Quest Partners LLC -- s. 80 of the CFA
Headnote
Section 80 of the Commodity Futures Act (Ontario) -- Foreign adviser exempted from the adviser registration requirement in section 22(1)(b) of the CFA where such adviser acts as an adviser in respect of commodity futures contracts or commodity futures options (commodities) for certain individual and institutional investors in Ontario who meet the definition of "permitted client" in NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- Commodities are primarily traded on commodity futures exchanges outside of Canada and primarily cleared outside of Canada.
Terms and conditions on exemption correspond to the relevant terms and conditions on the comparable exemption from the adviser registration requirement available to international advisers in respect of securities set out in section 8.26 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- Exemption also subject to a "sunset clause" condition.
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am.
Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss. 1(1), 22(1)(b), 80.
Instruments Cited
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1, 8.26.
IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, CHAPTER C. 20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
QUEST PARTNERS LLC
ORDER
(Section 80 of the CFA)
UPON the application (the Application) of Quest Partners LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA that the Applicant and any individuals engaging in, or holding themselves out as engaging in, the business of advising others on the Applicant's behalf (the Representatives) be exempt, for a period of five years, from the adviser registration requirements in paragraph 22(1)(b) of the CFA, subject to certain terms and conditions;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND WHEREAS for the purposes of this Order;
"CFA Adviser Registration Requirement" means the requirement in the CFA that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under the CFA;
"CFTC" means the United States Commodity Futures Trading Commission;
"Contract" has the meaning ascribed to that term in subsection 1(1) of the CFA;
"Foreign Contract" means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;
"International Adviser Exemption" means the exemption set out in section 8.26 of NI 31-103 from the OSA Adviser Registration Requirement;
"NFA" means the United States National Futures Association;
"NI 31-103" means National Instrument 31-103 Registration Requirements and Exemptions and Ongoing Registrant Obligations, as amended;
"OSA" means the Securities Act, R.S.O. 1990, c. S.5, as amended;
"OSA Adviser Registration Requirement" means the requirement in the OSA that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under the OSA; and
"Permitted Client" means a client in Ontario that is a "permitted client", as that term is defined in section 1.1. of NI 31-103, except that for purposes of the Order such definition shall exclude a person or company registered under the securities or commodities legislation of a jurisdiction of Canada as an adviser or dealer.
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a corporation formed under the laws of the State of New York in the United States. The head office of the Applicant is located in New York, New York, United States.
2. The Applicant is a portfolio manager that manages investments primarily for institutional investors across multiple strategies and financial instruments.
3. The Applicant is registered with the CFTC as a commodity trading advisor and as a commodity pool operator and is an approved member of the NFA. The Applicant engages in the business of commodity trading advising in the United States.
4. The Applicant is not registered in any capacity under the CFA or the OSA.
5. In Ontario, institutional investors that are Permitted Clients seek to engage the Applicant as a discretionary investment manager for purposes of implementing certain specialized investment strategies.
6. The Applicant seeks to act as a discretionary portfolio manager on behalf of prospective institutional investors that are Permitted Clients. The proposed advisory services would primarily include the use of specialized investment strategies employing Foreign Contracts.
7. Were the proposed advisory services limited to securities, the Applicant could rely on the International Adviser Exemption and carry out such activities on behalf of Permitted Clients on a basis that would be exempt from the OSA Adviser Registration Requirement.
8. There is currently no exemption from the CFA Adviser Registration Requirement that is equivalent to the International Adviser Exemption. Consequently, in order to advise Permitted Clients in Ontario as to trading in Foreign Contracts, the Applicant would be required to satisfy the CFA Adviser Registration Requirement and would have to obtain registration in Ontario as an adviser under the CFA in the category of commodity trading manager.
9. The Applicant submits that it would not be prejudicial to the public interest for the Commission to grant the requested relief because:
(a) the Applicant will only advise Permitted Clients as to trading in Foreign Contracts;
(b) Permitted Clients seek to access certain specialized portfolio management services provided by the Applicant, including advice as to trading in Foreign Contracts;
(c) the Applicant meets the prescribed conditions to rely on the International Adviser Exemption in connection with the provision of advice to Permitted Clients with respect to foreign securities; and
(d) the Applicant would provide advice to Permitted Clients as to trading in Foreign Contracts on terms and conditions that are analogous to the prescribed terms and conditions of the International Adviser Exemption.
AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed,
IT IS ORDERED pursuant to section 80 of the CFA that the Applicant and its Representatives are exempt, for a period of five years, from the adviser registration requirements of paragraph 22(1)(b) of the CFA in respect of the provision of advice to Permitted Clients as to the trading of Foreign Contracts, provided that:
1. the Applicant provides advice to Permitted Clients only as to trading in Foreign Contracts and does not advise Permitted Clients as to trading in Contracts that are not Foreign Contracts, unless providing such advice is incidental to its providing advice on Foreign Contracts;
2. the Applicant's head office or principal place of business remains in the United States;
3. the Applicant remains registered in the United States in a category of registration that permits it to carry on the activities in the United States that registration as an adviser under the CFA Adviser Registration Requirement would permit it to carry on in Ontario;
4. the Applicant continues to engage in the business of an adviser, as defined in the CFA, in the United States;
5. as at the end of the Applicant's most recently completed financial year, not more than 10% of the aggregate consolidated gross revenue of the Applicant, its affiliates and its affiliated partnerships is derived from the portfolio management activities of the Applicant, its affiliates and its affiliated partnerships in Canada (which, for greater certainty, includes both securities-related and commodity futures-related activities);
6. before advising a Permitted Client with respect to Foreign Contracts, the Applicant notifies the Permitted Client of all of the following:
(i) the Applicant is not registered in the local jurisdiction to provide the advice described under paragraph 1 of this Order;
(ii) the foreign jurisdiction in which the Applicant's head office or principal place of business is located;
(iii) all or substantially all of the Applicant's assets may be situated outside of Canada;
(iv) there may be difficulty enforcing legal rights against the Applicant because of the above; and
(v) the name and address of the Applicant's agent for service of process in Ontario;
7. the Applicant has submitted to the Commission a completed Submission to jurisdiction and appointment of agent for service in the form attached as Appendix "A";
8. the Applicant notifies the Commission of any regulatory action initiated with respect to the Applicant by completing and filing Appendix "B" within 10 days of the commencement of such action; and
9. by December 1 of each year, the Applicant notifies the Commission if it is relying on the exemption from registration granted pursuant to this order.
Dated this 28th day of December, 2012.
APPENDIX A
SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE
INTERNATIONAL DEALER OR INTERNATIONAL ADVISER
EXEMPTED FROM REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO
1. Name of person or company ("International Firm"):
2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:
3. Jurisdiction of incorporation of the International Firm:
4. Head office address of the International Firm:
5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.
Name:
E-mail address:
Phone:
Fax:
6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):
[ ] Section 8.18 [international dealer]
[ ] Section 8.26 [international adviser]
[ ] Other [specify]:
7. Name of agent for service of process (the "Agent for Service"):
8. Address for service of process on the Agent for Service:
9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.
10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.
11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator
a. a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated; and
b. an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service.
12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.
Dated: ____________________________________
__________________________________________
(Signature of the International Firm or authorized signatory)
__________________________________________
(Name of signatory)
__________________________________________
(Title of signatory)
Acceptance
The undersigned accepts the appointment as Agent for Service of____________________________________ [Insert name of International Firm] under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.
Dated: ____________________________________
__________________________________________
(Signature of the Agent for Service or authorized signatory)
__________________________________________
(Name of signatory)
__________________________________________
(Title of signatory)
This form is to be submitted to the following address:
Ontario Securities CommissionSuite 1903, Box 5520 Queen Street WestToronto, ON M5H 3S8Attention: Senior Registration Supervisor, Dealer TeamTelephone: (416) 593-8263email: [email protected]
Appendix B
Notice of Regulatory Action
1. Has the firm, or any predecessors or specified affiliates{1}of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ No _____
If yes, provide the following information for each settlement agreement:
Name of entity
Regulator/organization
Date of settlement (yyyy/mm/dd)
Details of settlement
Jurisdiction
2. Has any financial services regulator ,securities or derivatives exchange, SRO or similar organization:
Yes
No
(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?
_____
_____
(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?
_____
_____
(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?
_____
_____
(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(g) Issued an order (other than en exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?
_____
_____
If yes, provide the following information for each action:
Name of Entity
Type of Action
Regulator/organization
Date of action (yyyy/mm/dd)
Reason for action
Jurisdiction
3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?
Yes _____ No _____
If yes, provide the following information for each investigation:
Name of entity
Reason or purpose of investigation
Regulator/organization
Date investigation commenced (yyyy/mm/dd)
Jurisdiction
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
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Signature |
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This form is to be submitted to the following address:
Ontario Securities CommissionSuite 1903, Box 5520 Queen Street WestToronto, ON M5H 3S8Attention: Senior Registration Supervisor, Dealer TeamTelephone: (416) 593-8263email: [email protected]
{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 -- Registration Information.