Bank One, N.A. - MRRS Decision

Headnote

MRRS - Underwriter and advisor registration relief for Schedule III Bank - prospectus and registration relief for tradeswhere Schedule III Bank purchasing as principal and first trade relief for Schedule III Bank - prospectus and registrationrelief for trades of bonds, debentures and other evidences of indebtedness of or guaranteed by Schedule III Bankprovided trades involve only specified purchasers - prospectus and registration relief for evidences of deposits bySchedule III Bank to specified purchasers - fee relief for trades made in reliance on Decision.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.S.5, as am. ss. 25(1)(a)&(c), 34(a), 35(1)(3)(i), 35(2)1(c), 53(i), 72(1)(a)(i), 73(1)(a), 74(1),147.

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am. ss. 151, 206, 218, Schedule 1 s. 28.

IN THE MATTER OF THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,

ONTARIO, QUEBEC, NEW BRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND, NEWFOUNDLAND, YUKON TERRITORY,

NORTHWEST TERRITORIES, AND NUNAVUT TERRITORY

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

BANK ONE, NA

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provincesof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince EdwardIsland, Newfoundland and Labrador, Nunavut, Yukon and Northwest Territories (the "Jurisdictions") has received anapplication (the "Application") from Bank One, NA ("Bank One") for a decision pursuant to the securities legislation ofthe Jurisdictions (the "Legislation") that Bank One is exempt from various registration, prospectus and filing requirementsof the Legislation in connection with the banking business to be carried on by Bank One in the Jurisdictions;

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS it has been represented by Bank One to the Decision Makers that:

1. Bank One is established under the laws of the United States and is the principal bank subsidiary of Bank OneCorporation in the United States. Bank One has maintained an active presence in Canada since 1981. BankOne Canada is a foreign bank subsidiary of Bank One currently listed on Schedule II of the Bank Act (Canada)(the "Bank Act").

2. Bank One Canada provides a wide range of corporate banking services to Canadian companies andsubsidiaries of U.S. companies carrying on business in Canada, including cash management, foreignexchange, credit and related banking services. Local treasury operations of Bank One Canada provide fundingand liquidity for the various activities of Bank One Canada. Bank One Canada is an active participant in theovernight interbank market, accepts term deposits from major Canadian and multinational corporations andderives a portion of its funding from brokered deposits. These deposits are evidenced by certificates of depositregistered in the holder's name, bearer deposit notes or printed confirmations addressed to the depositor.

3. Bank One will only accept deposits from the following:

(a) Her Majesty in right of Canada or in right of a province or territory, an agent of Her Majesty in eitherof those rights and includes a municipal or public body empowered to perform a function ofgovernment in Canada, or an entity controlled by Her Majesty in either of those rights;

(b) the government of a foreign country or any political subdivision thereof, an agency of the governmentof a foreign country or any political subdivision thereof, or an entity that is controlled by thegovernment of a foreign country or any political subdivision thereof;

(c) an international agency of which Canada is a member, including an international agency that is amember of the World Bank Group, the Inter American Development Bank, the Asian DevelopmentBank, the Caribbean Development Bank and the European Bank for Reconstruction and Developmentand any other international regional bank;

(d) a financial institution (i.e.: (a) a bank or an authorized foreign bank under the Bank Act; (b) a bodycorporate to which the Trust and Loan Companies Act (Canada) applies; (c) an association to whichthe Cooperative Credit Association Act (Canada) applies; (d) an insurance company or a fraternalbenefit society to which the Insurance Companies Act (Canada) applies; (e) a trust, loan or insurancecorporation incorporated by or under an Act of the legislature of a province or territory in Canada; (f)a cooperative credit society incorporated and regulated by or under an Act of the legislature of aprovince or territory in Canada; (g) an entity that is incorporated or formed by or under an Act ofParliament or of the legislature of a province or territory in Canada and that is primarily engaged indealing in securities, including portfolio management and investment counseling, and is registered toact in such capacity under the applicable Legislation; and (h) a foreign institution that is (i) engagedin the banking, trust, loan or insurance business, the business of a cooperative credit society or thebusiness of dealing in securities or is otherwise engaged primarily in the business of providingfinancial services, and (ii) is incorporated or formed otherwise than by or under an Act of Parliamentor of the legislature of a province or territory in Canada);

(e) a pension fund sponsored by an employer for the benefit of its employees or employees of an affiliatethat is registered and has total plan assets under administration of greater than $100 million;

(f) a mutual fund corporation that is regulated under an Act of the legislature of a province or territory inCanada or under the laws of any other jurisdiction and has total assets under administration of greaterthan $10 million;

(g) an entity (other than an individual) that has, for the fiscal year immediately preceding the initialdeposit, gross revenues on its own books and records of greater than $5 million; or

(h) any other person if the deposit is, in the aggregate, greater than $150,000;

collectively referred to for purposes of this Decision as "Authorized Purchasers".

4. In June of 1999 amendments to the Bank Act were proclaimed that permit foreign commercial banks, toestablish direct branches in Canada. These amendments have created a new Schedule III listing foreign bankspermitted to carry on banking activities through branches in Canada.

5. Bank One is seeking an order under the Bank Act permitting it to establish a full service branch under the BankAct and designating it on Schedule III. Bank One will take over the current corporate banking services andtreasury functions currently conducted by Bank One Canada.

6. The Legislation applicable in each Jurisdiction refers to either "Schedule I and Schedule II banks", "banks","savings institutions" or "financial institutions" in connections with certain exemptions however no reference ismade in any of the Legislation to entities listed on Schedule III to the Bank Act.

7. In order to ensure that Bank One, as an entity listed on Schedule III, is able to provide banking services tobusinesses in the Jurisdictions it requires the exemptions under the Legislation which are similar to theexemptions applicable to banking institutions incorporated under the Bank Act to the extent that the currentexemptions applicable to Schedule I and II listed banks are relevant to the business being undertaken by BankOne in the Jurisdictions.

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that in connection with the bankingbusiness to be carried on by Bank One in the Jurisdictions:

1. Bank One is exempt from the requirement under the Legislation, where applicable, to be registered as anunderwriter with respect to the same types of securities that an entity listed on Schedule I or II to the Bank Actmay act as an underwriter in respect of without being required to be registered under the Legislation as anunderwriter.

2. Bank One is exempt from the requirement under the Legislation to be registered as an adviser where theperformance of the service as an adviser is solely incidental to its primary banking business.

3. A trade of a security to Bank One where Bank One purchases the security as principal shall be exempt fromthe registration and prospectus requirements of the Legislation of the Jurisdiction in which the trade takes place(the "Applicable Legislation") provided that:

(i) the forms that would have been filed and the fees that would have been paid under the ApplicableLegislation if the trade had been made, on an exempt basis, to an entity listed on Schedule I or II tothe Bank Act purchasing as principal (referred to in this Decision as a "Schedule I or II Bank ExemptTrade") are filed and paid in respect of the trade to Bank One, and

(ii) the first trade in a security acquired by Bank One pursuant to this Decision is deemed a distribution(or primary distribution to the public) under the Applicable Legislation unless:

(a) the issuer of the security is a reporting issuer, or the equivalent, under the ApplicableLegislation and, if Bank One is in a special relationship (where such term is defined in theApplicable Legislation) with such issuer, Bank One has reasonable grounds to believe thatsuch issuer is not in default of any requirements of the Applicable Legislation;

(b) (i) the securities are listed and posted for trading on a stock exchange, that isrecognized by the Decision Maker of the applicable Jurisdiction for purposes of theresale of a security acquired in a Schedule I or II Bank Exempt Trade, and complywith the requirements set out in paragraph (a) or (b) of Appendix A to this Decisionand have been held at least six months from the date of the initial exempt trade toBank One or the date the issuer became a reporting issuer, or the equivalent, underthe Applicable Legislation, whichever is the later, or

(ii) the securities are bonds, debentures or other evidences of indebtedness issued orguaranteed by an issuer or are preferred shares of an issuer and comply with therequirements set out in paragraph (a) or (c), of Appendix A to this Decision, andhave been held at least six months from the date of the initial exempt trade to BankOne or the date the issuer became a reporting issuer, or the equivalent, under theApplicable Legislation, whichever is the later, or

(iii) the securities are listed and posted for trading on a stock exchange, that isrecognized by the Decision Maker of the applicable Jurisdiction for purposes of theresale of a security acquired in a Schedule I or II Bank Exempt Trade, or are bonds,debentures or other evidences of indebtedness issued or guaranteed by thereporting issuer, or the equivalent, under the Applicable Jurisdiction whosesecurities are so listed, and have been held at least one year from the date of theinitial exempt trade to Bank One or the date the issuer became a reporting issuer,or the equivalent, under the Applicable Legislation, whichever is later, or

(iv) the securities have been held at least eighteen months from the date of the initialexempt trade to Bank One or the date the issuer became a reporting issuer, or theequivalent, under the Applicable Legislation, whichever is later; and

(c) Bank One files a report within 10 days of the trade prepared and executed in accordancewith the requirements of the Applicable Legislation that would apply to a Schedule I or IIBank Exempt Trade,

provided that no unusual effort is made to prepare the market or to create a demand for suchsecurities and no extraordinary commission or consideration is paid in respect of such trade andprovided Bank One does not hold sufficient number of securities to materially affect the control of theissuer of such securities but any holding by Bank One of more than 20 per cent of the outstandingvoting securities of the issuer of such securities shall, in the absence of evidence to the contrary, bedeemed to affect materially the control of such issuer.

4. Provided Bank One only trades the types of securities referred to in this paragraph 4 with AuthorizedPurchasers, trades of bonds, debentures or other evidences of indebtedness of or guaranteed by Bank Oneshall be exempt from the registration and prospectus requirements of the Legislation.

5. Evidences of deposit issued by Bank One to Authorized Purchasers shall be exempt from the registration andprospectus requirements of the Legislation.

THE FURTHER DECISION of the Decision Maker in Ontario is that in connection with the banking businessto be carried on by Bank One in Ontario:

A. Subsection 25(1)(a) of the Securities Act (Ontario) R.S.O. 1990 c. S.5 (as amended) (the "Act") doesnot apply to a trade by Bank One:

(i) of a type described in subsection 35(1) of the Act or section 151 of the Regulations madeunder the Act; or

(ii) in securities described in subsection 35(2) of the Act.

B. Except as provided for in paragraph 3 of this Decision, section 28 of Schedule I to the Regulationsmade under the Act shall not apply to trades made by Bank One in reliance on this Decision.

December 5th, 2000.

"Howard I. Wetston"       "Stephen N. Adams"

APPENDIX A

(a) are preferred shares of a corporation if,

(i) the corporation has paid a dividend in each of the five years immediately preceding the date of theinitial exempt trade at least equal to the specified annual rate upon all of its preferred shares, or

(ii) the common shares of the corporation are, at the date of the initial exempt trade, in compliance withparagraph (b) of this Appendix A;

(b) are fully paid common shares of a corporation that during a period of five years that ended less than one yearbefore the date of the initial exempt trade has either,

(i) paid a dividend in each such year upon its common shares, or

(ii) had earnings in each such year available for the payment of a dividend upon its common shares ofat least 4% of the average value at which the shares were carried in the capital stock account of thecorporation during the year in which the dividend was paid or in which the corporation had earningsavailable for the payment of dividends as the case may be;

(c) are bonds debentures or other evidences of indebtedness issued or guaranteed by,

(i) a corporation if, at the date of the initial exempt trade, the preferred shares or the common shares ofthe corporation which comply with paragraph (a) or (b) of this Appendix A, or

(ii) a corporation if its earnings in a period of five years ended less than one year before the date of theinitial exempt trade have been equal in sum total to at least ten times and in each of any four of thefive years have been equal to at least 1-1/2 times the annual interest requirements at the date of theinitial exempt trade on all indebtedness of or guaranteed by it, other than indebtedness classified asa current liability in its balance sheet, and, if the corporation at the date of the initial exempt tradesowns directly or indirectly more than 50% of the common shares of another corporation, the earningsof the corporations during the said period of five years may be consolidated with due allowance forminority interests, if any, and in that event the interest requirements of the corporation shall beconsolidated and such consolidated earnings and consolidated interest requirements shall be takenas the earnings and interest requirements of the corporation, and, for the purpose of this subclause,"earnings" mean earnings available to meet interest charges on indebtedness other than indebtednessclassified as a current liability.