Mutual Reliance Review System for Exemptive Relief Applications - issuer is a relatedissuer and a connected issuer of a registrant which may act as underwriter of securitiesof the issuer - registrant exempted from independent underwriter requirement in clause224(1)(b) of Regulation.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as amended.
Application Ontario Regulations
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as amended, ss.219(1), 224(1)(b) and 233.
Applicable Ontario Rules
In the Matter of the Limitations on a Registrant Underwriting Securities of a RelatedIssuer or Connected Issuer of the Registrant (1997), 20 OSCB 1217, as varied by(1999), 22 OSCB 58.
Proposed Instrument Cited
Multi-Jurisdictional Instrument 33-105 Underwriters Conflicts (1998), 21 OSCB 781.
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
SCOTIA CAPITAL INC. AND BNS CAPITAL TRUST
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Ontario, Quebec and Newfoundland (the"Jurisdictions") has received an application from BNS Capital Trust (the "Issuer") andScotia Capital Inc. ("SCI")(collectively, the "Filer") for a decision, pursuant to the securitieslegislation (the "Legislation") of the Jurisdictions, that the requirement (the "IndependentUnderwriter Requirement") contained in the Legislation, which prohibits a registrant fromacting as underwriter in connection with a distribution of securities of an issuer, made bymeans of prospectus, where the issuer is a "related issuer" (or the equivalent) of theregistrant, or, in connection with the distribution, a "connected issuer" (or the equivalent)of the registrant, without certain required participation in the distribution by an underwriter(an "Independent Underwriter"), in respect of which the issuer is neither a related issuer(or the equivalent) of the registrant, nor, in connection with the distribution, a connectedissuer (or the equivalent) of the registrant, shall not apply to SCI in respect of a proposeddistribution (the "Offering") of Scotiabank Trust Securities-Series 2000-1 of the Issuer (the"Scotia BaTS") by SCI and such other underwriters as may be appointed (collectively the"Underwriters") pursuant to a prospectus;
AND WHEREAS under the Mutual Reliance Review System for Exemptive ReliefApplications (the "System"), the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Filer has represented to the Decision Makers that:
1. The Issuer is a closed-end trust formed under the laws of Ontario by the MontrealTrust Company of Canada, a subsidiary of The Bank of Nova Scotia (the "Bank").
2. The Issuer's head office is in Ontario.
3. The Bank is a Schedule I chartered bank governed by the Bank Act (Canada). TheBank is a reporting issuer under the Legislation and is not, to the Issuer'sknowledge, in default of any applicable requirement of the Legislation.
4. SCI is an indirect wholly-owned subsidiary of the Bank.
5. SCI is registered as a dealer under the Legislation of each British Columbia,Alberta, Ontario, Quebec and Newfoundland.
6. The Issuer proposes to issue and sell to the public transferable trust units calledScotia BaTS. The Trust will also issue securities called special trust securities (the"Special Trust Securities" and, collectively with the Scotia BaTS, the "TrustSecurities") to the Bank or affiliates of the Bank. To that end, a preliminaryprospectus qualifying the Offering was filed on February 29, 2000, and a final longform prospectus (the "Prospectus") will be filed in all provinces and territories ofCanada.
7. The Scotia BaTS are non-voting except in limited circumstances and the SpecialTrust Securities are voting securities. The Bank will covenant for the benefit ofholders of Scotia BaTS that, for so long as any Scotia BaTS are outstanding, theBank will maintain ownership, directly or indirectly, of 100% of the Special TrustSecurities.
8. The Issuer proposes to enter into an underwriting agreement with a syndicate ofunderwriters (the "Underwriting Syndicate") whereby the Issuer agreed to issue andsell, and the Underwriters agreed to purchase the Scotia BaTs.
9. The proportionate share of the Offering to be underwritten by each member of theUnderwriting Syndicate is expected to be as set out below:
Scotia Capital Inc. 22%
TD Securities Inc. 20%
RBC Dominion Securities Inc. 15%
CIBC World Markets Inc. 12%
BMO Nesbitt Burns Inc. 12%
National Bank Financial Inc. 7%
Merrill Lynch Canada Inc. 6%
Goldman Sachs Canada Inc. 4%
HSBC Securities (Canada) Inc. 1%
Trilon Securities Corporation 1%
10. The Bank is taking the initiative in organizing the business of the Issuer inconnection with the proposed Offering and, as such, the Bank may be consideredto be a "promoter" of the Issuer within the meaning of securities legislation ofcertain provinces of Canada.
11. The Bank will enter into an administration and advisory agreement with the Issuerunder which the Bank will provide administrative and advisory services relating tothe operation of the trust. The Bank and/or its affiliates will also service the trustassets under certain mortgage, pooling and servicing agreements.
12. The Issuer may be considered a "related issuer" (or its equivalent) and a"connected issuer" (or its equivalent) of SCI for the purposes of the Offeringbecause:
(a) SCI is a subsidiary of the Bank;
(b) the Bank is a promoter of the Issuer;
(c) the Bank will hold all of the Special Trust Securities of the Issuer; and
(d) the Bank will provide on-going administrative and advisory services to theIssuer and will also service the trust assets.
13. Because the Issuer is a related issuer (or its equivalent) and connected issuer (orits equivalent), the proposed Underwriting Syndicate will not comply with theIndependent Underwriter Requirement of the Legislation.
14. The Issuer will not be a "related issuer" (or its equivalent) or, in connection with theOffering, a "connected issuer' (or its equivalent) in respect of TD Securities Inc.("TDSI").
15. TDSI will underwrite no less than 20 percent of the dollar value of the Offering, andwill participate in the drafting of the Prospectus, the due diligence relating to theOffering and in the pricing of the Trust Securities.
16. TDSI's participation in the Offering, together with the details of the relationshipexisting between the Issuer, the Bank and SCI, will be described in the Prospectus.
17. The Prospectus will contain a certificate signed by each of the Underwriters inaccordance with the Legislation.
18. SCI will not receive any benefit pursuant to the Offering other than the payment ofits fees in connection therewith.
AND WHEREAS under the System, this MRRS Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision"); and
AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Makers with the jurisdiction to make the decisionhas been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that theIndependent Underwriter Requirement shall not apply to SCI in connection with theOffering, provided that the Offering is completed in compliance with the requirementscontained in paragraphs 15, 16 and 17 herein.
March 23rd, 2000.
"J. A. Geller" "Robert W. Davis"