Multilateral Instrument 11-102 -- Passport System -- Relief from requirement that registrant appoint its CEO as UDP to allow filer to appoint its President as UDP -- President is functional equivalent of CEO -- President has ultimate authority for compliance related activity throughout the firm -- President is head of the filer's Executive Committee -- section 11.2 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 5.1, 11.2.
September 11, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF INVESCO CANADA LTD. (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the requirement contained in section 11.2 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit the Filer to designate its president (the President), instead of its chief executive officer (CEO), as the ultimate designated person (UDP) of the Filer (the Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec and Saskatchewan.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meanings if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is registered as an investment fund manager in each of Ontario, Québec and Newfoundland and Labrador and as a portfolio manager and an exempt market dealer in each province of Canada. The Filer is also registered as a mutual fund dealer in each of Alberta, British Columbia, Nova Scotia, Ontario, Prince Edward Island and Québec and as a commodity trading manager in Ontario.
2. The Filer is a corporation amalgamated under the laws of Ontario, with its head office located in Toronto, Ontario. The Filer is an indirect wholly-owned subsidiary of Invesco Ltd. (Invesco), a global investment manager.
3. The Filer is not in default of applicable securities legislation in any jurisdiction of Canada, except with respect to the matter to which the Relief Sought relates. The Filer applied for the Relief Sought on the basis that the President, rather than the CEO, is, and has been, more appropriately placed to act as UDP of the Filer. The purpose and intent of the UDP requirement in section 11.2 of NI 31-103 is to ensure that responsibility for compliance rests with the individual at the top of a firm, which, with respect to the Filer, is the President. Therefore, the Filer submits that it is, and has been, in compliance with the purpose and intent of the UDP requirement by designating the President as its UDP.
4. Invesco is a global operating company with subsidiaries in different geographic regions as required for regulatory purposes. Notwithstanding the multi-corporate subsidiary structure, Invesco operates as one global entity through Senior Managing Directors (SMDs), each of whom reports to Invesco's chief executive officer. SMDs are responsible for the overall business in their geographic areas.
5. The CEO is the SMD for the Americas and has the title of Head of Americas of Invesco. As a result, the CEO is responsible for oversight of Invesco's United States retail and institutional businesses and Invesco Fixed Income, the business division at Invesco responsible for fixed income investing. Given the size of Invesco's United States retail and institutional businesses, the majority of the CEO's time is devoted to United States matters. The CEO also has responsibilities throughout the Americas.
6. As is required under Invesco's internal corporate governance structure, the CEO's position as Head of Americas requires him to be the chief executive officer of the Filer. This enables the CEO to address issues at a regional, rather than national, level and apply learning from Invesco's United States (and other Americas) business to its Canadian operations.
7. The President is a director of the Filer, its Chief Operating Officer and a member of, and the head of, the Filer's Executive Committee. The President is responsible for overseeing the activities at the Filer that require registration under Canadian securities legislation.
8. The President devotes his time exclusively and solely to the Filer's business and is responsible for the day-to-day operations of the Filer. The CEO has little involvement in the Filer's day-to-day operations, leaving such operations to the oversight of the President.
9. Despite their different titles, the President and the CEO perform duties and have responsibilities in relation to the Filer that makes them functional equivalents.
10. The President is responsible for key decisions at the Filer. Even though he does not hold the title of chief executive officer, the President:
(a) is accountable for the performance of the Filer and provides reports to Invesco's Board of Directors regarding the Filer's performance at least annually;
(b) provides clear leadership and promotes a culture of compliance, collaboration and responsibility at the top of the Filer;
(c) has ultimate authority over compliance related matters for the Filer. The President supervises the Filer's business activities, and monitors and resolves all compliance related issues to ensure compliance with securities legislation;
(d) has senior management of the Filer, including members of the Filer's Executive Committee, report directly and/or indirectly to him;
(e) is responsible for, along with other members of the Filer's Executive Committee, creating and developing the strategic plan for the Filer. The CEO is consulted with respect to the Filer's strategic plan once it has been created and developed by the President and the members of the Filer's Executive Committee;
(f) is accountable for reporting to the Filer's Board of Directors; and
(g) is responsible for the overall organizational structure and succession planning at the Filer. The President leads and is solely responsible for ensuring appropriate staffing and succession planning at the Filer,
(collectively, the President Responsibilities).
11. The President is a member of, and the head of, the Filer's Executive Committee. The Filer's Executive Committee meets regularly to discuss the Filer's business, strategy and financial operations and is responsible for establishing and executing the strategy for the Filer. All Canadian strategic decisions are subject to review and approval by the Filer's Executive Committee. The CEO is not a member of the Filer's Executive Committee.
12. The President meets regularly with the Chief Compliance Officer (CCO) of the Filer to receive reports on compliance matters and discuss compliance issues. In addition, the President receives regular updates from other senior management of the Filer regarding compliance matters relating to the Filer. The President also serves on the Filer's Investment Compliance Committee and the Code of Ethics Committee and receives reports from other committees. Compliance staff of the Filer report to the CCO of the Filer, who reports directly to the President regarding compliance related matters. The President will also consult with the Head of Legal -- Canada of the Filer on such matters.
13. The CEO of the Filer does not have any involvement in compliance related matters of the Filer, other than receiving the annual report of the CCO pursuant to NI 31-103 in his capacity as a member of the Board of Directors of the Filer. The Filer's CEO does not have authority over the firm as a whole or all of the individuals acting on its behalf in relation to matters of compliance. If there were a disagreement between the President and the CEO about a compliance related matter, the President has the authority to make the final decision.
14. Under section 11.2 of NI 31-103, a registered firm is required to designate an individual to be the UDP of the firm and the individual must be the chief executive officer of the registered firm or, if the firm does not have a chief executive officer, an individual acting in a capacity similar to a chief executive officer.
15. Under section 5.1 of NI 31-103, the UDP is responsible for (i) supervising the activities of the firm that are directed towards ensuring compliance with securities legislation by the firm and each individual acting on the firm's behalf; and (ii) promoting compliance by the firm, and individuals acting on its behalf, with securities legislation (the UDP Responsibilities).
16. The UDP of the Filer is the President of the Filer, who has been designated as UDP since the coming into force of NI 31-103. Prior to the coming into force of NI 31-103, the President undertook to act as the Ultimately Responsible Person of the Filer under OSC Rule 31-505 Conditions of Registration.
17. The President is responsible for the President Responsibilities, which are substantively the responsibilities of a chief executive officer and as a member of, and the head of, the Filer's Executive Committee is involved in and responsible for all key business, strategic and financial decisions of the Filer.
18. The President has ultimate authority for the Filer's compliance related activities. The President supervises the activities of the Filer's business to ensure compliance with securities legislation and promotes compliance by the Filer and its employees with securities legislation.
19. The unique global structure of Invesco means that neither the President nor the CEO has sole authority over the Filer as a whole.
20. For these reasons, the President of the Filer is more appropriately placed to fulfill the UDP Responsibilities than the CEO.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Relief Sought is granted provided that:
(a) The President continues to be substantively responsible for the President Responsibilities or responsibilities in the future that are substantively similar;
(b) The President continues to have ultimate authority for all compliance related matters for the Filer and all of its employees; and
(c) The UDP provides reports to the Filer's Board of Directors as necessary or advisable in view of his or her responsibilities, including notice of any concerns the UDP has raised with the senior management team that could not be effectively resolved.