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Fidelity Investments Canada Limited and Ford Motor Company of Canada, Limited - MRRS Decision
Headnote
Mutualfund dealer exempted from the Dealer Registration Requirementof the Legislation of the Jurisdictions for trades of commonshares made by a mutual fund dealer, in its capacity as a groupplan administrator of an employee retirement savings programof a corporation, for, or on behalf of, employees, former employees,spouses of employees, spouses of former employees, the EPSP,employee RRSPs and employee spouse RRSPs of the corporation.
Director'sDecision Relieffrom "suitability" requirement of the Legislation of Ontarioand Alberta, that would otherwise arise as a result of the groupplan administrator purchasing or selling common shares for,or on behalf of, the above-mentioned persons, subject to theabove-mentioned persons receiving a corresponding acknowledgmentor having been sent a corresponding notice and the group planadministrator not making any recommendation or giving any investmentadvice regarding the purchase and sale of common shares of thecorporation.
ApplicableOntario Statute
SecuritiesAct, R.S.O. 1990, c. S.5, as am., ss. 25 and 74(1).
ApplicableOntario Securities Commission Rule
Rule31-505 "Conditions of Registration" (1999) 22 O.S.C.B. 731, ss.1.5 and 4.1.INTHE MATTER OF
THECANADIAN SECURITIES LEGISLATION
OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
ONTARIO,NEW BRUNSWICK AND NOVA SCOTIA
AND
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
AND
INTHE MATTER OF
FIDELITYINVESTMENTS CANADA LIMITED
AND
FORDMOTOR COMPANY OF CANADA, LIMITED
MRRSDECISION DOCUMENT
WHEREASthe local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Ontario,New Brunswick and Nova Scotia (the "Jurisdictions") has receivedan application from Fidelity Investments Canada Limited ("Fidelity")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that the requirement (the "Dealer RegistrationRequirement") in the Legislation that prohibits a person or companyfrom trading in a security unless the person or company is registeredin the appropriate category of registration under the Legislationshall not apply to certain trades in shares ("Common Shares")of common stock of Ford Motor Company ("Ford U.S.") to be madeby Fidelity for, or on behalf of, persons that are Employees,Spouses, Former Employees, Former Employees' Spouses, the EPSP,Employee RRSPs and Employee Spouse RRSPs (as such terms are definedbelow) in its capacity as a group plan administrator of a groupretirement savings plan (the "Program") of Ford Motor Companyof Canada, Limited ("Ford Canada") (which includes the EPSP, EmployeeRRSPs, and Employee Spouse RRSPs); ANDWHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commissionis the principal regulator for this application; ANDWHEREAS Fidelity has represented to the Decision Makersthat: 1.Fidelity, a corporation continued under the laws of Ontario, isregistered in the Jurisdictions as a dealer in the category of"mutual fund dealer" and is also, or will be, registered in allJurisdictions as an "adviser" in the categories of "investmentcounsel" and "portfolio manager". 2.Fidelity has applied, or will apply for relief pursuant to theLegislation of the Jurisdictions, exempting it from the requirementsunder the Legislation (the "MFDA Relief"): (i) to be a memberof the Mutual Fund Dealers Association of Canada (the "MFDA")on or before July 2, 2002; and (ii) to file with the MFDA an applicationfor membership and corresponding fees for membership before therequired date under the Legislation of the Jurisdictions. Reliefhas been obtained from Ontario and Alberta. 3.Fidelity's registration under the Legislation as a "mutual funddealer" has been, or is expected to be, restricted to certaintrades which are incidental to its principal business. The restrictedtrading activity includes trades by Fidelity to a participantin an employer-sponsored registered plan or other savings plan(the "Group Retirement Clients") until the earlier of: (i) theassumption of such trading activity by Fidelity Retirement ServicesCompany of Canada Limited ("New Fidelity"), a wholly-owned subsidiaryof Fidelity; and (ii) July 2, 2002. 4.At the time of receiving the MFDA Relief in Ontario and Alberta,and when making the application for the MFDA Relief in the otherJurisdictions, Fidelity intended to transfer its Group RetirementClients to New Fidelity. However, upon review of the businessneeds of the Group Retirement Clients, Fidelity has determinedthat the Group Retirement Clients would be more appropriatelyserviced by a member of the Investment Dealers Association ofCanada (the "IDA"), than a member of the MFDA. 5.As part of a separate business initiative, Fidelity has incorporatedanother wholly-owned subsidiary, Fidelity Intermediary SecuritiesCompany Limited (the "IDA Company"), which will submit an applicationfor registration as an investment dealer in each Canadian jurisdictionand an application for membership in the IDA. 6.Fidelity proposes to transfer the Group Retirement Clients tothe IDA Company and to run its business of servicing the groupretirement business (the "Group Retirement Business") as a divisionof the IDA Company once the IDA Company has become registeredin each Canadian jurisdiction and has been admitted to membershipwith the IDA and certain systems and other changes are made thatwill ensure the Group Retirement Business can be conducted ina manner which is compliant with the IDA By-laws and Rules. 7.Fidelity has applied in Ontario and Alberta for orders varyingthe terms of the MFDA Relief to allow Fidelity to trade in securities,where the trade is made to Group Retirement Clients until theearlier of the assumption of such trading activity by the IDACompany and December 31, 2002. Fidelity has applied or will applyfor similar orders, as required, in certain other Canadian jurisdictions(collectively, the "Extension Applications").8.Ford U.S. is a corporation incorporated under the laws of theState of Delaware.
9. FordU.S. is not a reporting issuer (or the equivalent under the Legislation)in any of the Jurisdictions. 10.Ford Canada, a corporation incorporated under the laws of Ontario,is not a reporting issuer (or the equivalent under the Legislation)in any of the Jurisdictions. 11.Ford Canada is wholly-owned by Ford U.S. 12.The Common Shares are registered with the Securities and ExchangeCommission in the United States of America (the "USA") under theSecurities Exchange Act of 1934 and Ford U.S. is subject to thereporting requirements thereunder. 13.The Common Shares are listed and posted for trading on the NewYork Stock Exchange (the "NYSE"). 14.Under the Program, Ford Canada selects mutual funds that persons(each an "Employee") who are employees of Ford Canada, and whoparticipate in the Program, may purchase through payroll deductionsor through lump sum payments. 15.Investments made by Employees under the Program are made throughthe following plans: (i)an "employees profit sharing plan" (the "EPSP"), as defined inthe Income Tax Act (Canada) (the "Tax Act"), that hasbeen established for the benefit of persons who are Employees; (ii)"registered retirement savings plans" (each, an "Employee RRSP"),as defined in the Tax Act, that have been established by or forthe benefit of Employees; and (iii)"registered retirement savings plans" (each, an "Employee SpouseRRSP"),as defined in the Tax Act, that have been established byor for the benefit of persons (collectively, "Spouses") who arelegally married to or are the "common law partners" (as definedin the Tax Act) of Employees. 16.Under the Program, Spouses are also permitted to invest amountsin their Employee Spouse RRSPs in certain mutual funds offeredthrough Fidelity. 17.The Program also offers participating employees the opportunityto invest in units of the Ford Stock Fund (the "Fund"), a singlestock fund that invests in the common shares of Ford U.S. ("CommonShares"). The Fund was established as a single purpose trust,the sole purpose of which is to acquire and hold Common Shares.Going forward, Ford Canada would like to be able to allow Employeesand Spouses to invest contributions and balances directly in CommonShares. Investments in the Fund will remain; however, future contributionswill be invested directly in Common Shares rather than in unitsof the Fund.18.Ford Canada also proposes to match a specified portion of anEmployee's purchase of Common Shares under the Program.
19.Under the Program, it is proposed that Fidelity carry out thefollowing activities: (i)receive orders from Employees to purchase Common Shares (includingCommon Shares to be purchased with employer matching contributionsthrough the EPSP or upon the automatic reinvestment of dividendspaid in respect of Common Shares) on behalf of Employees throughthe EPSP or for their Employee RRSPs or Employee Spouse RRSPs; (ii)receive orders from Spouses to purchase Common Shares (includingCommon Shares to be purchased upon the automatic reinvestmentof dividends paid in respect of Common Shares) for their EmployeeSpouse RRSPs; (iii)receive orders from Employees, and from persons ("Former Employees"were, but have since ceased to be, Employees, to sell Common Shareson their behalf through the EPSP or through their Employee RRSPs; (iv)receive orders from Spouses, Former Employees or persons ("FormerEmployee Spouses") who are legally married to or are "common lawpartners"of Former Employees, to sell Common Shares held throughtheir Employee Spouse RRSPs; (v)"match" the orders to purchase Common Shares, referred to in subparagraphs(i) or (ii), against orders to sell Common Shares, referred toin subparagraphs (iii) or (iv), with the offsetting purchasesand sales (a "Matching Transaction") effected by way of book entriesin the corresponding accounts maintained by Fidelity under theProgram and the funds received in respect of the purchase remittedby Fidelity to the vendor; (vi)where the number of Common Shares not affected in a Matching Transactionis less than 50 and if Fidelity deems it to be appropriate, satisfythe purchase or sale of Common Shares from or to Common Sharesheld by Fidelity in the name of Fidelity (a "Float Transaction"); (vii)transmit orders to purchase or sell Common Shares, referred toabove, which are not effected in a Matching Transaction or FloatTransaction, either: (a)for execution in a Jurisdiction through a registered dealer thatis registered under the Legislation, in each of the Jurisdictionswhere the order is received or executed, as a dealer in a categorythat permits it to act as a dealer for the subject trade; or (b)for execution through the facilities of the NYSE or another stockexchange outside of Canada through a person or company that isappropriately licensed to carry on the business of a broker/dealerunder the applicable securities legislation in the jurisdictionwhere the trade is executed; (viii)maintain books and records in respect of the foregoing, reflecting,among other things: all related payments, receipts, account entriesand adjustments; 20.Records of Common Shares held under the Program on behalf of Employees,Former Employees, Spouses, Former Employee Spouses, the EPSP,Employee RRSPs and Employee Spouse RRSPs (collectively, "ProgramParticipants") will be maintained by Fidelity, and the CommonShares will be held by a custodian that is not affiliated withFidelity, Ford U.S. or Ford Canada. 21.When an Employee becomes a Former Employee, the Former Employee,the EPSP in respect of the Former Employee, the Employee RRSPof the Former Employee, the Former Employee Spouse and the correspondingEmployee Spouse RRSP of the Former Employee will not be permittedto make further purchases of Common Shares under the Program,other than Common Shares to be purchased upon the automatic reinvestmentof dividends paid in respect of Common Shares, but, subject totime limitations in certain cases, the foregoing will be permittedto continue to hold, through Fidelity, Common Shares previouslypurchased on their behalf under the Program, to instruct Fidelityfrom time to time to sell Common Shares then held on their behalfby Fidelity, or to transfer such Common Shares to an account withanother dealer. 22.To participate in the Program, Employees and Spouses must enrolthrough Fidelity by application, which may be completed: in writing;on the telephone, by way of a recorded call; or, through the Internet,by way of secure access to Fidelity's website. 23.Employees and Spouses who enrol in the Program will be requiredwhen completing the enrolment application to acknowledge thatFidelity will not be performing any "suitability" analysis withrespect to any purchase or sale of Common Shares on their behalf,or on behalf of their Spouse, under the Program: by signing theapplication form, where the application is completed in writing;orally, where the application is completed on the telephone or,by making the appropriate selection on Fidelity's website, wherethe application is completed on the Internet. 24.Employees and Spouses who are enrolled in the Program and whoseenrolment in the Program occurred on or prior to the date of thisdecision will be sent, not less than 5 days before the date ofthis decision, written or electronic notice from Fidelity (orFord Canada on behalf of Fidelity) that Fidelity will not perform"suitability" analysis with respect to any purchase or sale ofCommon Shares on their behalf under the Program. 25.No Program Participant will be charged any trading commissions,fees, costs or other expenses in respect of the purchase or saleof any Common Shares on behalf of the Program Participant underthe Program. 26.Except for ascertaining the "suitability" of trades made underthe Program, Fidelity will comply with all other conditions orother requirements under the Legislation that would be applicableto it as a mutual fund dealer as if the Common Shares were sharesor units of a mutual fund, with respect to any purchase, saleor holding of Common Shares, by Fidelity on behalf of ProgramParticipants under the Program, including requirements relatingto, but not limited to: capital requirements; record keeping;account supervision; segregation of funds and securities; confirmationsof trades; "know your client" and statements of account. ANDWHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively, the"MRRS Decision"); ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the MRRS Decision has beenmet; THEMRRS DECISION of the Decision Makers under the Legislationis that the Dealer Registration Requirement under the Legislationshall not apply to the trades by Fidelity in Common Shares, asreferred to in paragraph 19, on behalf of Program Participantsunder the Program, provided that: 1.in the case of each trade in Common Shares in a Jurisdiction,Fidelity is, at the time of the trade, registered under the Legislationof the Jurisdiction as a dealer in the category of "mutual funddealer", and, the trade is made on behalf of Fidelity by a personthat is registered under the Legislation to trade mutual fundson behalf of Fidelity as a salesperson or officer; 2.in the case of a trades that consist of the sale of Common Sharestransmitted for execution outside of the Jurisdiction, as describedin paragraph 19(vii)(b): (a)at the time of the trade, Ford U.S. is not a reporting issuer(or the equivalent) under the Legislation of the Jurisdiction; (b)at the time of the acquisition of the Common Shares by the sellingProgram Participant, there was a de minimis market inthe Jurisdiction (as defined below), where, for the purposes ofthe above, there shall be a de minimis market in a Jurisdictionif, at the relevant time:(i) persons or companieswhose last address as shown on the books of Ford U.S. was inthe Jurisdiction and who held Common Shares:
(A)did not own directly or indirectly more than 10 per cent of theoutstanding Common Shares; and (B)did not represent in number more than 10 per cent of the totalnumber of owners directly or indirectly of the Common Shares; PROVIDEDALSO THAT, this MRRS Decision will terminate upon theearlier of: 1.the assumption of the activities referred to in paragraph 19 bythe IDA Company; and2. December 31, 2002;or
3.in respect of Alberta and Ontario;
(a)the assumption of the activities referred to in paragraph 19by the IDA Company; and
(b)July 2, 2002 or December 31, 2002 [if the relief requested underthe Extension Application is granted].
March13, 2002.
"R.Stephen Paddon" "Lorne Morphy"
INTHE MATTER OF
THESECURITIES LEGISLATION OF ONTARIO AND ALBERTA
WHEREASFidelity has made an application to the Director of the OntarioSecurities Commission (the "Director") for a decision of theDirector, pursuant to section 4.1 of Ontario Securities CommissionRule 31-505 Conditions of Registration and to the Alberta SecuritiesCommission (the "ASC") pursuant to section 185 of the SecuritiesAct (Alberta) (collectively, the "Registration Legislation"),that the requirements of the Registration Legislation (the "SuitabilityRequirements") to make enquiries of each Program Participant,that would otherwise arise as a result of Fidelity purchasingor selling Common Shares on behalf of the Program Participant,as described in the MRRS Decision above, to determine (a) thegeneral investment needs and objectives of the Program Participants;and (b) the suitability of a proposed purchase or sale of CommonShares for the Program Participants, do not apply to Fidelity,subject to certain terms and conditions;
ANDWHEREAS, Fidelity has made to the Director and theASC the same representations referred to in the above MRRS Decision; ANDWHEREAS, this Decision Document evidences the decisionof each of the Director and the ASC; ANDWHEREAS, each of the Director and the ASC is satisfiedthat to do so would not be prejudicial to the public interest;
ITIS THE DECISION of the Director and the ASC that, pursuantto the Registration Legislation, effective on the effectivedate of the above MRRS Decision, the Suitability Requirementsof the Registration Legislation shall not apply to Fidelityas a result of Fidelity purchasing or selling Common Shareson behalf of the Program Participant, as described in the aboveMRRS Decision, provided that, in the circumstances of each suchpurchase or sale: (i)the Program Participant, or, in the case of a Program Participantthat is the EPSP, an Employee RRSP or an Employee Spouse RRSP,the corresponding Employee or Spouse, has given the correspondingacknowledgement or has been sent the corresponding notice, referredto in paragraphs 23 or 24 of the above MRRS Decision; and
(ii)Fidelity does not make any recommendation or give any investmentadvice with respect to the purchase or sale. ANDPROVIDED ALSO THAT, this Decision will terminate uponthe earlier of: 1.the assumption of the activity referred to in paragraph 19 ofthe above MRRS Decision by the IDA Company; and2. July 2, 2002 orDecember 31, 2002 [if the relief requested under the ExtensionApplication is granted].
March13, 2002.
"DavidM. Gilkes"