Securities Law & Instruments

Headnote

Section 5.1 of Rule 31-506 - SRO Membership- Mutual Fund Dealers - Mutual fund manager, investment counseland portfolio manager exempted from the requirements of theRule that it be a member of the Mutual Fund Dealers Associationof Canada ("MFDA") and file with the MFDA an applicationand prescribed fees for the application for membership, providedthat it complies with terms and conditions of registration,and provided that it transfers trading activity with respectto group retirement clients to its affiliate, which will beregistered as an investment dealer and member of the InvestmentDealers Association of Canada - Decision having the effect ofvarying prior decision, to extend deadline for transfer of tradingactivity and to permit trading in third-party mutual fund securitieswith group retirement clients.

Statute Cited

Securities Act, R.S.O. 1990, c. S.5, as am.

Rule Cited

Rule 31-506 SRO Membership - Mutual Fund Dealers,ss. 2.1, 3.1, 5.1.

Published Documents Cited

Letter Sent to The Investment Funds Instituteof Canada and the Investment Counsel Association of Canada,December 6, 2000 (2000), 23 OSCB 8467.

Decisions Cited

In the Matter of Fidelity Investments CanadaLimited and Fidelity Retirement Services Company of Canada Limited(2001), 24 OSCB 3384.

IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

ONTARIO SECURITIES COMMISSION
RULE 31-506 SRO MEMBERSHIP - MUTUAL FUND DEALERS (the "Rule")

AND

IN THE MATTER OF
FIDELITY INVESTMENTS CANADA LIMITED

DECISION
(Section 5.1 of the Rule)

UPON the Director having received anapplication (the "Application) from Fidelity InvestmentsCanada Limited (the "Registrant") for a decision,pursuant to section 5.1 of the Rule, exempting the Registrantfrom the requirements in sections 2.1 and 3.1 of the Rule, whichwould otherwise require that the Registrant be a member of theMutual Fund Dealers Association (the "MFDA") on andafter July 2, 2002, and file with the MFDA, no later than May23, 2001, an application and corresponding fees for membership;

UPON considering the Application andthe recommendation of staff of the Ontario Securities Commission;

AND UPON the Registrant having representedto the Director that:

1. the Registrant is registered under the Actas a dealer in the category of "mutual fund dealer"and as an adviser in the categories of "investment counsel"and "portfolio manager";

2. the Registrant is the manager of a numberof mutual funds that it has established and will be the managerof other mutual funds it expects to establish in the future;

3. the securities of the mutual funds managedby the Registrant are generally sold to the public through otherregistered dealers;

4. currently, the Registrant sells securitiesof mutual funds to certain participants ("Group RetirementClients") in employer?sponsored plans, which include: registeredpension plans, deferred profit sharing plans, registered retirementsavings plans, registered retirement income funds, registerededucation savings plans, other deferred income plans registeredunder the Income Tax Act (Canada) and other savings plans;

5. Fidelity Retirement Services Company of CanadaLimited ("FRSCo"), a wholly-owned subsidiary of theRegistrant, has applied for registration under the Act as amutual fund dealer and has applied for membership in the MFDA;

6. in a letter dated March 14, 2001, the Registrantmade an application to the Director requesting an exemptionfrom the requirements of sections 2.1 and 3.1 of the Rule topermit the Registrant to continue to carry out certain tradingactivities, including, for a transitional period, certain tradingwith Group Retirement Clients;

7. pursuant to a Decision (the "Prior Decision")of the Director dated May 23, 2001, made under section 5.1 ofthe Rule, effective May 23, 2001, the Registrant was exemptedfrom the requirements of section 2.1 and 3.1 of the Rule, subjectto a proviso that the Registrant comply with terms and conditionson its registration as a mutual fund dealer set out in Schedule"A" (the "Prior Terms and Conditions") tothe Decision;

8. pursuant to the Prior Terms and Conditions,the Registrant was permitted to trade in securities of mutualfunds that are managed by the Registrant or an affiliated entitywhere the trade is made to a Group Retirement Client until theearlier of:

(a) the assumption of such trading activityby FRSCo; and

(b) July 2, 2002 (the "Deadline");

9. in an application dated July 12, 2001, theRegistrant applied to the Director to vary the Prior Terms andConditions to provide that the Registrant is permitted to tradein third-party mutual fund securities with the Group RetirementClients;

10. in order to service its Group RetirementClients, the Registrant has determined that the Group RetirementBusiness requires greater flexibility in terms of the productoffering that would be permitted under a mutual fund dealerregistration;

11. at the time when the Registrant receivedthe Prior Decision, the Registrant intended to transfer theGroup Retirement Clients to FRSCo, once FRSCo was registeredas a mutual fund dealer in each jurisdiction and was acceptedas a member of the MFDA;

12. a significant proportion of the Registrant'sregisterable activity with the Group Retirement Clients involvesthe sale of non-mutual fund securities of an employer (or anaffiliate of an employer) to the participants in plans sponsoredby the employer, pursuant to exemptions from the dealer registrationrequirement obtained under subsection 74(1) of the Act;

13. the Registrant has determined that the GroupRetirement Clients will be more appropriately serviced by aninvestment dealer which is a member of the Investment DealersAssociation of Canada (the "IDA");

14. the Registrant has incorporated anotherwholly-owned subsidiary under the Business Corporations Act(Ontario), Fidelity Intermediary Securities Company Limited(the "Registrant's Affiliate"), has submitted an applicationfor registration as an investment dealer in each Canadian jurisdictionand an application for membership in the IDA;

15. the Registrant proposes to transfer theGroup Retirement Clients to the Registrant's Affiliate and torun this business as a division of the Registrant's Affiliateonce the Registrant's Affiliate has become registered in eachCanadian jurisdiction and has been admitted to membership withthe IDA and once certain systems and other changes have beenmade to ensure that the business can be conducted in a mannerwhich is compliant with the by-laws, rules, regulations andpolicies of the IDA;

16. the Registrant is unable to transfer theGroup Retirement Clients to the Registrant's Affiliate by theDeadline due to a number of operational and systems reasons;

17. the Registrant has attempted to ensure thatthe transfer of the Group Retirement Clients will be completedas soon as possible;

18. the Registrant has requested that its registrationas a mutual fund dealer permit it to continue to carry on thetrading activities referred to in paragraph 4, above, untilDecember 31, 2002, without becoming a member of the MFDA, soas to ensure that the Group Retirement Clients are appropriatelyserviced pending the proposed transfer of this trading activityto the Registrant's Affiliate after it becomes an IDA member;

19. the Registrant's trading activities as amutual fund dealer currently represent and will continue torepresent activities that are incidental to its principal businessactivities;

20. the Registrant has agreed to the impositionof the terms and conditions on the Registrant's registrationas a mutual fund dealer set out in the attached Schedule "A",in substitution of the Prior Terms and Conditions, which outlineactivities the Registrant has agreed to adhere to in connectionwith its application for this Decision;

21. any person or company that is not currentlya client of the Registrant on the effective date of this Decision,will, before they are accepted as a client of the Registrant,receive written notice from the Registrant that:

The Registrant is not currently a member, anddoes not intend to become a member of the Mutual Fund DealersAssociation; consequently, clients of the Registrant will nothave available to them investor protection benefits that wouldotherwise derive from membership of the Registrant in the MFDA;and

22. the Registrant has provided to every clientthat was a client of the Registrant on May 23, 2001 the writtennotice referred to in paragraph 20, above;

AND UPON the Director being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS THE DECISION of the Director, pursuantto section 5.1 of the Rule, that,

(A) effective March 14, 2002, the Registrantis exempt from the requirements in sections 2.1 and 3.1 of theRule; and

(B) effective March 14, 2002, the Prior Decisionis revoked;

PROVIDED THAT the Registrant complieswith the terms and conditions on its registration under theAct as a mutual fund dealer set out in the attached Schedule"A".

March 14, 2002.

"David M. Gilkes"

 



Schedule "A"

TERMS AND CONDITIONS OF REGISTRATION
OF
FIDELITY INVESTMENTS CANADA LIMITED
AS A MUTUAL FUND DEALER

Definitions

1. For the purposes hereof, unless the contextotherwise requires:

(a) "Act" means the Securities Act,R.S.O. 1990, c. S.5, as amended;

(b) "Adviser" means an adviser asdefined in subsection 1(1) of the Act;

(c) "Client Name Trade" means, forthe Registrant, a trade to, or on behalf of, a person or company,in securities of a mutual fund, that is managed by the Registrantor an affiliated entity of the Registrant, where, immediatelybefore the trade, the person or company is shown on the recordsof the mutual fund or of an other mutual fund managed by theRegistrant or an affiliate of the Registrant as the holder ofsecurities of such mutual fund, and the trade consists of:

(A) a purchase, by the person or company, throughthe Registrant, of securities of the mutual fund; or

(B) a redemption, by the person or company,through the Registrant, of securities of the mutual fund;

and where, the person or company is either aclient of the Registrant that was not solicited by the Registrantor was an existing client of the Registrant on the EffectiveDate;

(d) "Commission" means the OntarioSecurities Commission;

(e) "Effective Date" means March 14,2002;

(f) "Employee", for the Registrant,means:

(A) an employee of the Registrant;

(B) an employee of an affiliated entity of theRegistrant; or

(C) an individual that is engaged to provide,on a bona fide basis, consulting, technical, management or otherservices to the Registrant or to an affiliated entity of theRegistrant, under a written contract between the Registrantor the affiliated entity and the individual or a consultantcompany or consultant partnership of the individual, and, inthe reasonable opinion of the Registrant, the individual spendsor will spend a significant amount of time and attention onthe affairs and business of the Registrant or an affiliatedentity of the Registrant;

(g) "Employee", for a Service Provider,means an employee of the Service Provider or an affiliated entityof the Service Provider, provided that, at the relevant time,in the reasonable opinion of the Registrant, the employee spendsor will spend, a significant amount of time and attention onthe affairs and business of:

(A) the Registrant or an affiliated entity ofthe Registrant; or

(B) a mutual fund managed by the Registrantor an affiliated entity of the Registrant;

(h) "Employee Rule" means OntarioSecurities Commission Rule 45-503 Trades To Employees, Executivesand Consultants;

(i) "Executive", for the Registrant,means a director, officer or partner of the Registrant or ofan affiliated entity of the Registrant;

(j) "Executive", for a Service Provider,means a director, officer or partner of the Service Provideror of an affiliated entity of the Service Provider;

(k) "Exempt Trade", for the Registrant,means:

(i) a trade in securities of a mutual fund thatis made between a person or company and an underwriter actingas purchaser or between or among underwriters; or

(ii) any other trade in securities for whichthe Registrant would have available to it an exemption fromthe registration requirements of clause 25(1)(a) of the Actif the Registrant were not a "market intermediary"as such term is defined in section 204 of the Regulation;

(l) "Fund-on-Fund Trade", for theRegistrant, means a trade that consists of:

(i) a purchase, through the Registrant, of securitiesof a mutual fund that is made by another mutual fund;

(ii) a purchase, through the Registrant, ofsecurities of a mutual fund that is made by a counterparty,an affiliated entity of the counterparty or an other personor company, pursuant to an agreement to purchase the securitiesto effect a hedge of a liability relating to a contract fora specified derivative or swap made between the counterpartyand another mutual fund; or

(iii) a sale, through the Registrant, of securitiesof a mutual fund that is made by another mutual fund where theparty purchasing the securities is:

(A) a mutual fund managed by the Registrantor an affiliated entity of the Registrant; or

(B) a counterparty, affiliated entity or otherperson or company that acquired the securities pursuant to anagreement to purchase the securities to effect a hedge of aliability relating to a contract for a specified derivativeor swap made between the counterparty and another mutual fund;and

where, in each case, at least one of the referencedmutual funds is a mutual fund that is managed by either theRegistrant or an affiliated entity of the Registrant;

(m) "In Furtherance Trade" means,for the Registrant, a trade by the Registrant that consistsof any act, advertisement, or solicitation, directly or indirectlyin furtherance of an other trade in securities of a mutual fund,where the other trade consists of:

(i) a purchase or sale of securities of a mutualfund that is managed by the Registrant or an affiliated entityof the Registrant; or

(ii) a purchase or sale of securities of a mutualfund where the Registrant acts as the principal distributorof the mutual fund; and

where, in each case, the purchase or sale ismade by or through an other registered dealer if the Registrantis not otherwise permitted to make the purchase or sale pursuantto these terms and conditions;

(n) "Mutual Fund Instrument" meansNational Instrument 81-102 Mutual Funds, as amended;

(o) "Permitted Client", for the Registrant,means a person or company that is a client of the Registrant,and that is, or was at the time the person or company becamea client of the Registrant:

(i) an Executive or Employee of the Registrant;

(ii) a Related Party of an Executive or Employeeof the Registrant;

(iii) a Service Provider of the Registrant oran affiliated entity of a Service Provider of the Registrant;

(iv) an Executive or Employee of a Service Providerof the Registrant; or

(v) a Related Party of an Executive or Employeeof a Service Provider of the Registrant;

(p) "Permitted Client Trade" means,for the Registrant, a trade to a person or company that is aPermitted Client or that represents to the Registrant that theyare a person or company included in the definition of PermittedClient, in securities of a mutual fund that is managed by theRegistrant or an affiliated entity of the Registrant, and thetrade consists of:

(i) a purchase, by the person or company, throughthe Registrant, of securities of the mutual fund; or

(ii) a redemption, by the person or company,through the Registrant, of securities of the mutual fund;

(q) "Registered Plan" means a registeredpension plan, deferred profit sharing plan, registered retirementsavings plan, registered retirement income fund, registerededucation savings plan or other deferred income plan registeredunder the Income Tax Act (Canada);

(r) "Registrant" means Fidelity InvestmentCanada Limited;

(s) "Regulation" means R.R.O. 1990,Reg. 1015, as amended, made under the Act;

(t) "Related Party", for a person,means an other person who is:

(i) the spouse of the person;

(ii) the issue of:

(A) the person,

(B) the spouse of the person, or

(C) the spouse of any person that is the issueof a person referred to in subparagraphs (A) or (B) above;

(iii) the parent, grandparent or sibling ofthe person, or the spouse of any of them;

(iv) the issue of any person referred to inparagraph (iii) above; or

(v) a Registered Plan established by, or forthe exclusive benefit of, one, some or all of the foregoing;

(vi) a trust where one or more of the trusteesis a person referred to above and the beneficiaries of the trustare restricted to one, some, or all of the foregoing;

(vii) a corporation where all the issued andoutstanding shares of the corporation are owned by one, some,or all of the foregoing;

(u) "securities", for a mutual fund,means shares or units of the mutual fund;

(v) "Seed Capital Trade" means a tradein securities of a mutual fund made to a persons or companyreferred to in any of subparagraphs 3.1(1)(a)(i) to 3.1(1)(a)(iii)of the Mutual Fund Instrument;

(w) "Service Provider", for the Registrant,means:

(i) a person or company that provides or hasprovided professional, consulting, technical, management orother services to the Registrant or an affiliated entity ofthe Registrant;

(ii) an Adviser to a mutual fund that is managedby the Registrant or an affiliated entity of the Registrant;or

(iii) a person or company that provides or hasprovided professional, consulting, technical, management orother services to a mutual fund that is managed by the Registrantor an affiliated entity of the Registrant.

2. For the purposes hereof, a person or companyis considered to be an "affiliated entity" of an otherperson or company if the person or company would be an affiliatedentity of that other person or company for the purposes of theEmployee Rule.

3. For the purposes hereof:

(a) "issue", "niece", "nephew"and "sibling" includes any person having such relationshipthrough adoption, whether legally or in fact;

(b) "parent" and "grandparent"includes a parent or grandparent through adoption, whether legallyor in fact;

(c) "registered dealer" means a personor company that is registered under the Act as a dealer in acategory that permits the person or company to act as dealerfor the subject trade; and

(d) "spouse", for an Employee or Executive,means a person who, at the relevant time, is the spouse of theEmployee or Executive.

4. Any terms that are not specifically definedabove shall, unless the context otherwise requires, have themeaning:

(a) specifically ascribed to such term in theMutual Fund Instrument; or

(b) if no meaning is specifically ascribed tosuch term in the Mutual Fund Instrument, the same meaning theterm would have for the purposes of the Act.

Restricted Registration

Permitted Activities

5. Subject to paragraph 6, the registrationof the Registrant as a mutual fund dealer under the Act shallbe for the purposes only of trading by the Registrant in securitiesof a mutual fund where the trade consists of:

(a) a Client Name Trade;

(b) an Exempt Trade;

(c) a Fund-on-Fund Trade;

(d) an In Furtherance Trade;

(e) a Permitted Client Trade; or

(f) a Seed Capital Trade;

provided that, in the case of all trades thatare only referred to in clauses (a) or (e), the trades are limitedand incidental to the principal business of the Registrant.

Permitted Activities for Transitional Period

6. For the purposes hereof, the trades listedin paragraph 5 shall also include trades in securities of mutualfunds where the trade is made to a participant in an employer-sponsoredRegistered Plan or other savings plan until the earlier of:

(i) the assumption of such trading activityby Fidelity Intermediary Securities Company Limited, a wholly-ownedsubsidiary of the Registrant, and

(ii) December 31, 2002.