Toronto-Dominion Bank and TD Capital Trust II

Order

Headnote

Application by bank (the Bank) and capital trust subsidiary (the Trust) for an order granting the Trust relief from the requirement in OSC Rule 13-502 Fees (the Fees Rule) to pay participation fees - Bank has paid, and will continue to pay, participation fees applicable to it under s. 2.2 of the Fees Rule, and Bank includes capitalization of Trust in its fee calculation - relief analogous to relief for "subsidiary entities" contained in s. 2.9(2) of the Fees Rule - Trust may not, from a technical accounting perspective, be considered to be a "subsidiary entity" of Bank for Canadian GAAP purposes and may not be entitled to rely on the exemption in s. 2.9(2) of the Fees Rule - Trust and Bank satisfy conditions of exemption in s. 2.9(2) but for definition of "subsidiary entity" - Trust exempt from requirement to pay participation fees, subject to conditions.

Applicable Legislative Provisions

OSC Rule 13-502 Fees, s. 2.9(2).

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 13-502 FEES

AND

IN THE MATTER OF

THE TORONTO-DOMINION BANK AND

TD CAPITAL TRUST II

 

ORDER

WHEREAS the Director has received an application from The Toronto-Dominion Bank (the Bank) and TD Capital Trust II (the Trust) for an order, pursuant to Section 6.1 of Ontario Securities Commission (the Commission) Rule 13-502 -- Fees (the Fees Rule), that the requirement to pay a participation fee under Section 2.2 of the Fees rule shall not apply to the Trust, subject to certain terms and conditions.

AND WHEREAS the Bank and the Trust have represented to the Commission that:

1. The Trust is a open-end trust established under the laws of the Province of Ontario by The Canada Trust Company as trustee (as succeeded by Computershare Trust Company of Canada, the Trustee) pursuant to a declaration of trust dated September 10, 2002 (as amended and restated on October 22, 2002).

2. The Trust has a financial year-end of December 31.

3. The Trust is a reporting issuer in Ontario and, to its knowledge, is not in default of any requirement under the securities legislation of the Province of Ontario.

4. Pursuant to an administration agreement dated October 22, 2002, the Trustee has delegated to the Bank certain of its obligations in relation to the administration of the Trust, including the day-to-day operations of the Trust and other matters as may be requested by the Trustee from time to time.

5. The outstanding securities of the Trust consist of (i) 350,000 TD Capital Trust II Securities -- Series 2012-1 (the TD CaTS II), each with a face value of $1,000 and (ii) 2,000 Special Trust Securities, each with a face value of $1,000. The Trust distributed the TD CaTS II in a public offering (the Offering) pursuant to a prospectus dated October 15, 2002 (the Prospectus) and may from time to time issue further series of TD Capital Trust II Securities. All of the Special Trust Securities, which are the only voting securities of the Trust, are held by the Bank. (The TD Capital Trust II Securities and the Special Trust Securities are collectively referred to herein as Trust Securities.)

6. No Trust Securities are currently listed on a marketplace as defined in National Instrument 21-101 Marketplace Operation.

7. The Trust's only business is to invest its assets and its objective is to acquire and hold assets, consisting primarily of a senior deposit note of the Bank (the Bank Deposit Note), which will generate income for distribution to holders of the Trust Securities. The Trust does not and will not carry on any independent business activities other than to acquire and hold assets to generate income as described above.

8. Pursuant to an MRRS decision document dated December 19, 2002 (the 2002 Continuous Disclosure Exemption) granted to the Trust by the Commission, as principal regulator, on behalf of itself and the other decision makers (collectively, the Decision Makers), the Decision Makers determined that the requirement contained in the securities legislation of the Province of Ontario and in other applicable jurisdictions (collectively, the Legislation) to:

(a) file interim financial statements and audited annual financial statements (collectively, the Financial Statements) with the Decision Makers and deliver such statements to the security holders of the Trust;

(b) make an annual filing (an Annual Filing) with the Decision Makers in lieu of filing an information circular, where applicable; and

(c) file an annual report (an Annual Report) and an information circular with the Decision Maker in the Province of Quebec and deliver such report or information circular to the security holders of the Trust resident in the Province of Quebec;

shall not apply to the Trust for so long as:

(i) the Bank remains a reporting issuer under the Legislation;

(ii) the Bank files with the Decision Makers, in electronic format under the Trust's SEDAR profile, the documents listed in (a) to (c) above in this paragraph 8, at the same time as they are required under the Legislation to be filed by the Bank;

(iii) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the documents referred to in (a) to (c) above in this paragraph 8;

(iv) the Bank sends its Financial Statements and Annual Filing, where applicable, to holders of Trust Securities and its Annual Report to holders of Trust Securities resident in the Province of Quebec at the same time and in the same manner as if the holders of Trust Securities were holders of Bank Common Shares;

(v) all outstanding securities of the Trust are either TD Capital Trust II Securities or Special Trust Securities;

(vi) the rights and obligations (other than the economic terms thereof) of holders of additional series of TD Capital Trust II Securities are the same in all material respects as the rights and obligations of the holders of the TD CaTS II on the date hereof; and

(vii) the Bank is the beneficial owner of all Special Trust Securities;

and provided that the 2002 Continuous Disclosure Exemption shall expire 30 days after the date that a material adverse change occurs in the affairs of the Trust.

In addition, the Decision Makers in Ontario, Saskatchewan and Quebec determined that the requirements to file an annual information form (an AIF) and management's discussion and analysis (MD&A) of the financial condition and results of operation of the Trust with the Decision Makers in Ontario, Saskatchewan and Quebec and send such MD&A to the security holders of the Trust, where applicable, shall not apply to the Trust for so long as:

(viii) the conditions set out in clauses (i), (v), (vi) and (vii) above of this paragraph 8 are complied with;

(ix) the Bank files its AIF and its annual and interim MD&A with the Decision Makers, as applicable, in electronic format under the Trust's SEDAR Profile at the same time as they are required under the Legislation to be filed by the Bank;

(x) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the documents referred to in clauses (a) to (c) above of this paragraph 8; and

(xi) the Bank sends its annual and interim MD&A and its AIF, as applicable, to holders of Trust Securities at the same time and in the same manner as if the holders of Trust Securities were holders of Bank Common Shares;

and provided that the 2002 Continuous Disclosure Exemption shall expire 30 days after the date that a material adverse change occurs in the affairs of the Trust.

9. Pursuant to an MRRS Decision Document dated May 31, 2004 (the 2004 Continuous Disclosure Exemption) granted to the Trust by the Commission, as principal regulator, on behalf of itself and the other Decision Makers, the Decision Makers determined that the requirement contained in the Legislation to:

(a) file annual certificates (Annual Certificates) with the Decision Makers under Section 2.1 of Multilateral Instrument 52-109 -- Certification of Disclosure in Issuer's Annual and Interim Filings (MI 52-109); and

(b) file interim certificates (Interim Certificates) with the Decision Makers under Section 3.1 of MI 52-109;

shall not apply to the Trust for so long as:

(i) the Trust is not required to, and does not, file its own interim filings and annual filings (each as defined in MI 52-109);

(ii) the Bank files with the Decision Makers, in electronic format under the Trust's SEDAR profile, the Bank's Annual Certificates and Interim Certificates at the same time as such documents are required under the Legislation to be filed by the Bank; and

(iii) the Trust qualifies for the relief contemplated by, and is in compliance with, the requirements and conditions set out in the 2002 Continuous Disclosure Exemption;

and provided that if a material adverse change occurs in the affairs of the Trust, the 2004 Continuous Disclosure Exemption shall expire 30 days after the date of such change.

10. The Trust was established by the Bank in order to comply with the regulatory requirements of the Office of the Superintendent of Financial Institutions (OSFI) relating to the issuance of innovative capital instruments (as contained in OSFI's Principles Governing Inclusion of Innovative Instruments in Tier 1 Capital (the OSFI Guidelines)).

11. OSFI maintains strict guidelines and standards (the OSFI Guidelines) with respect to the capital adequacy requirements of federally regulated financial institutions, including the Bank, and, in particular, specifies minimum required amounts of capital to be maintained by such institutions. Tier 1 capital consists of common shareholders' equity, qualifying non-cumulative perpetual preferred shares, qualifying innovative instruments and qualifying non-controlling interests arising on consolidation from Tier 1 capital instruments. Innovative instruments, such as the TD CaTS II, must satisfy the detailed requirements of the OSFI Guidelines to be included in the Tier 1 capital of the Bank, including the requirement that such instruments be issued by a special purpose vehicle (such as the Trust), whose primary purpose is to raise innovative Tier 1 capital. OSFI approved the inclusion of the TD CaTS II as Tier 1 capital of the Bank. If the Bank could issue the TD CaTS II directly, this capital would be included in the calculation of the participation fee payable by the Bank.

12. No continuous disclosure documents concerning only the Trust will be filed with the Commission.

13. The Trust is a "Class 2 reporting issuer" under the Fees Rule and would be required (but for this Order) to pay participation fees under such rule.

14. The Bank controls the Trust though its ownership of the Special Trust Securities issued by the Trust. The Bank has paid, and will continue to pay, participation fees applicable to it under section 2.2 of the Fees Rule.

15. The Fees Rule includes an exemption for "subsidiary entities" in subsection 2.9(2) of the Fees Rule. The Bank and the Trust meet all of the substantive requirements to rely on the exemption in subsection 2.9(2) of the Fees Rule, but for the definition of "subsidiary entity". The Fees Rule defines "subsidiary entity" by reference to the accounting definition under Canadian generally accepted accounting principles (Canadian GAAP), rather than by reference to a legal definition based on control.

16. On November 1, 2004, the Canadian Institute of Chartered Accountants adopted Guideline 15, Consolidation of Variable Interest Entities (the VIE Guideline). According to the VIE Guideline, the Bank may not consolidate the Trust because the assets of the Trust consist primarily of the Bank Deposit Note, a liability of the Bank. As a result, the Trust may not, from a technical accounting perspective, be considered to be a "subsidiary entity" of the Bank for Canadian GAAP purposes and may not be entitled to rely on the exemption in subsection 2.9(2) of the Fees Rule.

THE ORDER of the Commission under the Fees Rule is that the requirement to pay a participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, for so long as:

(i) the Bank and the Trust continue to satisfy all of the conditions contained in the 2002 Continuous Disclosure Exemption and the 2004 Continuous Disclosure Exemption; and

(ii) the capitalization of the Trust represented by the TD CaTS II and any additional securities of the Trust that may be issued, from time to time, by the Trust is included in the participation fee calculation applicable to the Bank and the Bank has paid the participation fee calculated on this basis.

DATED at Toronto this 31st day of October, 2008.

"Erez Blumberger"
Manager, Corporate Finance
Ontario Securities Commission