MogoTrade Inc. and Mogo 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 firm registered in any jurisdiction of Canada. The individual will have sufficient time to adequately serve both firms. Conflicts of interest are unlikely to arise because clients of the Filers and the products offered by the Filers differ considerably. Both firms have policies and procedures in place to handle potential conflicts of interest. The firms 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.
COURTESY TRANSLATION
October 27, 2023
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF MOGOTRADE INC. (MogoTrade) AND MOGO ASSET MANAGEMENT INC. (MAMI) (collectively, the Filers)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the prohibition in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), pursuant to section 15.1 of NI 31-103, to permit Mr. Jean-Olivier Lepage (the Representative) to act as registered Associate Advising Representative for MAMI, in addition to his current registration as Dealing Representative with MogoTrade (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers (the AMF) is the principal regulator for this application;
(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 in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Northwest Territories, Nunavut, Prince Edward Island, Saskatchewan, and Yukon; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
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
This decision is based on the following facts represented by the Filers:
1. MAMI is a corporation incorporated under the laws of Canada, with its registered office located at 400-3 Place Ville-Marie, Montréal, Québec H3B 2E3.
2. MogoTrade is a corporation incorporated under the laws of Canada, with its registered office located at 300-4 Place Ville-Marie, Montréal, Québec H3B 2E7.
3. MAMI is registered as (a) an Exempt Market Dealer and Portfolio Manager in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, and Saskatchewan, (b) a Portfolio Manager in Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, and Yukon, (c) an Exempt Market Dealer, Investment Fund Manager, and Portfolio Manager in Ontario, and (d) a Derivatives Portfolio Manager, Exempt Market Dealer, Investment Fund Manager, and Portfolio Manager in Québec.
4. MogoTrade is registered as an Investment Dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon.
5. The principal regulator of both Filers is the AMF.
6. MAMI offers discretionary portfolio management services through individual accounts and pooled funds (for which it acts as Investment Fund Manager) and advice-only services without discretionary authority, and facilitates the distribution of private funds to Canadians under prospectus exemptions.
7. MogoTrade offers an app-based, order-execution-only (OEO) service to retail investors. MogoTrade also offers direct electronic access (DEA) accounts and participates in the distribution of new issues on an OEO basis. MogoTrade does not offer advice.
8. The Filers are affiliates as they are both subsidiaries of Mogo Inc., a reporting issuer in all provinces and territories of Canada.
9. The Filers' offices are located at different addresses and their back-office functions are physically separate. Certain individuals work in both Filers' back offices.
10. Both of the Filers also have the same Chief Compliance Officer (CCO) and Ultimate Designated Person (UDP). The Filers have been able to deal with conflicts of interests that have arisen due to this arrangement.
11. Neither of the Filers is in default of securities legislation or derivatives legislation in any jurisdiction of Canada.
The Representative's Registration as Associate Advising Representative with MAMI
12. The Representative is currently registered as a Dealing Representative (Investment Dealer) with MogoTrade. In this role, the Representative acts as a backup trader whose role consists of providing support to ensure business continuity. Specifically, the Representative's registerable activity consists of entering trades manually if the MogoTrade app-based interface does not function as intended. The Representative has no involvement with MogoTrade's DEA or new issue distribution business lines.
13. If the Exemption Sought is granted, the Representative would also act as registered Associate Advising Representative (Portfolio Manager) on behalf of MAMI. In that role the Representative would support MAMI's Advising Representatives by providing financial analysis, know-your-client information collection and analysis, know-your-product analysis, suitability assessments, and related tasks. The Representative will not solicit clients and as such, his direct interaction with clients will be extremely limited.
14. From a business perspective, it would be optimal for the Filers if they could gain additional efficiency by having the Representative in both roles. If the Exemption Sought is not granted, then MAMI may be obligated to engage an additional Associate Advising Representative. At the same time, the Representative currently has excess capacity in his role at MogoTrade.
15. The Representative has appropriate proficiency requirements for being registered as Associate Advising Representative (Portfolio Manager) with MAMI.
16. MAMI's clients would benefit from the Exemption Sought as an additional duly registered Associate Advising Representative will provide support to their primary Advising Representative.
17. The Representative will have sufficient time to adequately serve both Filers. The CCO and UDP of the Filers will ensure that the Representative continues to have sufficient time and resources to adequately serve each Filer.
18. The Representative's dual registration is unlikely to give rise to conflicts of interest. The Filers' business lines are different, as MAMI provides advice and MogoTrade is prohibited from providing advice due to the nature of the activities it is permitted to engage in. The Filers thus carry out distinct but complementary business lines to fully service the needs of their clients. In addition, the Representative has little interaction with clients of either Filer due to the nature of his current and proposed roles. As a result, the potential for conflicts of interest and client confusion arising from the dual registration of the Registrant is very remote.
19. The Filers have the same CCO and UDP and appropriate compliance and supervisory policies and procedures in place to monitor the conduct of its registered individuals, including any material conflicts of interest that may arise as a result of the dual registration of the Representative. In particular, the Representative will be subject to the supervisory, and the applicable compliance requirements of each of the Filers. Notice of the Representative's dual registration will be added to the Filers' disclosure materials that are provided to clients. Furthermore, in the rare event that the Representative identified a potential or actual conflict of interest that could materially affect a client or the Filers, the Representative would, at such time, inform the CCO, and then the Filers would notify, in writing, their client of the conflict of interest and would otherwise address the conflict of interest in accordance with each Filer's policies and procedures as they apply to conflicts of interest.
20. The Representative will act fairly, honestly and in good faith and in the best interests of the clients of each Filer.
21. In order to minimize any client confusion, the Filers and the Representative will disclose the fact that the Representative is registered with both firms, and the relationship between MAMI and MogoTrade will be explained to clients. This disclosure will be made in writing prior to the Representative providing services to clients of each Filer.
22. In the absence of the Exemption Sought, the Filers would be prohibited from permitting the Representative to act as an Associate Advising Representative (Portfolio Manager) of MAMI while being a Dealing Representative (Investment Dealer) of MogoTrade, even though the Filers are affiliates and have controls and compliance procedures in place to deal with the Representative's registerable activities.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:
(a) The Representative is subject to supervision by, and the applicable compliance requirements of, both Filers;
(b) The CCO and the UDP of each Filer ensure that the Representative has sufficient time and resources to adequately serve each Filer and its respective clients;
(c) The Filers each have adequate policies and procedures in place to address any conflicts of interest that may arise as a result of the dual registration of the Representative and deal appropriately with any such conflicts; and
(d) The relationship between the Filers and the fact that the Representative is dually registered with both Filers is fully disclosed in writing to each client of the Filers that deal with the Representative.
OSC File #: 2023/0215