Securities Law & Instruments


Headnote

Relief under paragraph 4.1(1)(a) 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 acts as an officer, partner or director of another registered firm that is not an affiliate of the first-mentioned firm – The firms require relief for a limited period of time – The individual will have sufficient time to adequately serve both firms – As one firm is winding down its operations, conflicts of interest are unlikely to arise – The firms have policies 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.

April 11, 2017

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
BANWELL FINANCIAL INC.
(Banwell)

AND

IN THE MATTER OF
INVESTIA FINANCIAL SERVICES INC.
(Investia)

(Investia and Banwell are, collectively, the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from Investia and Banwell for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the requirement in paragraph 4.1(1)(a) 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 Michael Banwell, an officer, a director, a shareholder and the ultimate designated person (UDP) and chief compliance officer (CCO) of Banwell, to be both a registered dealing representative of Investia and the UDP, CCO, an officer, a director and a shareholder of Banwell for a limited period of time to maintain the registration of Banwell to facilitate the transfer of Banwell’ s client accounts to Investia (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the Autorité des marchés financiers (AMF) is the principal regulator for this application;

(b)           the Filers have provided notice that section 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, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan, and Yukon; and
(c)           the decision is the decision of the principal regulator and evidences the decision of the 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.             Investia  is registered as: (i) a mutual fund dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan and Yukon; (ii) an exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan and Yukon; (iii) a scholarship plan dealer in Québec; and (iv) a restricted dealer in Québec. Investia is a member of the Mutual Fund Dealers Association of Canada (MFDA).

2.             Investia engages primarily in mutual fund dealing and distribution in Canada. Its head office is located in Québec.

3.             The principal regulator of Investia is the AMF.

4.             Banwell is registered as: (i) a mutual fund dealer in Ontario and Alberta and (ii) an exempt market dealer in Ontario and Alberta. Banwell is a member of the MFDA.

5.             Banwell engages primarily in mutual fund and exempt market dealing and distribution in Ontario and Alberta. Its head office is located in Ontario.

6.             The principal regulator of Banwell is the Ontario Securities Commission (the OSC).

7.             The Filers are not in default of any requirement of securities legislation in any jurisdiction of Canada where they are operating.

8.             The Filers are not affiliates.

9.             Investia has provided notice pursuant to section 11.9 of NI 31-103 of the proposed transfer of all, or substantially all, of the client accounts of Banwell to Investia (the Proposed Transaction). In addition to the Proposed Transaction, the dealing representatives of Banwell will apply for registration with Investia as dealing representatives.

10.          The Proposed Transaction is designed to permit Investia to acquire all the client accounts of Banwell and expand its operations in the functional areas of mutual fund and exempt market dealings in Ontario and Alberta in a timely and efficient manner.

11.          Michael Banwell is currently a director, an officer, a shareholder and a dealing representative of Banwell and acts as Banwell’s UDP and CCO. Following the closing of the Proposed Transaction, it is intended that Michael Banwell will be registered with Investia as a dealing representative, and will continue to be a director, an officer and a shareholder of Banwell and act as the UDP and CCO of Banwell for a limited period of time (the Dual Registration).

12.          Prior to the closing date of the Proposed Transaction, clients of Banwell will be provided with notice of the Proposed Transaction that includes information about the transfer of client accounts to Investia as well as information that Banwell will no longer offer services to its clients.

13.          The timing of the Proposed Transaction has been set in order to ensure a smooth transition of Banwell’ s clients accounts to Investia. Banwell and Investia agree that clients should receive their 2017 Q1 client statements with their entire portfolio showing under Banwell. The next client statements 2017 Q2 will therefore show the clients entire portfolios under Investia.

14.          Michael Banwell’s Dual Registration is required so that Michael Banwell can service his clients under the Investia banner after the date of the Proposed Transaction while remaining registered under Banwell to wind-up the Banwell dealership.

15.          After the Proposed Transaction closes, Banwell will cease its registerable activities and will not open any new client accounts. Banwell will apply to surrender its MFDA membership and its securities registrations as soon as all client accounts are transferred to Investia.

16.          Banwell has agreed to certain terms and conditions being placed on its registration after the Proposed Transaction closes which include that:

(a)           Banwell and all its registered individuals shall not trade in securities and will not open any new client accounts; and

(b)           Michael Banwell, as a director and officer of Banwell, will act in such capacity only to comply with regulatory requirements including, as necessary, to resign the membership of Banwell with the MFDA and surrender the registrations of Banwell under applicable securities legislation.

17.          Michael Banwell has agreed to adhere to the terms and conditions imposed.

18.          Michael Banwell will have sufficient time and resources to adequately meet his obligations to each of the Filers.

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 and the inactive status of Banwell will facilitate this, by largely or entirely avoiding any conflicts of interest.

20.          Furthermore, Investia has compliance and supervisory policies and procedures in place to monitor the conduct of its representatives (including Michael Banwell) and to ensure that Investia can deal appropriately with any conflict of interest that may arise.

21.          Investia will supervise the activities that Michael Banwell will conduct on behalf of Banwell, including by holding meetings regularly with him and by obtaining regular status reports from him.

22.          In the absence of the Exemption Sought, Investia would be prohibited under paragraph 4.1(1)(a) of NI 31-103 from permitting Michael Banwell to act as a dealing representative of Investia while also acting as an officer and a director of Banwell.

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:

1.             the circumstances described above remain in place, and

2.             the Exemption Sought shall expire on the earlier of the following:

(i) one year after the date hereof, and

(ii) the date on which the surrender of Banwell’s registration is accepted by the OSC.

“Eric Stevenson”
Superintendent, Client Services and Distribution Oversight