CIBC World Markets Inc. - MRRS Decision
Headnote
MRRS - Relief granted, subjectto certain conditions, from the requirement of section 36 ofthe Act that a registrant deliver trade confirmations to clientsof its wrap account program and the revocation of a prior decision.
Applicable Ontario StatutoryProvisions
Securities Act, R.S.O. 1990,c. S.5, as am., ss. 36 and 144.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, ONTARIO,
NEW BRUNSWICK, NOVA SCOTIA,PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR,THE NORTHWEST TERRITORIES
AND NUNAVUT
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CIBC WORLD MARKETS INC.
MRRS DECISION DOCUMENT
WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker")in British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick,Nova Scotia, Prince Edward Island, Newfoundland and Labrador,the Northwest Territories and Nunavut (the "Jurisdictions")has received an application from CIBC World Markets Inc. ("CIBCWood Gundy") for:
1. a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to be registeredas an adviser (the "Registration Requirements")do not apply to advisory services provided to CIBC Wood Gundyby CIBC World Markets Corp. ("Oppenheimer"), CMInvestment Management Inc. ("CM") and other affiliatedcorporations of CIBC Wood Gundy (together the "Affiliates")and by portfolio managers carrying on business in Canada,the United States and elsewhere who act as sub-advisers toCIBC Wood Gundy (the "Advisers") in providing portfoliomanagement services for the benefit of retail clients of CIBCWood Gundy (the "Participating Clients") who participatein a wrap account program designated as the CIBC Wood GundyInvestment Advisory Service (the "IAS Program")or the CIBC Wood Gundy Investment Consulting Service (the"ICS Program") (collectively, the "Programs");
2. a decision under the Legislationthat the requirement (the "Trade Confirmation Requirement")in the Legislation that registered dealers, who have actedas principal or agent in connection with any trade in a security,promptly send by prepaid mail or deliver to the customer awritten confirmation of the trade, setting forth certain informationspecified in the Legislation, does not apply so as to requirethat CIBC Wood Gundy send or deliver written confirmationsto Participating Clients; and
3. a decision under the Legislationrevoking the following decisions (collectively, the "PriorDecisions") of certain of the Decision Makers:
4. the NAS Decision Documentdated October 9, 1998, IN THE MATTER OF CIBC WOOD GUNDY SECURITIESINC. (the "1998 Decision");
5. the MRRS Decision Documentdated June 11, 1999, IN THE MATTER OF CIBC WOOD GUNDY SECURITIESINC. (the "1999 Decision");
6. the Exemption Order ofthe Registrar of Securities for Nunavut dated November 15,1999, IN THE MATTER OF CIBC WORLD MARKETS INC. (the "1999NV Order");
7. the Exemption Order ofthe Registrar of Securities for the Northwest Territoriesdated November 16, 1999, IN THE MATTER OF CIBC WORLD MARKETSINC. (the "1999 NWT Order");
8. the MRRS Decision Documentdated May 11, 2000, IN THE MATTER OF CIBC WORLD MARKETS INC.(the "2000 Decision"); and
9. the Ruling and Order ofthe Nova Scotia Securities Commission dated June 2, 2000,IN THE MATTER OF CIBC WORLD MARKETS INC. (the "2000 NSOrder");
AND WHEREAS under theMutual Reliance Review System for Exemptive Relief Applications(the "System"), the Alberta Securities Commissionis the principal regulator for this application;
AND WHEREAS CIBC WoodGundy has represented to the Decision Makers that:
1. CIBC Wood Gundy is an investmentdealer registered under the Legislation in each province andterritory in Canada;
2. under exemptions previouslygranted by the Decision Makers in the Prior Decisions, CIBCWood Gundy makes available to its retail clients throughoutCanada the IAS Program, which is based on the CIBC OppenheimerInvestment Advisory Service provided in the United Statesby its affiliate, Oppenheimer, and which enables ParticipatingClients to invest in securities, including U.S. securities;
3. Oppenheimer is registered:
(a) in the United Statesas a broker-dealer under the Securities Exchange Actof 1934 and as an adviser under the InvestmentAdvisers Act of 1940 (the "Investment AdvisersAct"); and
(b) in Canada as an internationaladviser in Ontario, a portfolio manager and investmentcounsel (foreign) in Alberta and a non-resident portfoliomanager in British Columbia;
4. in December, 2001 CIBCWood Gundy acquired the Canadian retail brokerage businessof Merrill Lynch Canada Inc. ("MLC"), which includedthe client accounts of Merrill Lynch Consults Canada Service("MLCCS"), a wrap account program operated on adifferent basis than the IAS Program;
5. under the MLCCS each participatingclient selected one or more portfolio strategies from amongover forty portfolio strategies provided to MLC by sub-advisersin and outside of Canada pursuant to agreements with MLC andits affiliate, Merrill Lynch Investment Managers Canada Inc.("MLIMC") (each a "Strategy"), which Strategyor Strategies were selected with the advice of MLC and wereimplemented by MLC for their clients in client accounts fullyhandled by MLC, without any involvement of the sub-advisersbeyond providing advice to MLC on investment Strategies interms of the securities to be purchased for and their proportionof each Strategy;
6. MLC was assisted in theadministration of these accounts by MLIMC, which also actedas a sub-adviser in the MLCCS program;
7. all of the shares of MLIMCwere acquired by CIBC Wood Gundy's parent corporation, CanadianImperial Bank of Commerce ("CIBC"), on January 31,2002, and MLIMC is now an affiliate of CIBC Wood Gundy namedCM Investment Management Inc. ("CM");
8. CM is registered as anadviser and limited market dealer in Ontario and is applyingfor registration as an investment counsel and portfolio managerin Manitoba;
9. CIBC Wood Gundy is currentlyin the process of integrating the acquired MLC business operationswith its own and intends to make the ICS Program, which willbe based on the MLCCS and the IAS Program, available to itsretail clients throughout Canada;
10. the ICS Program will enableParticipating Clients to invest in securities pursuant toinvestment Strategies, including U.S. and global Strategies;
11. the integration of thesebusiness operations will be accomplished over a period oftime with MLCCS continuing as part of the ICS Program andwith new client accounts following the approach of the IASProgram or the ICS Program, depending on the Adviser selectedfor the account;
12. the IAS Program will continueunder its existing designation and the expanded MLCCS willbe carried on as the ICS Program until June 28, 2002, whenthe IAS designation will cease to be used and both Programswill thereafter be carried on under the ICS designation;
13. in connection with thePrograms, CIBC Wood Gundy intends to utilize the servicesof CM, and other of its Affiliates that are registered orlicensed to carry on a securities advisory business in thejurisdiction in which they do so, to perform some or all ofthe activities performed by Oppenheimer for the IAS Program;
The Programs
14. the initial phase of theIAS Program, which was limited to U.S. dollar accounts managedby U.S. Advisers investing primarily in U.S. securities, witha minimum required investment of $100,000 U.S. for each account,was implemented under:
(i) the 1998 Decision inthe Jurisdictions, except the Northwest Territories andNunavut; and
(ii) the 1999 NWT Orderand the1999 NV Order in the Northwest Territories and Nunavut,respectively;
15. the IAS Program was extendedto include Canadian dollar accounts managed by Canadian Advisersinvesting primarily in Canadian securities, with a minimumrequired investment of $150,000 Canadian for each such account,under:
(a) the 2000 Decision inthe Jurisdictions, except Nova Scotia; and
(b) the 2000 NS Order inNova Scotia;
16. CIBC Wood Gundy intendsto extend the Programs to include global accounts, with aminimum required investment equivalent to $150,000 Canadian,investing primarily in securities from other countries orregions managed by Advisers carrying on business in thosecountries or regions;
17. each account in the Programswill be a fully managed account managed by CIBC Wood Gundyacting as agent for the Participating Client under a programmanagement agreement (a "PMA") with the ParticipatingClient;
18. each Participating Clientwill provide CIBC Wood Gundy with its investment objectivesand other information necessary to enable CIBC Wood Gundy,or Oppenheimer, CM or another Affiliate acting on behalf ofCIBC Wood Gundy, to prepare a client profile for the ParticipatingClient;
19. CIBC Wood Gundy will provideeach Participating Client with a list of one or more Advisers,prepared by Oppenheimer, CM or another Affiliate, whose investmentphilosophy or Strategy is appropriate to the ParticipatingClient's investment objectives;
20. all Advisers in the UnitedStates (the "U.S. Advisers") will be U.S. portfoliomanagers registered as advisers in the United States underthe Investment Advisers Act who will provide services forU.S. dollar accounts investing primarily in U.S. securitiesor for U.S., global and international Strategies;
21. all Advisers in Canada(the "Canadian Advisers") will be Canadian portfoliomanagers registered as advisers under the securities legislationof one or more provinces, who will provide services for Canadiandollar accounts investing primarily in Canadian securitiesor for Canadian Strategies;
22. all Advisers in jurisdictionsother than the United States or Canada ("Other Advisers")will be portfolio managers registered as advisers or otherwiselicensed or legally qualified to provide portfolio managementservices under applicable legislation in the jurisdictionin which they carry on business and will provide servicesfor accounts investing primarily in securities from that jurisdictionor the region in which it is located or for Strategies emphasizingthat jurisdiction or the region in which it is located;
23. CIBC Wood Gundy will alsoprovide each Participating Client with the information abouteach U.S. Adviser and Oppenheimer that is required to be givento clients in a written disclosure statement by Rule 204-3under the Investment Advisers Act and with equivalent informationabout each Canadian Adviser and each Other Adviser;
24. the Participating Clientwill, with the assistance of CIBC Wood Gundy, select one ormore Strategies or one or more Advisers to manage its accountwith CIBC Wood Gundy;
25. if the Participating Clientselects one or more Strategies, CIBC Wood Gundy will managethe Participating Client's account on the basis of advicereceived by it from an Adviser concerning the Strategy;
26. if the Participating Clientselects an Adviser to manage its account with CIBC Wood Gundy,the Adviser selected will manage the Participating Client'saccount with respect to investments and voting of securitiesheld in the account and will maintain separate accounts andrecords for each Participating Client;
27. each Participating Clientwill agree in the PMA that written confirmations of transactionsin the Participating Client's account will not be sent ordelivered to the Participating Client;
28. CIBC Wood Gundy will:
(i) execute all transactionsin the Participating Clients' accounts unless better executioncan be obtained elsewhere;
(ii) provide confirmationsof such transactions to the relevant Adviser and send theinformation contained in them to each relevant ParticipatingClient with the monthly statement referred to in paragraph3.28.4;
(iii) act as custodian forall securities held in its accounts unless the ParticipatingClient directs otherwise; and
(iv) send monthly statementsand quarterly performance reports prepared by CIBC WoodGundy, Oppenheimer, CM or another Affiliate for each accountto the relevant Participating Client;
29 a Participating Clientmust obtain all advice and information and give all instructionsand directions through CIBC Wood Gundy and may meet with anAdviser only if the registered representative of CIBC WoodGundy responsible for the Participating Client's account ispresent at all times;
30. a single wrap fee willbe charged to Participating Clients for investment advisoryservices in the Programs, which fee will be calculated onthe basis of assets under administration in the ParticipatingClient's account, will include all fees payable to Oppenheimer,CM or another Affiliate and the Advisers and will not be basedon the transactions effected in the account;
31. CIBC Wood Gundy will enterinto agreements with Oppenheimer, CM or another Affiliate,and directly or through Oppenheimer, CM or the other Affiliateacting on its own behalf and as agent for CIBC Wood Gundy,with each Adviser, which agreements will set out the obligationsand duties of each party in connection with the Program andpursuant to which Oppenheimer, CM or the other Affiliate andthe Advisers will agree to act as sub-advisers to CIBC WoodGundy for the benefit of Participating Clients;
32. CIBC Wood Gundy will assumeresponsibility in the PMA to Participating Clients for alladvice received from Oppenheimer, CM or another Affiliateand the Advisers, including responsibility for losses sustainedby a Participating Client as a result of the negligence, wilfulmisconduct, bad faith or wilful neglect, default or failureto comply with applicable laws and regulations by CIBC WoodGundy, Oppenheimer, CM, another Affiliate or an Adviser, andwill not waive this responsibility; and
33. the Advisers who are nototherwise registered in Ontario will not be required to registeras advisers under the Securities Act (Ontario) as theterms of the Programs and their agreements with CIBC WoodGundy will bring them within the exemption from registrationin section 7.3 of Rule 35-502 - Non-Resident Advisers underthe Securities Act (Ontario);
AND WHEREAS under theSystem, this MRRS Decision Document evidences the decision ofeach Decision Maker (collectively, the "Decision");
AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;
THE DECISION of the DecisionMakers under the Legislation is that the Registration Requirementswill not apply to Oppenheimer, CM, another Affiliate and theAdvisers with respect to their activities in providing portfoliomanagement and other services for the benefit of ParticipatingClients in connection with the Programs;
AND THE FURTHER DECISIONof the Decision Makers under the Legislation is that, with respectto any transactions in a Participating Client's account in thePrograms in which CIBC Wood Gundy acts as principal or agentin connection with the associated trade, the Trade ConfirmationRequirements will not apply to CIBC Wood Gundy;
AND THE FURTHER DECISIONof the Decision Makers under the Legislation is that the PriorDecisions are revoked.
July 5, 2002.
"Stephen P. Sibold" "GlendaA. Campbell"