PI Financial Corp. and Wolverton Securities Ltd.
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Section 4.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- A registered firm wants to permit an individual to act as a dealing, advising or associate advising representative where the individual acts as an officer, partner or director of another firm registered in a jurisdiction of Canada that is not an affiliate -- The registered firms have valid business reasons for the individuals to be registered with both firms; the situation will last only until the registration of the acquired firm is surrendered and, if applicable, its membership with an SRO is terminated; the individuals will have sufficient time to adequately serve both firms; the situation will last only until the earlier of one year from the date of the relief and the date that the registration of the acquired firm is surrendered or terminated; the firms have policies and procedures in place to manage potential conflicts of interest; the firms are able to deal with any potential conflicts, including by supervising how the individual will deal with these conflicts.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 15.1.
June 30, 2016
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF PI FINANCIAL CORP. (PI Financial) AND WOLVERTON SECURITIES LTD. (Wolverton and together with PI Financial, the Filers)
DECISION
Background
1. The securities regulatory authority or regulator in each of the Jurisdictions (Decision Makers) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the requirement in section 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit Brent Wolverton to act as a dealing representative of PI Financial and also act as a director and an officer of Wolverton for a limited period of time following the acquisition of substantially all of the assets of Wolverton by PI Financial (Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission (BCSC) 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 all of the other provinces and territories of Canada; and
(c) the decision is the decision of the principal regulator and evidences the decision of the regulator in Ontario.
Interpretation
2. Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 31-103 have the same meaning if used in this decision, unless otherwise defined.
Representations
3. This decision is based on the following facts represented by the Filers:
1. PI Financial is registered under applicable securities legislation in each of the jurisdictions of Canada in the category of investment dealer, is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and has its head office in British Columbia.
2. Wolverton is registered under applicable securities legislation in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Newfoundland and Labrador, Northwest Territories and Yukon in the category of investment dealer, is a member of IIROC and has its head office in British Columbia.
3. PI Financial and Wolverton are each independently owned and are not affiliates of one another.
4. Neither of the Filers is in default of any requirements of securities legislation in any jurisdiction of Canada.
5. Mr. Wolverton is currently the Chairman, the Chief Investment Officer, a director and an indirect beneficial owner of shares of Wolverton.
6. Mr. Wolverton is resident in British Columbia and is registered under applicable securities legislation as:
(a) the Chief Compliance Officer and a dealing representative of Wolverton in British Columbia, Alberta and Ontario; and
(b) the Chief Compliance Officer of Wolverton in Saskatchewan, Manitoba, Nova Scotia, Newfoundland and Labrador, Northwest Territories and Yukon.
7. The application for the Relief Sought is made in relation to the transfer of substantially all of the assets of Wolverton, including Wolverton's customer accounts and certain other assets to PI Financial (the Transaction). In connection with the Transaction, Mr. Wolverton will seek registration as a dealing representative of PI Financial and will become an officer of PI Financial.
8. Pursuant to section 11.9 of NI 31-103, the Filers notified the BCSC, as principal regulator of each Filer, of the Transaction by letter dated April 26, 2016.
9. IIROC provided all required approvals in relation to the Transaction.
10. A notice of the Transaction, which included information about the transfer of customer accounts to PI Financial, was mailed to Wolverton's clients on May 13 and May 16, 2016.
11. The transfer of the customer accounts from Wolverton to PI Financial was completed on June 20, 2016 (the Transaction Date).
12. After the Transaction Date, Mr. Wolverton will:
(a) terminate his registration as a dealing representative of Wolverton; and
(b) subsequently seek registration as a dealing representative of PI Financial and be appointed as an officer of PI Financial, and will also continue as a director and an officer of Wolverton and as the Chief Compliance Officer of Wolverton until the resignation of Wolverton's IIROC membership and the voluntary surrender of Wolverton's registrations under applicable securities legislation is complete (the Dual Registration).
13. Upon registration as a dealing representative of PI Financial, Mr. Wolverton will no longer be involved in trading activities on behalf of Wolverton.
14. Upon completion of the Transaction, Wolverton agreed to the following term and condition being placed upon its registration:
(a) Wolverton and its registered individuals will not trade in securities within the meaning of applicable securities laws and will not open any new customer accounts; and
(b) Mr. Wolverton, as a director and non-trading officer of Wolverton, will act in such capacity only to comply with regulatory requirements including, as necessary, to resign the membership of Wolverton with IIROC and surrender the registration of Wolverton under applicable securities legislation.
15. The Dual Registration will permit Mr. Wolverton:
(a) as an officer and director of Wolverton, to facilitate the orderly wind-up of Wolverton's registrable business and operations, including the resignation of Wolverton's IIROC membership and the voluntary surrender of Wolverton's registration under applicable securities legislation; and
(b) as a dealing representative of PI Financial, to provide services in relation to former clients of Wolverton who became clients of PI Financial that are similar to the services he performed on behalf of Wolverton and to provide other support to PI Financial after the Transaction Date.
16. Effective as of the Transaction Date, Wolverton ceased its registrable activities and will not open any new client accounts. Wolverton has notified IIROC and the BCSC of the completion of the Transaction, is taking steps to complete the resignation of Wolverton's IIROC membership and will submit an application for voluntary surrender of its registration under applicable securities legislation. Wolverton expects to complete the wind-up of its registrable business and operations by October 2016.
17. Subject to the issuance of the Relief Sought, PI Financial will submit an application through the National Registration Database to register Mr. Wolverton as a dealing representative of PI Financial.
18. Mr. Wolverton will have sufficient time and resources to adequately meet his obligations to both Wolverton and PI Financial.
19. The Filers have in place policies and procedures to address any conflicts of interest that may arise as a result of the Dual Registration. The limited activities of Wolverton and Mr. Wolverton, on behalf of Wolverton, should result in there being few, if any, conflicts of interest.
20. PI Financial has compliance and supervisory policies and procedures in place to monitor the conduct of its representatives, including Mr. Wolverton, and to ensure that PI Financial can deal appropriately with any conflicts of interest that may arise.
21. PI Financial will supervise the activities that Mr. Wolverton will conduct on behalf of Wolverton in the same way it does other outside business activities of its registered individuals, including by holding meetings regularly with him and by obtaining regular status reports from him.
22. In the absence of the Relief Sought, PI Financial would be prohibited under section 4.1(1)(a) of NI 31-103 from permitting Mr. Wolverton to act as a dealing representative of PI Financial while also acting as a director and an officer of Wolverton.
Decision
4. 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 Relief Sought is granted provided that the Relief Sought shall expire on the earlier of the following:
(a) one year after the date hereof; and
(b) on the date that the registration of Wolverton is surrendered or terminated.