Scotia Discount Brokerage Inc. - MRRS Decision

le 17 janvier 2001

MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - relief from the Suitability Requirements, as reflectedin paragraph 1.5(1)(b) of OSC Rule 31-505, pursuant to section 4.1 of OSC Rule 31-505, subject to the terms andconditions set out in the Decision Document.

Decision pursuant to s.21.1(4) of the Act, that the IDA Suitability Requirements do not apply to the Filer, subject to theterms and conditions set out in the Decision Document.

Applicable Ontario Statute

Securities Act R.S.O. 1990, c.S.5, as amended, s.21.1(4).

Rules Cited

Ontario Securities Commission Rule 31-505 "Conditions of Registration" (1999) 22 O.S.C.B. 731.

IDA Regulations Cited

IDA Regulation 1300.1(b), 1800.5(b), 1900.4.

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

NEWFOUNDLAND NOVA SCOTIA AND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SCOTIA DISCOUNT BROKERAGE INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provincesof British Columbia, Alberta, Saskatchewan, Newfoundland, Nova Scotia and Ontario (collectively, the "Jurisdictions")has received an application from Scotia Discount Brokerage Inc. (the "Filer") regarding the operation of the separatedivision, Scotia Discount Brokerage Direct (the "Division") for:

1. a decision under the securities legislation of the Jurisdictions (the "Legislation") that the requirements of theLegislation requiring the Division and its registered salespersons, partners, officers and directors ("RegisteredRepresentatives") to make inquiries of each client of the Division as are appropriate, in view of the nature ofthe client's investments and of the type of transaction being effected for the client's account, to determine (a)the general investment needs and objectives of the client and (b) the suitability of a proposed purchase or saleof a security for the client (such requirements, the "Suitability Requirements") do not apply to the Division andits Registered Representatives; and

2. a decision under the Legislation, other than the securities legislation of Newfoundland and Nova Scotia, thatthe requirements of the Investment Dealers Association of Canada (the "IDA"), in particular IDA Regulation1300.1(b), 1800.5(b) and 1900.4, requiring the Division and its Registered Representatives to make inquiriesof each client of the Division as are appropriate, in view of the nature of the client's investments and of the typeof transaction being effected for the client's account, to determine (a) the general investment needs andobjectives of the client and (b) the suitability of a proposed purchase or sale of a security for the client (suchrequirements, the "IDA Suitability Requirements") do not apply to the Division and its RegisteredRepresentatives;

AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS the Filer and the Division have represented to the Decision Makers that

1. the Filer is a corporation incorporated under the Canada Business Corporations Act and is a wholly-ownedsubsidiary of The Bank of Nova Scotia

2. the Division is a distinct internal operating division of the Filer;

3. the Filer has branches and/or call centres located in Montreal, Quebec (servicing Quebec); Halifax, Nova Scotia(servicing New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island); Toronto, Ontario (servicingOntario, as well as electronic trading across Canada); and Calgary, Alberta (servicing Manitoba, Saskatchewan,Alberta, British Columbia and the Yukon, the Northwest Territories and Nunavut). In addition, the Filer has anumber of sub-branches that act as client service centres but which do not open accounts and do not acceptorders;

4. the Filer is registered under the Legislation as an investment dealer or equivalent and is a member of the IDA;

5. Scotia Discount Brokerage Direct is a trade name of the Filer registered with each of the Jurisdictions;

6. the Division operates independently using its own letterhead, accounts, Registered Representatives andaccount documentation;

7. the Division and its Registered Representatives do not and will not provide advice or recommendationsregarding the purchase or sale of any security and the Filer and the Division will adopt, prior to acceptingclients, policies and procedures to ensure the Division and the Division's Registered Representatives do notand will not provide advice or recommendations regarding the purchase or sale of any security

8. when the Division provides trade execution services to clients it would, in the absence of this Decision, berequired to comply with the Suitability Requirements and IDA Suitability Requirements;

9. clients who request the Division or its Registered Representatives to provide advice or recommendations oradvice as to suitability will be referred to another division of the Filer or another dealer

10. the Division does not and will not compensate its Registered Representatives on the basis of transactionalvalues;

11. each client of the Filer will be advised of the Decision of the Decision Makers and, if the client wishes totransfer an existing account to the Division, the client will be requested to acknowledge that:

(a) the Division and its Registered Representatives shall not provide advice or recommendationsregarding the purchase or sale of any security, and

(b) the Division and its Registered Representatives will not assess the general investment needs andobjectives of the client or the suitability of a proposed purchase or sale of a security for the client;(both (a) and (b) shall constitute the "Client Acknowledgement");

12. the Client Acknowledgement will provide the client with sufficient detail and will explain to each client thesignificance of not receiving either investment advice or a recommendation from the Division, including thesignificance of the Division not assessing the general investment needs and objectives of the client, or thesuitability of a proposed purchase or sale of a security for a client

13. all prospective clients of the Division will be advised and required to acknowledge that:

(a) the Division and its Registered Representatives shall not provide advice or recommendationsregarding the purchase or sale of any security, and

(b) the Division and its Registered Representatives will not assess the general investment needs andobjectives of the client or the suitability of a proposed purchase or sale of a security for the client,(both (a) and (b) shall constitute the "Prospective Client Acknowledgement"),

prior to the Division opening an account for such prospective client;

14. the Prospective Client Acknowledgement will provide the client with sufficient detail and will explain to eachclient the significance of not receiving either investment advice or a recommendation from the Division,including the significance of the Division not assessing the general investment needs and objectives of theclient, or the suitability of a proposed purchase or sale of a security for the client;

15. the Filer and the Division will adopt, prior to the Division accepting clients, policies and procedures to ensure:

(a) that evidence of all Client Acknowledgements and Prospective Client Acknowledgements isestablished and retained pursuant to the record keeping requirements of the Legislation and the IDA,and

(b) all client accounts of the Filer are appropriately designated as being a client account to which a ClientAcknowledgement or Prospective Client Acknowledgement has been received or being a clientaccount to which a Client Acknowledgement has not been received;

16. the Filer will adopt, prior to the Division accepting clients, policies and procedures to ensure that:

(a) the Division operates separately from any other division of the Filer using its own letterhead, accounts,account documentation and Registered Representatives,

(b) Registered Representatives of the Division will be clearly employed by the Division and will not handlethe business or clients of any other division of the Filer, and

AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers under the Legislation is that the Suitability Requirements containedin the Legislation shall not apply to the Division and its Registered Representatives so long as

1. the Division and its Registered Representatives do not provide any advice or recommendations regarding thepurchase or sale of any security;

2. clients who request the Division or its Registered Representatives to provide advice or recommendations oradvice as to suitability are referred to another division of the Filer or another dealer;

3. the Division operates independently using its own letterhead, accounts, Registered Representatives andaccount documentation;

4. the Division does not compensate its Registered Representatives on the basis of transactional values;

5. each client of the Filer is advised of the Decision of the Decision Makers and, if the client wishes to transferan existing account to the Division, the client will be requested to make a Client Acknowledgement;

6. each prospective client of the Division is advised of the Decision of the Decision Makers and required to makea Prospective Client Acknowledgement prior to the Division or its Registered Representation servicing suchprospective client;

7. evidence of all Client Acknowledgements and Prospective Client Acknowledgements is established andretained pursuant to the record keeping requirements of the Legislation and the IDA;

8. the Filer accurately identifies and distinguishes client accounts for which a Client Acknowledgement orProspective Client Acknowledgement has been provided and client accounts for which no ClientAcknowledgement has been provided;

9. the Filer has in force policies and procedures to ensure that:

(a) the Division operates separately from any other division of the Filer using its own letterhead, accounts,Registered Representatives and account documentation,

(b) Registered Representatives of the Division are clearly employed by the Division and do not handlethe business or clients of any other division of the Filer, and

10. if an IDA rule addressing the IDA Suitability Requirements comes into effect, the Decision with respect to theSuitability Requirements will terminate one year following the date such rule comes into force, unless theDecision Maker determines otherwise.

January 17th, 2001.

"William Gazzard"

THE DECISION of the Decisions Makers, other than Newfoundland and Nova Scotia, is that the IDA SuitabilityRequirements do not apply to the Division and its Registered Representatives so long as: