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Falcon Trust/Fiducie Falcon - MRRS Decision
Headnote
Mutual Reliance Review System - issuer of asset-backedsecurities exempt from the requirement to prepare, file anddeliver interim and annual financial statements and annual informationcirculars or, where applicable, annual reports in lieu of aninformation circular subject to conditions, including the requirementto prepare, file and deliver monthly and annual reports regardingperformance of pools of securities assets.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,77, 78,79, 80(b)(iii), 88(2)(b).
Regulations Cited
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., s. 5.
Policies Cited
National Policy Statement No. 41.
National Instrument 44-101 Short Form ProspectusDistributions.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA, ONTARIO,
QUÉBEC, NOVA SCOTIAAND NEWFOUNDLAND AND LABRADOR
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
FALCON TRUST/FIDUCIE FALCON
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Québec, Nova Scotia and Newfoundland and Labrador (the"Jurisdictions") has received an application (the"Application") from Falcon Trust/Fiducie Falcon (the"Issuer") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that the provisions of the Legislation concerning the preparation,filing and delivery of:
(a) interim and annual financial statements,
(b) annual filing reports prepared and certifiedin accordance with the Legislation or, where applicable,annual reports in prescribed form, and
(c) information circulars where managementof the Issuer solicits the proxies of holders of "votingsecurities" in respect of a meeting of which noticehas or will be given,
shall not apply to the Issuer in connectionwith public offerings of Asset-Backed Securities, includingthe offering of the Certificates (as such terms are definedbelow).
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 the Issuer has representedto the Decision Makers that:
1. The Issuer was created as a special purposevehicle pursuant to a declaration of trust made as of July10, 2002 (the "Declaration of Trust") under thelaws of the Province of Ontario, the beneficiary of whichis a charity registered under the Income Tax Act (Canada).The head office of the Issuer is located in Toronto, Ontario.
2. The Issuer has issued and will issue (the"Offerings") mortgage pass-through certificates(the "Asset-Backed Securities") to the public inCanada, including commercial mortgage-backed pass-throughcertificates issuable in series and classes, that are primarilyserviced by the cash flows of discrete pools of mortgage loanreceivables, hypothecs or other charges on real or immovableproperty situated in Canada, and all related assets (includingthe proceeds thereof and any related securities), either fixedor revolving, that by their terms convert into cash withina finite time period, and any rights or other assets designedto assure the servicing or timely distribution of proceedsto holders of Asset-Backed Securities (collectively, the "SecuritizedAssets").
3. It is anticipated that the Offerings willbe undertaken by the Issuer from time to time pursuant toshort form prospectuses on the basis of an approved ratingby an approved rating organization, as those terms are definedin National Instrument 44-101 - Short Form Prospectus Distributionsor in any successor instrument thereto (the "POP System").Securities may also be offered on a "private placement"basis in reliance upon exemptions from the prospectus requirementsof applicable securities laws.
4. The proceeds from the Offerings have beenand will be used to finance the origination or purchase bythe Issuer of discrete pools of Securitized Assets. Each particularseries and class of Asset-Backed Securities will representundivided co-ownership interests in a particular pool of SecuritizedAssets.
5. The Issuer filed a short form prospectusdated October 4, 2002 with each provincial securities regulatoryauthority or regulator for the issuance of approximately $147,500,000aggregate principal amount of Commercial Mortgage Pass-ThroughCertificates, Series 2002-SMU (the "Certificates")and received receipts for such prospectus from each provincialsecurities regulatory authority or regulator.
6. The Issuer was initially settled with $10.00and the issuer trustee (the "Issuer Trustee") isCIBC Mellon Trust Company, a trust company incorporated underthe Trust and Loans Companies Act (Canada). The IssuerTrustee's registered and principal office is located in Toronto,Ontario.
7. The only security holders of the Issuerwill be the holders of its Asset-Backed Securities, includingthe holders of the Certificates. The Issuer currently hasno material assets or liabilities other than its rights andobligations arising under certain of the material contractsrelated to the Asset-Backed Securities issued by the Issuer.
8. As a special purpose vehicle, the Issuerwill not carry on any activities except in respect of theissuance of Asset-Backed Securities (including the Certificates),the origination of commercial mortgages and the purchase andacquisition of Securitized Assets.
9. Scotia Capital Inc. ("Scotia")has entered into an administration agreement dated July 10,2002 with the Issuer, as amended (the "AdministrationAgreement") pursuant to which Scotia will provide certainadministrative and management activities for and on behalfof the Issuer, for which Scotia will receive an administrativefee.
10. The Issuer has no directors and no officers.
11. No insider of the Issuer, or associateor affiliate of same, has a direct or indirect interest inany transaction which has materially affected or would materiallyaffect the Issuer.
12. The auditors of the Issuer are Deloitte& Touche LLP.
13. Purchasers of asset-backed securitieson a private placement basis normally do not receive financialinformation regarding the issuer of the asset-backed securitiesbut normally receive summaries of the monthly portfolio reportsrelating to the asset-backed securities.
14. The information contained in the interimfinancial statements and comparative financial statementsof the Issuer is not and will not be relevant to holders ofAsset-Backed Securities (including holders of Certificates)since such holders only have recourse to the pool of SecuritizedAssets securing their series and class of Asset-Backed Securitiesand do not have any recourse to any assets of the Issuer.
15. For each Offering (including the offeringof the Certificates), the discrete pool of Securitized Assetswill be deposited with a custodian pursuant to a servicingagreement or other custodial arrangement (each a "ServicingAgreement") that the Issuer will enter into which willgovern the rights of holders of Asset-Backed Securities (includingholders of Certificates) and their entitlement to the SecuritizedAssets.
16. Each Servicing Agreement will also providefor the fulfilment of certain administrative functions relatingto the Asset-Backed Securities (including the Certificates),such as the maintenance of a register of holders of Asset-BackedSecurities and the making of periodic reports to holders ofAsset-Backed Securities.
17. The Issuer or a representative or agentwill provide, on a website identified or to be identifiedin the relevant short form prospectus for the Asset-BackedSecurities or in correspondence sent to holders of Asset-BackedSecurities, or otherwise as provided for in the relevant shortform prospectus, no later than the 15th day of each month(or such subsequent business day if the 15th day of the monthis not a business day) the financial and other informationprescribed therein to be delivered or made available to holdersof Asset-Backed Securities on a monthly basis, together withsuch additional information as may be prescribed by the DecisionMakers (the "Distribution Date Statement"), andwill contemporaneously file or cause to be filed reasonablycontemporaneously therewith the Distribution Date Statementon the System for Electronic Document Analysis and Retrieval("SEDAR").
18. Notwithstanding paragraph 17, the Issuermay amend, or caused to be amended, the contents of the financialand other information posted on the website and filed on SEDARin order not to disclose the names of individual obligorsof Securitized Assets as may be required by confidentialityagreements or other obligations of confidentiality bindingon the Issuer.
19. There will be no annual meeting of holdersof Asset-Backed Securities since the Servicing Agreement provides,or will provide, that only the holders of a certain percentageof Asset-Backed Securities of each series and class of theIssuer have the right to direct the custodian and partiesthat may perform servicing functions with respect to the SecuritizedAssets to take certain actions under the Servicing Agreement.
20. On not less than an annual basis, theIssuer will request, or cause to be requested, intermediariesto deliver a notice to holders of Asset-Backed Securitiespursuant to the procedures stipulated by National Instrument54-101 - Communication with Beneficial Owners of Securitiesof a Reporting Issuer, or its successor instrument, advisingholders of Asset-Backed Securities that the monthly informationprescribed by paragraph 17, the quarterly information prescribedin paragraph 21 and the annual information prescribed in paragraph22 is available on SEDAR and on a website, the website address,and that holders of Asset-Backed Securities may request thatpaper copies of same be provided to them by ordinary mail.
21. Within 60 days of the end of each fiscalquarter of the Issuer, the Issuer or a representative or agentwill post on the applicable website or mail to holders ofAsset-Backed Securities who so request in accordance withthe procedures set forth above, and will contemporaneouslyfile on SEDAR, management's discussion and analysis ("MD&A")with respect to the applicable pool of Securitized Assetsincluded in the Issuer's Annual Information Form filed withthe Decision Makers (as supplemented by any short form prospectusfiled by the Issuer during the intervening period).
22. Within 140 days of the end of each fiscalyear of the Issuer, the Issuer or a representative or agentwill post on the applicable website or mail to holders ofAsset-Backed Securities who so request in accordance withthe procedures set forth above, and will contemporaneouslyfile on SEDAR:
(a) cumulative financial and other informationas prescribed by the Decision Makers for the last completedfiscal year with respect to the applicable pool of SecuritizedAssets;
(b) MD&A with respect to the applicablepool of Securitized Assets included in the Issuer's AnnualInformation Form filed with the Decision Makers (as supplementedby any short form prospectuses filed by the Issuer duringthe intervening period);
(c) annual statement of compliance signedby a senior officer of each applicable servicer or otherparty acting in a similar capacity on behalf of the Issuerfor the applicable pool of Securitized Assets, certifyingthat the servicer or such other party acting in a similarcapacity has fulfilled all of its obligations under therelated Servicing Agreement during the year or, if therehas been a default in the fulfilment of any such obligation,specifying each such default and the status thereof; and
(d) annual accountant's report in form andcontent acceptable to the Decision Makers prepared by afirm of independent public or chartered accountants acceptableto the Decision Makers respecting compliance by each applicableservicer or other party acting in a similar capacity onbehalf of the Issuer with the Uniform Single AttestationProgram ("USAP") or such other servicing standardacceptable to the Decision Makers.
23. The Issuer will issue, or cause to beissued, press releases and file material change reports inaccordance with the requirements of the Legislation in respectof material changes in its affairs and in respect of changesin the status (including default in payment due to holdersof Asset-Backed Securities), of the Securitized Assets underlyingthe Asset-Backed Securities which may be reasonably be consideredto be material to holders of Asset-Backed Securities.
24. The provision of information to holdersof Asset-Backed Securities on a monthly, quarterly and annualbasis as described in paragraphs 17, 21 and 22, as well asthe annual notice to be given by, or behalf of, the Issueras to the availability of such information pursuant to theterms of paragraph 20 will meet the objectives of allowingthe holders of Asset-Backed Securities to monitor and makeinformed decisions about their investments.
25. Fees payable in connection with the filingof annual financial statements will be paid at the time that,and in respect of, the annual financial information specifiedin paragraph 22 hereof is filed.
AND WHEREAS pursuant to the MRRS thisDecision Document evidences the decision of each Decision Maker(collectively, the "Decision").
AND WHEREAS each Decision Maker is satisfiedthat the test contained in the Legislation providing the DecisionMaker with the jurisdiction to make the Decision has been met.
THE DECISION of the Decision Makers pursuantto the Legislation is that the Issuer is exempted from the requirementsin the Legislation concerning the preparation, filing and deliveryof interim and annual financial statements, annual filing reportsprepared and certified in accordance with the Legislation or,where applicable, annual reports in prescribed form, and informationcirculars where management of the Issuer solicits the proxiesof holders of "voting securities" in respect of ameeting of which notice has or will be given, provided that:
(a) the only securities that the issuerdistributes to the public are Asset-Backed Securities;
(b) the Issuer complies with paragraphs17, 20, 21, 22 and 23 hereof; and
(c) the exemption from the requirementsof the Legislation concerning the preparation, filing anddelivery of an annual report, where applicable, and theannual filing, where applicable, in lieu of an informationcircular shall terminate sixty days after the occurrenceof a material change in any of the representations of theIssuer contained in paragraphs 8 through 11 inclusive, unlessthe Issuer satisfies the Decision Makers that the exemptionshould continue.
November 14, 2002.
"Paul M. Moore, Q.C." "MaryTheresa McLeod"