National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus requirement for certain trades made in connection with an employee limited partnership interest purchase plan -- the issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 -- Prospectus and Registration Exemptions as the securities are not being offered to employees but to former employees -- Canadian participants will receive disclosure documents -- the issuer is subject to the supervision of the local securities regulator -- Canadian participants will not be induced to participate in the offering by expectation of employment -- no market for the securities of the issuer in Canada -- number of Canadian participants is de minimis -- relief granted.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 74(1).
National Instrument 45-106 Prospectus and Registration Exemptions, s. 2.24.
August 6, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
THE JONES FINANCIAL COMPANIES, L.L.L.P.
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 an exemption from the prospectus requirements contained in the Legislation so that such requirements do not apply to the issuance of limited partnership interests of the Filer to two former employees of Edward Jones (Edward Jones Canada), a limited partnership organized under the laws of the Province of Ontario that is directly or indirectly wholly-owned by the Filer, pursuant to the Filer's 2010 Employee Limited Partnership Interest Purchase Plan (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator (the Principal Regulator) for this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the Province of British Columbia (the Non-Principal Jurisdiction).
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a registered limited liability limited partnership organized under the laws of the State of Missouri.
2. The Filer is a holding company with no direct operations. Its principal operating subsidiaries are Edward D. Jones & Co., L.P. (Edward Jones), a Missouri limited partnership, and Edward Jones Canada.
3. Edward Jones is a registered broker-dealer in the United States (U.S.) that engages in the retail brokerage business. Edward Jones Canada carries on a securities business in Canada and is registered as an investment dealer under the Legislation and the securities legislation of the Province of British Columbia.
4. Neither the Filer nor Edward Jones Canada is, or has any current intention of becoming, a reporting issuer in any jurisdiction of Canada. Neither the Filer nor Edward Jones Canada is in default under the Legislation or under the securities legislation of the Province of British Columbia.
5. The Filer proposes to offer an aggregate of up to 275,000 units of limited partnership interests in its partnership (the Interests) pursuant to a registration statement of the Filer on Form S-1 (the Registration Statement) under the U.S. Securities Act of 1933 filed with the U.S. Securities and Exchange Commission on July 2, 2010. The Interests will be issued pursuant to the Filer's 2010 Employee Limited Partnership Interest Purchase Plan (the Plan). The Plan is intended to provide an investment opportunity to certain current and former employees of the Filer's subsidiaries and certain general partners of the Filer (the Participants) and, also, to increase the Filer's capital through Participants' contributions. Pursuant to the Plan, Participants are granted awards that represent an opportunity to acquire Interests.
6. The purchase price of each full Interest will be US$1,000 payable by the Participant at the time the Interests are purchased, with a minimum purchase of five Interests, or US$5,000.
7. The Plan will become effective January 1, 2011, or, if later, the date that the Registration Statement is declared effective by the U.S. Securities and Exchange Commission. The offer will continue in effect until December 31, 2010, unless extended by the managing partner of the Filer. The Filer may amend the Plan at any time either retroactively or prospectively and may terminate or suspend the Plan or any performance award granted under the Plan at any time for any reason.
8. There is no market for the Interests and none of the limited partners of the Filer (Limited Partners) may sell, pledge, exchange, transfer or assign any Interest without the consent of the managing partner of the Filer, which is not expected to be given. Because the Interests are non-transferable, no public market in the Interests will develop.
9. The rights and obligations of the Limited Partners are governed by the Filer's partnership agreement, as amended from time to time, a copy of which will be attached to the Registration Statement. None of the Limited Partners may vote or otherwise participate in the management of the business of the Filer.
10. The price at which the Interests will be offered (US$1,000 per Interest) represents the book value of each Interest and has been arbitrarily determined. Each Limited Partner will be entitled to a 71/2% guaranteed annual payment on such book value (US$1,000 per Interest). Each Limited Partner must accept redemption of his or her Interest(s) at such book value and accept the return of his or her capital contribution(s) plus any accrued and unpaid 71/2% guaranteed annual payments and relinquish all rights as one of the Limited Partners (a) upon his or her death, (b) immediately upon notice of his or her voluntary withdrawal, or (c) within 30 days of receipt of a notice to withdraw from the Filer's managing partner or the holders of 50% or more of the Filer's general partners' capital (a Mandatory Withdrawal Notice). The decision to issue a Mandatory Withdrawal Notice is within the absolute discretion of the Filer's managing partner. No Limited Partner has any rights to retain his or her Interest.
11. Interests will be offered to employees and former employees of subsidiaries of the Filer resident in the U.S. under the Registration Statement. Interests will also be offered to certain employees of Edward Jones Canada resident in Canada (the Canadian Employees) pursuant to the exemption from the prospectus requirement of the Legislation provided by Section 2.24 of National Instrument 45-106 -- Prospectus and Registration Exemptions (the 45-106 Exemption).
12. The offering of Interests in Canada will be made solely by the Filer, without the participation of any dealer, underwriter or selling agent.
13. The Filer also wishes to offer Interests to one former employee of Edward Jones Canada resident in the Jurisdiction and one former employee of Edward Jones Canada resident in the Province of British Columbia (together, the Canadian Former Employees). Because each of these individuals is no longer an employee of Edward Jones Canada, the 45-106 Exemption is not available in respect of distributions of Interests to such individuals. As such, the granting of the Exemption Sought is necessary in order to allow the two Canadian Former Employees to participate in the Plan.
14. Participation in the offering by the Canadian Former Employees will be on a voluntary basis and such persons will not be induced to purchase Interests by expectation of employment.
15. None of the Filer, Edward Jones Canada or any of their employees, agents or representatives will provide investment advice to the Canadian Former Employees with respect to an investment in the Interests.
16. Each of the Canadian Former Employees will receive a copy of the Registration Statement together with a supplement that describes the relevant Canadian income tax consequences. In addition, upon request each Canadian Former Employee may receive copies of all documents incorporated by reference into the Registration Statement, including the Filer's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
17. The distributions of Interests to the two Canadian Former Employees are isolated transactions.
The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the relevant regulator or securities regulatory authority to make the decision.
The decision of the Principal Regulator is that the Exemption Sought is granted.