RBC Dominion Securities Inc. & Royal Bank of Canada - MRRS Decision
Headnote
MRRS Application for relief from independent underwriter requirements in respect of offering of derivative securities overtwo-year period by applicant bank using Shelf procedures applicant bank a related issuer of underwriter offeringsmay be on agency or underwritten basis -- independent underwriter to participate in offerings as required by ProposedMulti-jurisdictional Instrument 33-105 - Underwriting Conflicts (1998) 21 OSCB 781 -- independent underwriter toparticipate in due diligence relating to offerings but not pricing or structuring of transaction -- clear disclosure of this factrequired.
Applicable Ontario Statutes
Securities Act, R.S.O. 1990, c.S.5, as am.
Applicable Ontario Regulations
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., 219(1), 224(1)(b), 233.
Rules Cited
Proposed Multi-jurisdictional Instrument 33-105 - Underwriting Conflicts (1998) 21 OSCB 781.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, ONTARIO,
QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
RBC DOMINION SECURITIES INC. AND
ROYAL BANK OF CANADA
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia,Alberta, Ontario, Quebec and Newfoundland (the "Jurisdictions") has received an application from Royal Bank of Canada(the "Bank") and RBC Dominion Securities Inc. ("RBC DS") for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the requirement (the "Independent Underwriter Requirement") contained in theLegislation which restricts a registrant from acting as an underwriter in connection with a distribution of securities by anissuer made by means of a prospectus, where the issuer is a related issuer (or the equivalent) or a connected issuer(or the equivalent) of the registrant, unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by independent underwriters shall not apply to RBC DS in respect of eachproposed distribution (an "Offering") of cash-settled derivative warrants and principal at risk term securities (together,the "Offered Securities") of the Bank, pursuant to a short form shelf prospectus (the "Shelf Prospectus");
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Quebec Securities Commission is the principal regulator for this application;
AND WHEREAS RBC DS has represented to the Decision Makers that:
1. The Bank is a reporting issuer under the Legislation of each Jurisdiction and is not in default of anyrequirements of the Legislation of any Jurisdiction.
2. The Bank is a Schedule I chartered bank under the Bank Act (Canada), which constitutes its charter. TheBank's head office is located at 1 Place Ville Marie, Montreal, Quebec, H3C 3A9.
3. The common shares and certain series of preferred shares of the Bank are listed on the Toronto StockExchange, among other exchanges. The Offered Securities may be listed on a Canadian stock exchange.
4. RBC DS is a registrant under the Legislation. The executive and registered office of RBC DS is located at 200Bay Street, Royal Bank Plaza, P.O. Box 50, Toronto, Ontario, M5J 2W7.
5. The Bank has filed a Shelf Prospectus relating to the Offered Securities under SEDAR Project No. 321245. ADecision Document evidencing the receipt for the Shelf Prospectus was issued on December 28, 2000. TheShelf Prospectus will be supplemented by a prospectus supplement (the "Prospectus Supplement") describingthe specific terms of a particular offering of Offered Securities.
6. The Offered Securities will be offered by RBC DS and one or more underwriters unrelated (each an"Independent Underwriter") to the Bank (collectively, the "Underwriters"). The Offered Securities may be offeredby the Underwriters on either a best efforts agency basis or an underwritten basis. The identity of theUnderwriters will be determined at the time of the Prospectus Supplements.
7. The Independent Underwriter will be an independent underwriter as defined in Multi-Jurisdictional Instrument33-105 Underwriting Conflicts (the «Proposed Instrument»).
8. The Bank will not be a "related issuer" or "connected issuer" (as those terms are defined in the ProposedInstrument) of any Independent Underwriter.
9. By virtue of the Bank indirectly owning all of the issued and outstanding shares of RBC DS, the Bank may beconsidered a related issuer (or the equivalent) of RBC DS. The decision to offer a tranche of Offered Securitiesand the determination of the terms of the tranche and of the Offering will be based on the direction and adviceof one or more officers of RBC DS and, accordingly, RBC DS may be considered a connected issuer (or theequivalent) of the Bank.
10. The Underwriters will receive no benefit under the Offering other than such fees or commissions as may bedisclosed in a Prospectus Supplement. Notwithstanding the foregoing, RBC DS, as agent of the Bank, mayenter into arrangements to hedge the Bank's risks associated with the Offered Securities. The Bank may agreewith RBC DS that RBC DS may retain all or an agreed-upon portion of any profits, and may be required tocompensate the Bank for all or an agreed-upon portion of any losses resulting from such hedgingarrangements. Full disclosure of all such hedging arrangements applicable to a tranche of Offered Securitieswill appear in the Prospectus Supplement for such tranche.
11. The nature and details of the relationship between the Bank and RBC DS is described in the Shelf Prospectusand the Shelf Prospectus contains the information specified in Appendix "C" of the Proposed Instrument. Ifadditional disclosure is required in respect of a particular offering in order to comply with such Appendix, thenecessary disclosure will be set forth in the relevant Prospectus Supplement.
12. The decision to issue the Offered Securities, including the determination of the terms of such distribution hasbeen made through negotiations between the Bank and RBC DS. It is anticipated that the IndependentUnderwriter will have no role in the structuring or pricing of an offering of a tranche of Offered Securities, whichfact will be disclosed in the Prospectus Supplement.
13. The Independent Underwriter(s) will be identified in the Prospectus Supplement. An Independent Underwriterwill have participated in the due diligence relating to such Offering and will participate in the preparation of eachProspectus Supplement.
14. The certificate in the Prospectus has been signed by RBC DS and the certificate in each ProspectusSupplement will be signed by the Underwriters, including each Independent Underwriter.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the decision of eachDecision Maker (the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Makers with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers, under the Legislation, is that the Independent Underwriter Requirementshall not apply to RBC DS in connection with an offering of a tranche of Offered Securities provided that:
(1) in respect of an offering of Offered Securities made on an underwritten basis, an Independent Underwriterunderwrites not less than the lesser of
(a) 20 percent of the dollar value of the offering, and
(b) the largest portion of the offering underwritten by RBC DS or any other non-independent Underwriter.
(2) in respect of an offering of Offered Securities made on a best efforts agency basis, an Independent Underwriterreceives a portion of the total management fees equal to an amount not less than the lesser of
(a) 20 percent of the total management fees for the offering, and
(b) the largest portion of the management fees paid or payable to RBC DS or any other registrant that isnot an Independent Underwriter; and
(3) the name of the Independent Underwriter and the extent of the participation of such Independent Underwriterin the due diligence and pricing of the Offered Securities is described in the Prospectus Supplement relatingto each Offering.
DATED at Montréal, this 28th day of February, 2001.
"Guy Lemoine" "Viateur Gagnon"