Credit Suisse First Boston (USA), Inc. - MRRS Decision

Headnote

MRRS for Exemptive Relief Applications - applicationfor relief from the registration requirements and the prospectusrequirements in connection with certain trades in over-the-counter("OTC") derivatives entered into between certain wholly-ownedsubsidiaries of the applicant and certain counterparties - applicationfor relief from fees required to be paid in respect of suchOTC derivatives transactions - relief granted subject to theconditions that (i) each trade involves an OTC Derivative whichmeets certain conditions, and (ii) each trade is between a subsidiaryand Qualified Party (as defined), each acting as principal,and is marketed by a subsidiary.

Applicable Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).

Applicable Ontario Regulations

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., s. 59(1).

Rules Cited

Proposed OSC Rule (not in force) 91-504 - Over-the-CounterDerivatives.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO, QUEBEC AND NOVA SCOTIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CREDIT SUISSE FIRST BOSTON(USA), INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, Québec and Nova Scotia (collectively, the"Jurisdictions") has received an application fromCredit Suisse First Boston (USA), Inc. (the "Applicant")for a decision under the securities legislation (the "Legislation")of the Jurisdictions that (i) the requirements in the Legislationto be registered to trade in a security (the "RegistrationRequirement") and to file and obtain a receipt for a preliminaryprospectus and a prospectus in respect of such security (the"Prospectus Requirement") shall not apply to certaintrades in over-the-counter ("OTC") derivatives enteredinto between certain wholly-owned subsidiaries of the Applicant(the "Subsidiaries") and certain counterparties, and(ii) any fees required to be paid under the Legislation of Ontarioand Québec in respect of such OTC derivatives transactionsshall not be required to be paid;

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS the Applicant has representedto the Decision Makers that:

1. The Applicant, together with its subsidiariesand affiliaties, is a global integrated investment bank whoseclients include financial institutions, corporations, governmentsand individuals. The Applicant, through its wholly-owned subsidiariesand divisions, provides its clients with a broad range offinancial products and services.

2. The Applicant is a corporation organizedunder the laws of the State of Delaware. The Applicant isa wholly-owned indirect subsidiary of Credit Suisse Groupand is controlled by Credit Suisse First Boston, the Swissbank.

3. The Applicant has issued securities thatare registered under the Securities Act of 1933, asamended, and makes continuous disclosure filings in the UnitedStates with the Securities and Exchange Commission pursuantto the United States Securities Exchange Act of 1934.Neither the Applicant nor any of its Subsidiaries is a reportingissuer in any of the Jurisdictions.

4. The Applicant's Subsidiaries include CreditSuisse First Boston Corporation ("CSFBC"), a UnitedStates broker-dealer registered under applicable legislationin the United States and a member of the National Associationof Securities Dealers and various U.S. securities and commoditiesexchanges, including the New York Stock Exchange. CSFBC isalso registered under the Securities Act (Ontario)(the "Ontario Act") as an international dealer.CSFBC markets a full range of interest rate, foreign exchange,equity, commodity and credit related products for the Applicant.

5. The Applicant, through its Subsidiaries,designs, creates and markets a full range of interest rate,foreign exchange, equity, commodity and credit-related productsthat address the broad financing, risk management and investmentneeds of its clients.

6. The Applicant is proposing to engage, throughcertain of its Subsidiaries, in the marketing and tradingof OTC derivatives with certain counterparties in the Jurisdictions.These OTC Derivatives will consist of one or more of the following:an option, a forward contract, a swap or a contract for differencesof a type commonly considered to be a derivative, in which:

6.1 the agreement relating to, and the materialeconomic terms of the option, forward contract, swap orcontract for differences have been customized to the purposesof the parties to the agreement and the agreement is notpart of a fungible class of agreements that are standardizedas to their material economic terms;

6.2 the creditworthiness of a party havingan obligation under the agreement would be a material considerationin entering into or determining the terms of the agreement;and

6.3 the agreement is not entered into ortraded on or through an organized market, stock exchangeor futures exchange and is not cleared by a clearing corporation.

7. The underlying interest of the OTC Derivativestransacted between the Subsidiaries and the counterpartieswill consist entirely of an interest rate, Canadian or foreigncurrency, a foreign exchange rate, a commodity, a security,an index, a benchmark or other variable, another OTC Derivative,or some relationship between, or combination of, one or moreof any of them.

8. The counterparties to such transactionswill consist exclusively of parties that meet the followingcriteria:

8.1 they are Qualified Parties, as definedin Appendix 1 to this MRRS Decision Document;

8.2 they have a high level of business andfinancial sophistication;

8.3 they have access to their own independentadvisors who can assist in the determination of the suitabilityof the transaction and the creditworthiness of the relevantSubsidiary; and

8.4 they enter into OTC Derivative tradesin order to hedge or otherwise manage specific risks associatedwith their businesses or investments as part of the ordinarycourse of their businesses (or investing activity).

9. Each of the Subsidiaries which will engagein such OTC derivative trading activities will be wholly-owned,directly or indirectly, by the Applicant.

AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of the DecisionMakers (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 underthe Legislation is that the Subsidiaries and their counterpartieswho are Qualified Parties shall each be exempt from the RegistrationRequirement and the Prospectus Requirement in respect of tradesin OTC Derivatives subject to the following conditions:

(i) each trade involves an OTC Derivativeof which the underlying interest consists entirely of aninterest rate, Canadian or foreign currency, a foreign exchangerate, a commodity, a security, an index, a benchmark orother variable, or another OTC Derivative, or some relationshipbetween, or combination of, one or more of any of them;and

(ii) each trade is between a Subsidiaryand Qualified Party, each acting as principal, and is marketedby a Subsidiary.

AND THE FURTHER DECISION of the DecisionMakers of Ontario and Québec under the Legislation isthat trades entered into in reliance on this Decision are herebyexempted from the fees which would otherwise be payable in connectionwith such OTC Derivative transactions pursuant to the Legislation.

August 20, 2002.

"Paul Moore"                    "HaroldP. Hands"

Appendix 1

OVER-THE-COUNTER DERIVATIVESQUALIFIED PARTIES

Interpretation

(1) The terms "subsidiary" and "holdingbody corporate" used in paragraphs (w), (x) and (y) ofsubsection (3) of this Appendix have the same meaning as theyhave in the Business Corporations Act (Ontario).

(2) All requirements contained in this Appendixthat are based on the amounts shown on the balance sheet ofan entity apply to the consolidated balance sheet of the entity.

Qualified Parties Acting as Principal

(3) The following are Qualified Parties forall OTC derivatives transactions, if acting as principal:

Banks

(a) A bank listed in Schedule I or II tothe Bank Act (Canada).

(b) The Business Development Bank of Canadaincorporated under the Business Development Bank of CanadaAct (Canada).

(c) A bank subject to the regulatory regimeof a country that is a member of the Basle Accord, or thathas adopted the banking and supervisory rules set out inthe Basle Accord, if the bank has a minimum paid up capitaland surplus, as shown on its last audited balance sheet,in excess of $25 million or its equivalent in another currency.

Credit Unions and Caisses Populaires

(d) A credit union central, federation ofcaisses populaires, credit union or regional caisse populaire,located, in each case, in Canada.

Loan and Trust Companies

(e) A loan corporation or trust corporationregistered under the Loan and Trust Corporations Act(Ontario) or under the Trust and Loan Companies Act(Canada), or under comparable legislation in any other provinceor territory of Canada.

(f) A loan company or trust company subjectto the regulatory regime of a country that is a member ofthe Basle Accord, or that has adopted the banking and supervisoryrules set out in the Basle Accord, if the loan company ortrust company has a minimum paid up capital and surplus,as shown on its last audited balance sheet, in excess of$25 million or its equivalent in another currency.

Insurance Companies

(g) An insurance company licensed to dobusiness in Canada or a province or territory of Canada;

(h) An insurance company subject to theregulatory regime of a country that is a member of the BasleAccord, or that has adopted the banking and supervisoryrules set out in the Basle Accord, if the insurance companyhas a minimum paid up capital and surplus, as shown on itslast audited balance sheet, in excess of $25 million orits equivalent in another currency.

Sophisticated Entities

(i) A person or company that, together withits affiliates:

(i) has entered into one or more transactionsinvolving OTC derivatives with counterparties that arenot its affiliates, if

(A) the transactions had a total grossdollar value of or equivalent to at least $1 billionin notional principal amount; and

(B) any of the contracts relating toone of these transactions was outstanding on any dayduring the previous 15-month period, or

(ii) had total gross marked-to-marketpositions of or equivalent to at least $100 million aggregatedacross counterparties, with counterparties that are notits affiliates in one or more transactions involving OTCderivatives on any day during the previous 15-month period.

Individuals

(j) An individual who, either alone or jointlywith the individual's spouse, has a net worth of at least$5 million, or its equivalent in another currency, excludingthe value of his or her principal residence.

Governments/Agencies

(k) Her Majesty in right of Canada or anyprovince or territory of Canada and each crown corporation,instrumentality and agency of a Canadian federal, provincialor territorial government.

(l) A national government of a country thatis a member of the Basle Accord, or that has adopted thebanking and supervisory rules set out in the Basle Accord,and each instrumentality and agency of that government orcorporation wholly-owned by that government.

Municipalities

(m) Any Canadian municipality with a populationin excess of 50,000 and any Canadian provincial or territorialcapital city.

Corporations and other Entities

(n) A company, partnership, unincorporatedassociation or organization or trust, other than an entityreferred to in paragraph (a), (b), (c), (d), (e), (f), (g)or (h), with total revenue or assets in excess of $25 millionor its equivalent in another currency, as shown on its lastfinancial statement, to be audited only if otherwise required.

Pension Plan or Fund

(o) A pension fund that is regulated byeither the Office of the Superintendent of Financial Institutions(Canada) or a provincial pension commission, if the pensionfund has total net assets, as shown on its last auditedbalance sheet, in excess of $25 million, provided that,in determining net assets, the liability of a fund for futurepension payments shall not be included.

Mutual Funds and Investment Funds

(p) A mutual fund or non-redeemable investmentfund if each investor in the fund is a Qualified Party.

(q) A mutual fund that distributes its securitiesin any of the Jurisdictions, if the portfolio manager ofthe fund is registered as an adviser, other than a securitiesadviser, under the Legislation or securities legislationelsewhere in Canada.

(r) A non-redeemable investment fund thatdistributes its securities in any of the Jurisdictions,if the portfolio manager of the fund is registered as anadviser, other than a securities adviser, under the Legislationor securities legislation elsewhere in Canada.

Brokers/Investment Dealers

(s) A person or company registered underthe Legislation or securities legislation elsewhere in Canadaas a broker or an investment dealer or both.

(t) A person or company registered underthe Legislation as an international dealer if the personor company has total assets, as shown on its last auditedbalance sheet, in excess of $25 million or its equivalentin another currency.

Futures Commission Merchants

(u) A person or company registered underthe CFA as a dealer in the category of futures commissionmerchant, or in an equivalent capacity elsewhere in Canada.

Charities

(v) A registered charity under the IncomeTax Act (Canada) with assets not used directly in charitableactivities or administration, as shown on its last auditedbalance sheet, of at least $5 million or its equivalentin another currency.

Affiliates

(w) A wholly-owned subsidiary of any ofthe organizations described in paragraph (a), (b), (c),(d), (e), (f), (g), (h), (j), (n), (o), (s), (t) or (u).

(x) A holding body corporate of which anyof the organizations described in paragraph (w) is a wholly-ownedsubsidiary.

(y) A wholly-owned subsidiary of a holdingbody corporate described in paragraph (x).

(z) A firm, partnership, joint venture orother form of unincorporated association in which one ormore of the organizations described in paragraph (w), (x)or (y) have a direct or indirect controlling interest.

Guaranteed Party

(aa) A party whose obligations in respectof the OTC derivatives transaction for which the determinationis made is fully guaranteed by another Qualified Party.

Qualified Party Not Acting as Principal

(4) The accounts of a person, company, pensionfund or pooled fund trust that are fully managed by a portfoliomanager or financial intermediary referred to in paragraphs(a), (d), (e), (g), (s), (t), (u) or (w) of paragraph (3)or a broker or investment dealer acting as a trustee or agentfor the person, company, pension fund or pooled fund trustunder section 148 of the Ontario Regulation are QualifiedParties, in respect of all OTC derivative transactions.

Subsequent Failure to Qualify

(5) A party is a Qualified Party for the purposeof any OTC derivatives transaction if it, he or she is a QualifiedParty at the time it, he or she enters into the transaction.

Qualified Party for Specified Commodity DerivativeTransaction

(6) A commercial user is a Qualified Partywith respect to any specified commodity derivative transaction.For these purposes:

"commercial user" means a personor company that enters into a specified commodity derivativetransaction, if

(a) the person or company deals in its businesswith a specified commodity, and

(b) the transaction involves a specifiedcommodity derivative of which the underlying interest, ora material component of the underlying interest, is

(i) a specified commodity referred toin paragraph (a),

(ii) a related specified commodity toa specified commodity referred to in paragraph (a), or

(iii) a specified commodity derivative,the underlying interest of which is

A. a specified commodity, or

B. a related specified commodity toa specified commodity referred to in paragraph (a);

"related specified commodity" meansa specified commodity that is part or all of an underlyinginterest of a specified commodity derivative that is usedby a commercial user to hedge its exposure to a risk resultingfrom its use of another specified commodity in its business;

"specified commodity" means

(a) whether in the original or a processedstate, an agricultural product, forest product, productof the sea, mineral, metal, hydrocarbon fuel product orprecious stone or other gem,

(b) a pollutant emission level,

(c) electricity,

(d) a liability from an insurance contract,and

(e) a matter designated by the Commissionsas a specified commodity, if that designation has not beenrevoked; and

"specified commodity derivative"means an OTC derivative of which an underlying interest is:

(a) a specified commodity, or

(b) another OTC derivative of which theunderlying interest is a specified commodity.