Subsection 144(1) of Securities Act (Ontario) (the Act) -- revocation of an order previously granted to the Applicant dated October 31, 1008.
Subsection 74(1) of the Act -- relief from the registration requirements of paragraph 25(1)(a) of the Act granted to non-Ontario registered dealing representatives of the Applicant trading on behalf of one or more Ontario charitable foundation in connection with a charitable gift program.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1)(a), 74(1), 144(1).
July 23, 2010
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
CANACCORD GENUITY CORP.
(Subsection 74(1) and Subsection 144(1))
UPON the application (the Application) of Canaccord Genuity Corp. (the Applicant) to the Ontario Securities Commission (the Commission) for an order:
(a) Pursuant to subsection 144(1) of the Act, revoking the exemption order granted by the Commission to Canaccord Capital Corporation on October 31, 1008 (the Previous Order, as described below); and
(b) pursuant to subsection 74(1) of the Act that the registration requirements contained in paragraph 25(1)(a) of the Act (the Dealer Registration Requirements) shall not apply to non-Ontario registered dealing representatives of the Applicant (the Dealing Representatives) in respect of trading on behalf of one or more public foundations (each, a Foundation, as described below) in connection with the Applicant's charitable gift program (the Charitable Gift Program, as described below);
AND UPON considering the Application and the recommendation of the Staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a corporation continued under the Business Corporations Act (Ontario) and is registered as a dealer in the category of investment dealer in Ontario and in all other provinces and territories in Canada. The Applicant is also a member of the Investment Industry Regulatory Organization of Canada (IIROC).
The Dealing Representatives
2. Each Dealing Representatives is employed by the Applicant and is registered in one or more provinces or territories in Canada as a dealing representative of the Applicant. Each Dealing Representative is also approved by IIROC as a registered representative.
3. Each Foundation is an independent non-profit charitable organization with registered charitable status as a public foundation under the Income Tax Act (Canada) (the Tax Act). The head office of each Foundation is in Ontario.
4. The purpose of each Foundation is to support charities and other permitted entities as defined under the Tax Act (Qualified Donees) through charitable gifts received from donors. Each Foundation specializes in the management and administration of donor-advised charitable gift funds and has entered into an agreement with the Applicant in connection with its Charitable Gift Program.
The Charitable Gift Program
5. Prospective charitable donors to each Foundation will, prior to making a donation, receive a document (the Program Details Document) which will outline the details of the operation of the Charitable Gift Program and its fees.
6. Donors (each, a Donor) make an irrevocable charitable gift of cash and/or securities to a Foundation and receive a tax receipt generally equal to the cash, or fair market value of securities, donated to the Foundation. Securities donated to the Foundation will be liquidated by the Applicant.
7. The applicable Foundation will deposit the proceeds of each Donor's gift into an individual account which it will open with the Applicant (each, an Account). Donors may also make subsequent gifts to the applicable Foundation under the Charitable Gift Program from time to time.
8. Each Account will be opened in the name of the applicable Foundation in a manner in which the Donor can be identified. The Donor, or his/her successor or designate, will be responsible for providing the applicable Foundation with recommendations regarding the disbursements from the Account to Qualified Donees.
9. In order to comply with the Tax Act, the Charitable Gift Program will require that all gifts to the applicable Foundation held in the Account are disbursed to Qualified Donees in accordance with the disbursement quotas established under the Tax Act or held as required under the Tax Act. In particular, any property held in the Account which is "enduring property" as defined in subparagraph (c) of the definition of "enduring property" under section 149.1(1) of the Tax Act (also known as a "ten year gift") will be held for the required ten year period or expended strictly in accordance with any applicable exemption permitted by the Tax Act.
10. Legislation applicable to the Foundations requires that all donated assets be invested in accordance with the "prudent investor" standard. In accordance with this requirement, each Foundation will pre-select a list of mutual funds and portfolio mandates for managed accounts offered by the Applicant under the Charitable Gift Program (the Eligible Investment Vehicles). Every Account opened as a result of a donation under the Charitable Gift Program will be restricted to investments in one or more Eligible Investment Vehicles. Each of the Eligible Investment Vehicles is expected to be either a fixed income or a well-diversified balanced portfolio. The Donor will be provided an opportunity to express to the applicable Foundation his or her preference (if any) regarding which Eligible Investment Vehicles the Account should be invested in from time to time.
11. In the event that an Eligible Investment Vehicle is a mutual fund, the mutual fund will be qualified by way of a prospectus in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure and available for distribution in Ontario and the province or territory in which the Donor resides.
12. The Dealing Representative that solicits the Donor's gift to a Foundation will initially service the Account set up with the proceeds of that Donor's gift and may also have an ongoing relationship with the Donor. The Dealing Representative may make a recommendation to the Donor as to the initial choice of Eligible Investment Vehicle and may subsequently recommend changes to the choice of Eligible Investment Vehicle.
13. The applicable Foundation will have final authority over all investment decisions in each Account, except Accounts that are opened as managed accounts. In particular, after receiving the preferences of a Donor, the applicable Foundation will make all final decisions on investments for the Account, and will send trading instructions to the Dealing Representative servicing that Account.
14. In the case where an Account is a managed account, investment decisions will be made by the Dealing Representative responsible for the Account, in accordance with the investment objectives of the Account pursuant to the portfolio mandate(s) selected by the Donor as an Eligible Investment Vehicle. The applicable Foundation has the ability to select another Dealing Representative to manage the managed account. Each Dealing Representative exercising discretionary authority over an Account that is a managed account will be appropriately qualified to provide portfolio management services.
15. The Applicant will deliver trade confirmations and account statements (Account Statements) to the applicable Foundation with respect to each Account as required under the securities legislation in the jurisdiction where such Account is located. The Applicant will make a copy of any or all Account Statements available to the applicable Donor upon request. The Applicant will deliver a semi-annual donor statement (Donor Statement) to each Donor, which will provide certain relevant Account information to the Donor.
The Previous Order
16. On October 31 ,2008, the Commission granted Canaccord Capital Corporation an exemption from the registration requirement contained in, then, paragraph 25(1)(a) of the Act in respect of non-Ontario registered salespersons trading on behalf of a public foundation in connection with a charitable gift program (the Previous Order).
17. On December 12, 2009, Canaccord Capital Corporation changed its name to Canaccord Financial Ltd.
18. On May 10, 2010, Canaccord Financial Ltd. changed its name to Canaccord Genuity Corp. At the same time as the name change, Canaccord Genuity Corp. continued from the Business Corporations Act (British Columba) to the Business Corporations Act (Ontario).
19. The Applicant is seeking a new order for the following reasons: 1) it has since changed its name, 2) it is proposing to trade on behalf of one or more Foundations, and 3) instead of the Foundation delivering a quarterly Donor statement to each Donor, it is proposing that it, the Applicant, deliver a semi-annual Donor Statement to each Donor.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to subsection 144(1) of the Act, that the Previous Order is revoked;
IT IS FURTHER ORDERED, pursuant to subsection 74(1) of the Act, that the Dealer Registration Requirements shall not apply to the Dealing Representatives in respect of registrable activities undertaken on behalf of a Foundation in connection with the Applicant's Charitable Gift Program, provided that:
(a) each Dealing Representative undertaking registrable activities on behalf of a Foundation is registered in one or more provinces or territories in Canada as a dealing representative of the Applicant and is approved by IIROC as a registered representative;
(b) each Dealing Representative exercising discretionary authority over a managed account in connection with the Charitable Gift Program will be appropriately qualified to provide portfolio management services;
(c) all fees, expenses and commissions related to the Charitable Gift Program will be fully disclosed in the Program Details Document, and the Program Details Document shall be provided to every Donor by the Applicant or the applicable Dealing Representative prior to the Donor making a gift to a Foundation;
(d) the Donor making a gift to a Foundation receives, upon request, a duplicate copy of any or all Account Statements delivered to the Foundation by the Applicant; and
(e) the Applicant delivers a semi-annual Donor Statement to each Donor.