Invesco Trimark Ltd. et al. – s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 80.
Securities Act, R.S.O. 1990, c. S.5, as am.
Rule 35-502 -- Non Resident Advisers.
IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, CHAPTER C.20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
INVESCO TRIMARK LTD.,
INVESCO ADVISERS, INC.,
AND INVESCO ASSET MANAGEMENT LIMITED
ORDER
(Section 80 of the CFA)
R.S.O. 1990, CHAPTER C.20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
INVESCO TRIMARK LTD.,
INVESCO ADVISERS, INC.,
AND INVESCO ASSET MANAGEMENT LIMITED
ORDER
(Section 80 of the CFA)
AND
IN THE MATTER OF
INVESCO TRIMARK LTD.,
INVESCO ADVISERS, INC.,
AND INVESCO ASSET MANAGEMENT LIMITED
ORDER
(Section 80 of the CFA)
INVESCO TRIMARK LTD.,
INVESCO ADVISERS, INC.,
AND INVESCO ASSET MANAGEMENT LIMITED
ORDER
(Section 80 of the CFA)
AND INVESCO ASSET MANAGEMENT LIMITED
ORDER
(Section 80 of the CFA)
(Section 80 of the CFA)
UPON the application (the Application) of Invesco Trimark Ltd. (the Principal Adviser), and Invesco Advisers, Inc. and Invesco Asset Management Limited (each a Sub-Adviser and collectively, the Sub-Advisers) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 80 of the CFA, that the Sub-Advisers and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services (as defined below) be exempt, for a period of five years, from the adviser registration requirements of paragraph 22(1)(b) of the CFA when acting as an adviser for the Principal Adviser in respect of the Funds (as defined below) in respect of commodity futures contracts and commodity futures options (collectively, the Contracts) traded on commodity futures exchanges and cleared through clearing corporations;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Sub-Advisers and the Principal Adviser having represented to the Commission that:
1. The Principal Adviser is a corporation established under the laws of the Province of Ontario and its principal business office is in Toronto, Ontario.
2. The Principal Adviser is registered with the securities regulator or regulatory authority in all of the provinces of Canada as an adviser in the category of portfolio manager; with the Commission and with the Securities Commission of Newfoundland and Labrador as a dealer in the category of exempt market dealer; and with the Commission as an adviser in the category of commodity trading manager.
3. The Principal Adviser is registered as an investment adviser and as a transfer agent with the U.S. Securities and Exchange Commission and as an investment adviser with the Irish Financial Services Regulatory Authority.
4. The Principal Adviser is an indirect wholly-owned subsidiary of Invesco Ltd., a publicly-traded company listed on the New York Stock Exchange. As such, the Principal Adviser leverages the global expertise of investment professionals at its affiliates worldwide.
5. The Principal Adviser is the investment manager of (i) investment funds, the securities of which are qualified by prospectus for distribution to the public in Ontario and the other provinces and territories of Canada (the Investment Funds), (ii) pooled funds, the securities of which are sold on a private placement basis in Ontario and the other provinces and territories of Canada to accredited investors pursuant to prospectus and registration exemptions contained in National Instrument 45-106 Prospectus and Registration Exemptions (the Pooled Funds), (iii) managed accounts of institutional clients who have entered into investment management agreements with the Principal Adviser (the Managed Accounts) and (iv) other Investment Funds, Pooled Funds and Managed Accounts that may be established in the future for which the Principal Adviser engages the respective Sub-Adviser to provide advisory services (the Future Funds) (each of the Investment Funds, Pooled Funds, Managed Accounts and Future Funds are referred to individually as a Fund and collectively as the Funds).
6. The Funds may, as part of their investment program, invest in Contracts.
7. The Principal Adviser intends to offer the portfolio management services of the respective Sub-Adviser to the respective Funds that choose to have exposure to capital markets and Contracts in which the respective Sub-Adviser has experience and expertise.
8. The Funds are or will be formed in Ontario where the Principal Adviser is registered as an adviser in the category of commodity trading manager.
9. Invesco Advisers, Inc. is a corporation formed under the laws of the State of Delaware, United States of America. The head office of Invesco Advisers, Inc. is located in Atlanta, Georgia in the United States of America.
10. Invesco Advisers, Inc. is currently registered as an investment adviser with the U. S. Securities and Exchange Commission and is exempted from registration as a commodity trading adviser or commodity pool operator with the U.S. Commodity Futures Trading Commission (the CFTC). Invesco Advisers, Inc. is also registered as an adviser in the category of portfolio manager (international adviser, or equivalent) with the Commission, the New Brunswick Securities Commission and the Manitoba Securities Commission.
11. Invesco Asset Management Limited is a corporation formed under the laws of England and Wales. The head office of Invesco Asset Management Limited is located in London, England.
12. Invesco Asset Management Limited is an authorised person for the purposes of the Financial Services & Markets Act 2000 and is authorised and regulated to carry on investment business in the United Kingdom by virtue of its authorisation by the Financial Services Authority. Invesco Asset Management Limited is also currently registered as an investment adviser with the U.S. Securities and Exchange Commission and is exempted from registration as a commodity trading adviser or commodity pool operator with the CFTC.
13. Each respective Sub-Adviser is appropriately registered or licensed, or is entitled to rely on appropriate exemptions from such registrations or licences, to provide advice for the Funds pursuant to the applicable legislation of its principal jurisdiction.
14. The Sub-Advisers are not residents of any province or territory of Canada.
15. Each Sub-Adviser is an affiliate of the Principal Adviser; for this purpose, an "affiliate" means any entity that is controlled by Invesco Ltd., or other ultimate parent company of the Principal Adviser, as the case may be, and "control" and any derivation thereof, means the possession, directly or indirectly, of the power to direct or significantly influence the management and policies/business or affairs of an entity whether through ownership of voting securities or otherwise.
16. The Principal Adviser may, pursuant to a written investment management agreement with each Fund, act as an adviser to the Fund in respect of:
(a) securities, as defined in the Securities Act (Ontario) (the Act); and
(b) Contracts, as defined in the CFA
by exercising discretionary authority to purchase or sell securities and Contracts on behalf of the Funds in respect of the investment portfolio of the Funds.
17. In connection with the Principal Adviser acting as an adviser to the Funds in respect of the purchase or sale of securities and Contracts, the Principal Adviser will, pursuant to a written agreement made between the Principal Adviser and each Sub-Adviser, retain the respective Sub-Adviser to act as an adviser to the Funds (the Proposed Advisory Services) by exercising discretionary authority on behalf of the Principal Adviser, in respect of all or a portion of all of the assets of the respective investment portfolio of the Funds, including discretionary authority to buy or sell Contracts for the Funds, provided that:
(a) in each case, the Contracts must be cleared through an acceptable clearing corporation; and
(b) such investments are consistent with the investment objectives and strategies of the Funds.
18. The written agreement between the Principal Adviser and each Sub-Adviser will set out the obligations and duties of each party in connection with the Proposed Advisory Services and will permit the Principal Adviser to exercise the degree of supervision and control it is required to exercise over each Sub-Adviser in respect of the Proposed Advisory Services.
19. The Principal Adviser will deliver to the Funds all applicable reports and statements required under applicable securities and derivatives legislation.
20. If there is any direct contact between a Fund and a Sub-Adviser in connection with the Proposed Advisory Services, a representative of the Principal Adviser, duly registered in accordance with Ontario commodity futures law, will be present at all times either in person or by telephone.
21. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a representative, a partner or an officer of a registered adviser and is acting on behalf of a registered adviser.
22. By providing the Proposed Advisory Services, each Sub-Adviser and any individuals acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services will be engaging in, or holding themselves out as engaging in, the business of advising others in respect of the Contracts and, in the absence of being granted the requested relief, would be required to register as an adviser, or a representative of an adviser, as the case may be, under the CFA.
23. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA that is similar to the exemption from the adviser registration requirement in section 25(3) of the Act which is provided under section 7.3 of OSC Rule 35-502 Non-Resident Advisers (OSC Rule 35-502).
24. The relationship among the Principal Adviser, the Sub-Advisers and the Funds satisfies the requirements of section 7.3 of OSC Rule 35-502.
25. As would be required under section 7.3 of OSC Rule 35-502:
(a) the duties and obligations of each respective Sub-Adviser will be set out in a written agreement with the Principal Adviser;
(b) the Principal Adviser will contractually agree with the Funds to be responsible for any loss that arises out of the failure of the respective Sub-Adviser:
(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Principal Adviser and the Funds; or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (together with (i), the Assumed Obligations); and
(c) the Principal Adviser cannot be relieved by the Funds from its responsibility for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations.
26. The Sub-Advisers will only provide the Proposed Advisory Services as long as the Principal Adviser is, and remains, registered under the CFA as an adviser in the category of commodity trading manager.
27. The prospectus or similar offering document for each Investment Fund or Pooled Fund or other Investment Funds or Pooled Funds that may be established in the future and for which the Principal Adviser engages the respective Sub-Adviser to provide the Proposed Advisory Services will include the following disclosure:
(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations; and
(b) a statement that there may be difficulty in enforcing any legal rights against the respective Sub-Adviser (or any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services) because the respective Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
28. Prior to purchasing any securities of one or more of the Funds directly from the Principal Adviser or entering into an investment management agreement with the Principal Adviser for a Managed Account, all investors who are Ontario residents will receive written disclosure that includes:
(a) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations; and
(b) a statement that there may be difficulty in enforcing any legal rights against the respective Sub-Adviser (or any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services) because the respective Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested;
IT IS ORDERED, pursuant to section 80 of the CFA, that the Sub-Advisers and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services are exempt from the adviser registration requirement in paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided to the Principal Adviser, for a period of five years, provided that at the relevant time that such activities are engaged in:
(a) the Principal Adviser is registered under the CFA as an adviser in the category of commodity trading manager;
(b) each respective Sub-Adviser and any individuals engaging in, or holding themselves out as engaging in, the business of advising others when acting on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services are appropriately registered or licensed, or are entitled to rely on appropriate exemptions from such registrations or licences, to provide advice for the Funds pursuant to the applicable legislation of their principal jurisdiction;
(c) the obligations and duties of each respective Sub-Adviser are set out in a written agreement with the Principal Adviser;
(d) the Principal Adviser has contractually agreed with the respective Fund to be responsible for any loss that arises out of any failure of the respective Sub-Adviser to meet the Assumed Obligations;
(e) the Principal Adviser cannot be relieved by a Fund or its securityholders from its responsibility for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations;
(f) the prospectus or similar offering document for each Investment Fund or Pooled Fund or other Investment Funds or Pooled Funds that may be established in the future and for which the Principal Adviser engages the respective Sub-Adviser to provide the Proposed Advisory Services will include the following disclosure:
(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations; and
(ii) a statement that there may be difficulty in enforcing any legal rights against the respective Sub-Adviser (or any individuals engaging in, or holding themselves out as engaging in, the business of advising others on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services) because the respective Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and
(g) prior to purchasing any securities of one or more of the Funds directly from the Principal Adviser or entering into an investment management agreement with the Principal Adviser for a Managed Account or other Managed Accounts that may be established in the future, all investors who are Ontario residents will receive written disclosure that includes:
(i) a statement that the Principal Adviser is responsible for any loss that arises out of the failure of the respective Sub-Adviser to meet the Assumed Obligations; and
(ii) a statement that there may be difficulty in enforcing any legal rights against the respective Sub-Adviser (or any individuals engaging in, or holding themselves out as engaging in, the business of advising others on behalf of the respective Sub-Adviser in respect of the Proposed Advisory Services) because the respective Sub-Adviser is resident outside of Canada and all or substantially all of its assets are situated outside of Canada.
August 24, 2010