Mutual Reliance Review System for ExemptiveRelief Applications - National Instrument 33-105, section 5.1and equivalent Quebec legislation - issuer is related issuerand therefore connected issuer of sole underwriter - issueradministered by underwriter and both issuer and underwriterare subsidiaries of common parent - issuer proposing distributionby prospectus of tranche of asset-backed securities - completerelief from independent underwriter requirement granted sinceover 90% of offering expected to be sold to institutional investorsand no purchase under the prospectus shall be for less than$500,000.
National Instrument 33-105 Underwriting Conflicts,ss. 5.1, 2.1.
Form 44-101F3 Short Form Prospectus.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO,
BRITISH COLUMBIA, ALBERTA, QUÉBEC,
NOVA SCOTIA, PRINCE EDWARD ISLAND AND
NEWFOUNDLAND AND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MERRILL LYNCH FINANCIAL ASSETS INC.
(formerly MERRILL LYNCH MORTGAGE LOANS INC.)
AND MERRILL LYNCH CANADA INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia, Alberta, Québec, Nova Scotia,Prince Edward Island and Newfoundland and Labrador (the "Jurisdictions")has received an application from Merrill Lynch Financial AssetsInc. (formerly Merrill Lynch Mortgage Loans Inc.) (the "Issuer")and Merrill Lynch Canada Inc. ("ML Canada") (the Issuerand ML Canada are collectively referred to herein as the "Filer")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the provisioncontained in the Legislation mandating independent underwriterinvolvement shall not apply to ML Canada and the Issuer in respectof the proposed offering of Canada 7 Pass-Through Certificates(as defined below);
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "MRRS")the Ontario Securities Commission is the principal regulatorfor this Application;
AND WHEREAS it has been representedby the Filer to the Decision Makers that:
1. the Issuer was incorporated under the lawsof Canada on March 13, 1995; effective March 15, 2001, the Issuerchanged its name from Merrill Lynch Mortgage Loans Inc. to MerrillLynch Financial Assets Inc.; the authorized share capital ofthe Issuer consists of an unlimited number of common shares,of which 1,000 common shares are issued and outstanding, allof which are held by Merrill Lynch & Co., Canada Ltd. ("ML& Co."); the head office of the Issuer is located inToronto, Ontario;
2. to date the Issuer has completed ten publicreal estate-based securities transactions (the "Prior Transactions");
3. The Issuer filed a renewal annual informationform on May 18, 2001.
4. the Issuer has been a "reporting issuer"pursuant to the securities legislation in each of the provincesof Canada for over 12 calendar months. Pursuant to a decisiondated November 30, 2000 of the Decision Makers of Ontario, BritishColumbia, Alberta, Newfoundland, Nova Scotia and Saskatchewan(the "November 30, 2000 Decision"), the Issuer hasbeen granted certain relief in connection with the requirementin securities legislation of such jurisdictions to make continuousdisclosure of its financial results, and from other forms ofcontinuous disclosure required under such legislation, providedthat the Issuer complies with the conditions set out in theNovember 30, 2000 Decision;
5. the Issuer currently has no assets or liabilitiesother than its rights and obligations under certain of the materialcontracts related to the Prior Transactions and does not presentlycarry on any activities except in relation to the certificatesissued under the Prior Transactions;
6. the officers and directors of the Issuer are employees ofML Canada or its affiliates;
7. ML Canada was continued and amalgamated underthe laws of Canada on August 26, 1998; the authorized sharecapital of ML Canada consists of an unlimited number of commonshares; the common shares of ML Canada are owned by ML &Co. and Midland Walwyn Inc; the head office of ML Canada islocated in Toronto, Ontario;
8. ML Canada is not a reporting issuer in anyCanadian province;
9. ML Canada is registered as a dealer in thecategories of "broker" and "investment dealer"and is a member of the Investment Dealers Association of Canada;
10. the Issuer proposes to offer CommercialMortgage Pass-Through Certificates, Series 2002-Canada 7 (the"Canada 7 Pass-Through Certificates"), issuable inclasses, with an Approved Rating by an Approved Rating Organization,as those terms are defined in the Legislation with respect toshort form prospectus distributions, to the public in Canada,to finance the purchase by the Issuer from Merrill Lynch CapitalCanada Inc. and from other originators of mortgage loans asmay be specified in the prospectus in respect of the Canada7 Pass-Through Certificates of ownership interests in particularmortgage loans deposited with Computershare Trust Company ofCanada as custodian; each Canada 7 Pass-Through Certificateof a particular class will represent an undivided co-ownershipinterest in a particular pool of mortgage loans;
11. ML Canada proposes to act as the underwriterin connection with the distribution of 100% of the dollar valueof the distribution for the proposed Offering;
12. the Filers expect that approximately 90%of the Offering, in which the minimum subscription will be $500,000,will be made to Canadian institutions, pension funds, endowmentfunds or mutual funds based upon the experience of the PriorTransactions and ML & Co.'s U.S. experience;
13. the only financial benefits which ML Canadawill receive as a result of the proposed Offering are the normalarm's length underwriting commission and reimbursement of expensesassociated with a public offering in Canada, which commissionsand reimbursements shall for purposes of this Decision be deemedto include the increases or decreases contemplated by Section1.5(b) of Form 44-101F3 Short Form Prospectus and by the applicablesecurities legislation in Québec;
14. ML Canada administers the ongoing operationsand pays the ongoing operating expenses of the Issuer, for whichML Canada receives no additional compensation;
15. the Issuer may be considered to be a related(or equivalent) issuer (as defined in the Legislation) and thereforea connected (or equivalent) issuer (as defined in the Legislation)of ML Canada for the purposes of the proposed Offering because:
(a) both ML Canada and the Issuer are subsidiariesof ML & Co.;
(b) the officers of the Issuer are employeesof ML Canada or its affiliates;
(c) ML Canada administers the on-going operationsof the Issuer;
16. in connection with the proposed distributionby ML Canada of 100% of the Canada 7 Pass-Through Certificatesof the Issuer, the preliminary and final prospectus and theprospectus supplement of the Issuer shall contain the followinginformation:
(a) on the front page of each such document,
(i) a statement, naming ML Canada, in bold typewhich states that the Issuer is a related or connected issuerof ML Canada in connection with the distribution,
(ii) a summary, naming ML Canada, stating thebasis upon which the Issuer is a related or connected issuerof ML Canada,
(iii) a cross-reference to the applicable sectionin the body of the document where further information concerningthe relationship between the Issuer and ML Canada is provided,and
(iv) a statement that the minimum subscriptionamount is $500,000;
(b) in the body of each such document,
(i) a statement, naming ML Canada, setting outthat the Issuer is a related or connected issuer of ML Canadain connection with the distribution,
(ii) the basis on which the Issuer is a relatedor connected issuer to ML Canada, including details of the commonownership by ML & Co. of ML Canada and the Issuer, and otheraspects of the relationship between ML Canada and the Issuer,
(iii) disclosure regarding the involvement ofML Canada in the decision to distribute the Canada 7 Pass-ThroughCertificates and the determination of the terms of the distribution,and
(iv) details of the financial benefits describedin paragraph 13 of this Decision Document which ML Canada willreceive from the proposed Offering;
AND WHEREAS pursuant to the MRRS thisDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers,pursuant to the Legislation, is that the requirement containedin the Legislation mandating independent underwriter involvementshall not apply to ML Canada and the Issuer in connection withthe Offering provided that the Issuer complies with Paragraph16 hereof.
May 6, 2002.