequately serve both firms.
21. The relationship between Highstreet and AGF and the fact that the Representative is dually registered with both Highstreet and AGF will be fully disclosed to clients and prospective clients of Highstreet and AGF, as applicable. The Filers will provide written disclosure to the investors of the funds and accounts, as applicable, managed by each Filer of the affiliated registrant relationship between the Filers as well as the dual registration of the Representative in disclosure documents provided by any affected fund to their investors.
22. The Representative will act in the best interest of all clients of each Filer and will deal fairly, honestly and in good faith with these clients.
23. If the Exemption Sought is granted, it will not be relied upon by the Filers if the Representative is sponsored for registration in any of the Jurisdictions as an advising representative or dealing representative of another registered firm.
24. In the absence of the Exemption Sought, the Filers would be prohibited by the Dual Registration Restriction from permitting the Representative to be registered as an advising representative of each Filer, even though the Filers have controls and compliance procedures in place to deal with such advising and associate advising activities.
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 on the following conditions:
i. The Representative is subject to supervision by, and the applicable compliance requirements of, both Filers;
ii. The Chief Compliance Officer and Ultimate Designated Person of each Filer ensures that the Representative has sufficient time and resources to adequately service each Filer and its respective clients;
iii. The Filers each have adequate policies and procedures in place to address any potential conflicts of interest that may arise as a result of the dual registration of the Representative and deal appropriately with any such conflicts; and
iv. The relationship between the Filers and the fact that the Representative is dually registered with both is fully disclosed in writing to clients of each of them that deal with the Representative.