Cumberland Associates Investment Counsel Inc. et al.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- subsection 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 -- individuals have time to serve both firms -- policies in place to handle potential conflicts of interest -- clients advised of relationship between affiliated firms -- Filer exempted from 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, 15.1.
December 1, 2011
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
CUMBERLAND ASSOCIATES
INVESTMENT COUNSEL INC.
(CAIC)
AND
CUMBERLAND PRIVATE WEALTH
MANAGEMENT INC.
(CPWM)
AND
GERALD CONNOR
(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 (the Relief Sought) from the requirement under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit Gerald Connor to be registered as both a dealing representative of CPWM and an advising representative of CAIC (the Dual Registration).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(i) the Ontario Securities Commission is the principal regulator for this application; and
(ii) the Filer has 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 British Columbia, Ontario, and Quebec, (collectively with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
1. CPWM is registered under NI 31-103 as an investment fund manager in Ontario, as a derivatives dealer in Quebec and as a dealer in the category of investment dealer in each Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec and Saskatchewan CPWM is a member of Investment Industry Regulatory Organization of Canada (IIROC). The head office of CPWM is located in Ontario.
2. CAIC is registered under NI 31-103 as an adviser in the category of portfolio manager in British Columbia, Ontario and Quebec. The head office of CAIC is located in Ontario. CAIC is also registered as adviser with the United States Securities and Exchange Commission.
3. Each of the Filers is a direct wholly-owned subsidiary of Cumberland Partners Ltd. (CPL).
4. Neither of the Filers is in default of any requirements of securities legislation in any jurisdiction of Canada.
5. Gerald Connor is registered as a dealing representative and ultimate designated person of CPWM in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec and Saskatchewan, and as a derivatives representative in Quebec. Gerald Connor is authorized by IIROC to manage investment portfolios on a discretionary basis. He is resident in Ontario.
6. Although CPWM is registered as an investment dealer, its business primarily consists of providing discretionary investment management services. CPWM does not engage in corporate finance or underwriting activities. CPWM offers a variety of model portfolios to its clients. These model portfolios are also offered to clients of CAIC.
7. Both CPWM and CAIC service predominantly high net worth individuals.
8. Currently there are a number of individuals registered as dealing representatives with CPWM who are also registered as advising representatives with CAIC. This dual registration permits the individuals acting as portfolio manager of the model portfolio to make trades simultaneously and apply the same average price for all the accounts using the same model.
9. The Filers are each wholly-owned subsidiaries of CPL and accordingly, the Dual Registration will not give rise to the conflicts of interest present in a similar arrangement involving unrelated, arm's length firms. The interests of CPWM and CAIC are aligned and therefore, the potential for conflicts of interest is remote.
10. The Filers have in place policies and procedures to address conflicts of interest that may arise as a result of the Dual Registration, and believe that they will be able to appropriately deal with these conflicts.
11. The Dual Registration will be disclosed to clients of CPWM and CAIC.
12. In the absence of the Requested Relief, the Filers would be prohibited from permitting Gerald Connor to act as an advising representative of CAIC while he is registered as a dealing representative of CPWM even though CAIC is an affiliate of CPWM.
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 Relief Sought is granted.