Applicant that is registered in the United Statesas an adviser exempted from the dealer registration requirementsand the adviser registration requirements contained in the SecuritiesAct (Ontario) so it can advise affiliated companies in Ontarioregarding Canadian securities.
Securities Act, R.S.O. 1990, c. S.5, as amendedss. 25(1), 74(1).
Ontario Securities Commission Rule 35-502 -Non Resident Registrants.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")
IN THE MATTER OF
AEGON USA INVESTMENT MANAGEMENT,LLC
(Subsection 74(1)) of theAct
WHEREAS the Ontario Securities Commission(the "Commission") has received an application foran order pursuant to subsection 74(1) of the Act that the Applicantbe exempted from clause 25(1)(c) of the Act;
AND WHEREAS the Applicant has representedto the Commission that:
1. The Applicant is a corporation existingunder the laws of Iowa and is registered as an adviser withthe U.S. Securities and Exchange Commission under the U.S.Investment Advisers Act of 1940. The Applicant does nothave an office or employees in Canada.
2. The Applicant advises institutional investorsand as at December 31, 2001 had in excess of U.S.$80 billionin assets under management.
3. The Applicant is part of corporate groupof financial companies headquartered in Europe known as AEGONN.V. (the "Corporate Group"). The Applicant is asister company of Canadian Premier Life Insurance Companyand Legacy General Insurance Company (the "Canadian InsuranceCompanies"), both of which are Canadian federally licensedinsurance companies with their head offices in Ontario. Accordingly,the Canadian Insurance Companies are affiliates, as definedin the Act, of the Applicant.
4. The Applicant wishes to provide investmentadvice to the Canadian Insurance Companies, and the CanadianInsurance Companies wish to retain the Applicant to providesuch investment advice, with respect to the portfolio assetsowned by the Canadian Insurance Companies. However, the Applicantwishes to provide such advice on a basis that would not requireregistration under the Act.
5. In the proposed advisory relationship betweenthe Applicant and its affiliated Canadian Insurance Companies,the Applicant would be providing investment advice almostexclusively with respect to Canadian securities (being theinvestment objectives of the portfolios of the Canadian InsuranceCompanies) rather than with respect to foreign securities,and therefore the non-resident adviser registration exemptionin section 7.1 of Ontario Securities Commission Rule 35-502is not applicable.
6. There is no requirement for employees ofa corporation to be registered as advisers under the Act ifthe employees provide investment advice to their corporateemployers with respect to the portfolio assets of such corporateemployers. The Canadian Insurance Companies do not currentlyemploy, nor do they wish to hire, individuals to provide investmentadvice with respect to the portfolio assets of such corporations,but rather the Canadian Insurance Companies have decided thatthey wish to outsource the adviser function to the Applicantwhich is affiliated with the Canadian Insurance Companiesas part of the same Corporate Group. Outsourcing the investmentfunction is permitted under the federal insurance companylegislation.
7. The portfolio assets of the Canadian InsuranceCompanies that would be advised by the Applicant are ownedby the Canadian Insurance Companies themselves and there areno external stakeholders (such as, for example, holders ofvariable annuity contracts) that have any direct interestin the performance of such portfolios. Accordingly, thereare no stakeholders in Ontario or elsewhere other than theCanadian Insurance Companies and their shareholders that willbe directly affected by the results of the investment adviceto be provided by the Applicant. Therefore, it should notbe prejudicial to the public interest to grant the reliefrequested by the Applicant.
8. Subsection 74(1) of the Act provides thatan order may be issued subject to terms and conditions asare considered necessary. The Applicant has no objection tohaving the order issued subject to the condition that theApplicant will provide investment advice in Ontario pursuantto the order only to its affiliates and, with respect to anyparticular affiliate, only so long as that affiliate remainsan affiliate of the Applicant;
AND WHEREAS the Commission is satisfiedthat it would not be prejudicial to the public interest to grantthe requested relief;
IT IS ORDERED, pursuant to subsection74(1) of the Act, that the Applicant is exempt from the requirementsof clause 25(1)(c) of the Act in respect of it acting as anadviser to its affiliates, provided that the Applicant can relyon this order to provide investment advice in Ontario only toits affiliates and, with respect to any particular affiliate,only so long as that affiliate remains an affiliate of the Applicant.
July 26, 2002.
"Howard I. Wetston" "RobertL. Shirriff"