Securities Law & Instruments


Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Section 233 of theRegulation - issuer is connected and related issuer of sole underwriter - noindependent underwriter involvement -underwriter exempt from requirement that anindependent underwriter underwrite 20% of the offering, subject to conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., (the "Act").

Regulations Cited

Regulation made under the Act, R.R.O. 1990, Reg. 1015, as am., ss. 219(1), 224(1)(b)and 233, Form 12.

Rules Cited

In the Matter of the Limitation on a Registrant Underwriting Securities of a RelatedIssuer or Connected Issuer of the Registrant (1997), 20 OSCB 1217.

Policies Cited

National Policy Statement No. 44, Rules for Shelf Prospectus Offerings and for PricingOfferings After the Final Prospectus is Receipted.


IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF ONTARIO, BRITISH COLUMBIA, ALBERTA, QUEBEC AND NEWFOUNDLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
MERRILL LYNCH MORTGAGE LOANS INC. AND MERRILL LYNCH CANADA INC.

MRRS DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of Ontario, British Columbia, Alberta, Quebec andNewfoundland (the "Jurisdictions") has received an application from Merrill LynchMortgage Loans Inc. (the "Issuer") and Merrill Lynch Canada Inc. ("ML Canada") (theIssuer and ML Canada are collectively referred to herein as the "Filer") for a decisionpursuant to the securities legislation of the Jurisdictions (the "Legislation") that theprovision contained in the Legislation mandating independent underwriter involvementshall not apply to ML Canada and the Issuer in respect of the proposed offering of C-3Certificates (as defined below);

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "MRRS") the Ontario Securities Commission is the principalregulator for this Application;

AND WHEREAS it has been represented by the Filer to the Decision Makersthat:

1. The Issuer was incorporated under the laws of Canada on March 13, 1995; theauthorized share capital of the Issuer consists of an unlimited number ofcommon shares, of which 1,000 common shares are issued and outstanding, allof which are held by Merrill Lynch & Co., Canada Ltd. ("ML & Co."); the headoffice of the Issuer is located in Toronto, Ontario.

2. The Issuer filed a long form prospectus dated June 14, 1995, and asupplemental prospectus dated June 19, 1995, in connection with an initialpublic offering of 6,000,000 S&P 500 BULLS (the "S&P 500 Bulls") and receivedreceipts for such prospectus from each of the Canadian provincial securitiesregulatory authorities.

3. On May 12, 1999 the Issuer filed a revised annual information form and receivedan acceptance thereof on behalf of the Canadian securities administrators datedMay 13, 1999.

4. On December 21, 1998, the Issuer offered, by private placement, $182,083,237(initial certificate balance) of pass-through certificates evidencing co-ownershipinterests in a pool of 32 commercial mortgage loans, of which $163,874,000(initial certificate balance) of pass-through certificates were designated asExchangeable Commercial Mortgage Pass-Through Certificates, Series 1998-Canada 1 (the "Offered Certificates") and sold pursuant to a ConfidentialOffering Memorandum dated December 16, 1998.

5. The Issuer was issued receipts by each of the Canadian provincial securitiesregulatory authorities for a short form prospectus dated May 31, 1999 for theissuance of $163,874,000 (initial certificate balance) of commercial mortgagepass-through certificates, designated as Commercial Mortgage Pass-ThroughCertificates, Series 1998-Canada 1 (the "C-1 Certificates") in exchange for theOffered Certificates of the same class.

6. The Issuer filed a short form prospectus dated September 16, 1999 with eachof the Canadian provincial securities regulatory authorities for the issuance of$193,741,000 (initial certificate balance) of commercial mortgage pass-throughcertificates, designated as Commercial Mortgage Pass-Through Certificates,Series 1999-Canada 2 (the "C-2 Certificates") and received receipts for suchprospectus from each of the Canadian provincial securities regulatoryauthorities.

7. The Issuer filed a short form prospectus dated October 1, 1999 with each of theCanadian provincial securities regulatory authorities for the issuance of$220,000,000 (initial certificate balance) of pass-through certificates, designatedas 1st Street Tower Pass-Through Certificates (the "Tower Certificates") andreceived receipts for such prospectus from each of the Canadian provincialsecurities regulatory authorities.

8. The Issuer has been a "reporting issuer" pursuant to the securities legislationin certain of the provinces of Canada for over 12 calendar months, but hasapplied for relief from the requirements to make continuous disclosure of itsfinancial results and from other forms of continuous disclosure requirementsunder applicable securities legislation from the securities regulatory authoritiesin applicable provinces other than certain reports to the S&P 500 Bullsinvestors, the holders of the C-1 Certificates, the C-2 Certificates and the TowerCertificates based upon the fact that after the completion of the offerings of theS&P

500 Bulls, C-1 Certificates, C-2 Certificates and Tower Certificates, thecontinued financial performance of the Issuer is not relevant to investorsbecause the S&P Bulls, C-1 Certificates, C-2 Certificates and Tower Certificatesdo not represent any interest or claim on any assets of the Issuer.

9. The Issuer currently has no assets or liabilities other than its rights andobligations under certain of the material contracts related to the S&P 500BULLS, the C-1 Certificates, the C-2 Certificates and the Tower Certificatestransactions and does not presently carry on any activities except in relation tothe S&P 500 Bulls, the C-1 Certificates, the C-2 Certificates and the TowerCertificates.

10. The officers and directors of the Issuer are employees of ML Canada.

11. ML Canada was continued and amalgamated under the laws of Canada onAugust 26, 1998; the authorized share capital of ML Canada consists of anunlimited number of common shares; the common shares of ML Canada areowned by ML & Co. and Midland Walwyn Inc; the head office of ML Canada islocated in Toronto, Ontario.

12. ML Canada is not a reporting issuer in any Canadian province.

13. ML Canada is registered as a dealer in the categories of "broker" and"investment dealer" and is a member of the Investment Dealers Association ofCanada.

14. The Issuer proposes to offer Commercial Mortgage Pass-Through Certificates,Series 2000-Canada 3 (the "C-3 Certificates"), issuable in classes, with anApproved Rating by an Approved Rating Organization, as those terms aredefined in the Legislation, to the public in Canada (the "Offering"), to finance thepurchase by the Issuer from Merrill Lynch Capital Canada Inc. and from otheroriginators of mortgage loans of ownership interests in particular mortgageloans deposited with Montreal Trust Company of Canada as custodian; each C-3 Certificate of a particular class will represent an undivided co-ownershipinterest in a particular pool of mortgage loans.

15. ML Canada proposes to act as the underwriter in connection with thedistribution of 100% of the dollar value of the distribution for the proposedOffering.

16. The Filer expects that approximately 90% of the Offering, in which the minimumsubscription will be $500,000, will be made to Canadian institutions, pensionfunds, endowment funds or mutual funds based upon the experience of theofferings of the C-1 Certificates and C-2 Certificates and ML & Co.'s U.S.experience.

17. The only financial benefits which ML Canada will receive as a result of theproposed Offering are the normal arm's length underwriting commission andreimbursement of expenses associated with a public offering in Canada, whichcommissions and

reimbursements shall for purposes of this Decision be deemed to include theincreases or decreases contemplated by Section 3.5(a)(1) of National PolicyStatement No. 44 and by the applicable securities legislation in Quebec.

18. ML Canada took the initiative in organizing the business of the Issuer inconnection with the Offering and as such ML Canada may be considered to bea "promoter" of the Issuer within the meaning of the Legislation.

19. ML Canada administers the ongoing operations and pays the ongoing operatingexpenses of the Issuer, for which ML Canada receives no additionalcompensation.

20. The Issuer may be considered to be a related issuer (as defined in theLegislation) and therefore a connected (or equivalent) issuer (as defined in theLegislation) of ML Canada for the purposes of the proposed Offering because:

(a) both ML Canada and the Issuer are subsidiaries of ML & Co.;

(b) the officers of the Issuer are employees of ML Canada;

(c) ML Canada is a promoter of the Issuer; and

(d) ML Canada administers the on-going operations of the Issuer;

21. In connection with the proposed distribution by ML Canada of 100% of the C-3Certificates of the Issuer, the preliminary and final prospectus of the Issuer shallcontain the following information:

(a) on the front page of each such document,

(i) a statement, naming ML Canada, in bold type which states thatthe Issuer is a related or connected issuer of ML Canada inconnection with the distribution,

(ii) a summary, naming ML Canada, stating that the Issuer is arelated or connected issuer of ML Canada based on, among otherthings, the common ownership of ML Canada and the Issuer,

 

(iii) a cross-reference to the applicable section in the body of thedocument where further information concerning the relationshipbetween the Issuer and ML Canada is provided, and

(iv) a statement that the minimum subscription amount is $500,000;

(b) in the body of each such document,

(i) a statement, naming ML Canada, that the Issuer is a related orconnected issuer of ML Canada in connection with thedistribution,

(ii) the basis on which the Issuer is a related or connected issuer toML Canada, including details of the common ownership by ML &Co. of ML Canada and the Issuer, and other aspects of therelationship between ML Canada and the Issuer,

(iii) disclosure regarding the involvement of ML Canada in thedecision to distribute the C-3 Certificates being offered and thedetermination of the terms of the distribution, and

(iv) details of the financial benefits described in paragraph 17 of thisDecision Document which ML Canada will receive from theproposed Offering;

AND WHEREAS pursuant to the MRRS this Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that therequirement contained in the Legislation mandating independent underwriterinvolvement shall not apply to ML Canada and the Issuer in connection with theOffering provided that the Issuer complies with Paragraph 21 hereof.

March 9th, 2000.

"Howard I. Wetston"      "Theresa McLeod"