MRRS - Underwriter and advisor registrationrelief for Schedule III Bank - prospectus and registration relieffor trades where Schedule III Bank purchasing as principal andfirst trade relief for Schedule III Bank - prospectus and registrationrelief for trades of bonds, debentures and other evidences ofindebtedness of or guaranteed by Schedule III Bank providedtrades involve only specified purchasers - prospectus and registrationrelief for evidences of deposits by Schedule III Bank to specifiedpurchasers - fee relief for trades made in reliance on Decision.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.ss. 25(1)(a)&(c), 34(a), 35(1)(3)(i), 35(2)1(c), 53(i),72(1)(a)(i), 73(1)(a), 74(1), 147.
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am. ss. 151, 206, 218, Schedule 1 s. 28.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA,
ONTARIO, QUEBEC, NEW BRUNSWICK,NOVA SCOTIA,
PRINCE EDWARD ISLAND, NEWFOUNDLANDAND LABRADOR,
YUKON TERRITORY, NORTHWESTTERRITORIES,
AND NUNAVUT TERRITORY
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundlandand Labrador, Northwest Territories, Nunavut Territory and YukonTerritory (the "Jurisdictions") has received an application(the "Application") from WestLB AG ("WestLB")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that WestLB is exemptfrom various registration, prospectus and filing requirementsof the Legislation in connection with the banking activitiesto be carried on by WestLB in Canada;
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 it has been represented byWestLB to the Decision Makers that:
1. WestLB is a joint stock corporation dulyorganized and existing under the laws of the Federal Republicof Germany and is a validly existing banking organizationunder the banking laws of the Federal Republic of Germany;
2. WestLB has an extensive international branchnetwork. WestLB currently maintains a representative officein Toronto, Ontario. WestLB intends to participate in theCanadian domestic loan and structured finance markets by establishinga foreign bank lending branch;
3. In March, 2002, WestLB made an application(the "Bank Act Application") to the Office of theSuperintendent of Financial Institutions Canada ("OSFI")for an order under the Bank Act (Canada) (the "BankAct") permitting it to establish a lending branchunder the Bank Act and designating it on Schedule IIIto the Bank Act;
4. Upon approval of the Bank Act Applicationand receipt of an order from the Superintendent of FinancialInstitutions approving the commencement and carrying on ofbusiness in Canada, WestLB will establish itself and commencebusiness as a foreign bank branch under the Bank Act;
5. For purposes of this Decision, "AuthorizedPurchasers" shall mean:
(a) Her Majesty in right of Canada or inright of a province or territory, an agent of Her Majestyin either of those rights and includes a municipal or publicbody empowered to perform a function of government in Canada,or an entity controlled by Her Majesty in either of thoserights;
(b) the government of a foreign countryor any political subdivision thereof, an agency of the governmentof a foreign country or any political subdivision thereof,or an entity that is controlled by the government of a foreigncountry or any political subdivision thereof;
(c) an international agency of which Canadais a member, including an international agency that is amember of the World Bank Group, the Inter-American DevelopmentBank, the Asian Development Bank, the Caribbean DevelopmentBank and the European Bank for Reconstruction and Developmentand any other international regional bank;
(d) a financial institution (i.e.:(a) a bank or an authorized foreign bank under the BankAct; (b) a body corporate to which the Trust andLoan Companies Act (Canada) applies, (c) an associationto which the Cooperative Credit Association Act (Canada)applies, (d) an insurance company or a fraternal benefitsociety to which the Insurance Companies Act (Canada)applies, (e) a trust, loan or insurance corporation incorporatedby or under an Act of the legislature of a province or territoryin Canada, (f) a cooperative credit society incorporatedand regulated by or under an Act of the legislature of aprovince or territory in Canada; (g) an entity that is incorporatedor formed by or under an Act of Parliament or of the legislatureof a province or territory in Canada and that is primarilyengaged in dealing in securities, including portfolio managementand investment counseling, and is registered to act in suchcapacity under the applicable Legislation, and (h) a foreigninstitution that is (i) engaged in the banking, trust, loanor insurance business, the business of a cooperative creditsociety or the business of dealing in securities or is otherwiseengaged primarily in the business of providing financialservices, and (ii) is incorporated or formed otherwise thanby or under an Act of Parliament or of the legislature ofa province or territory in Canada);
(e) a pension fund that is maintained inrespect of a pension plan registered for income tax purposesand that has total assets under administration of more than$100 million;
(f) a mutual fund that is regulated underan Act of the legislature of a province or territory inCanada or under the laws of any other jurisdiction and theassets of which are managed by a person that has total assetsunder their management of more than $10 million;
(g) an entity that has gross revenues onits own books and records of greater than $5 million asof the date of its most recent annual financial statements;
(h) any other entity, where the depositfacilitates the provision of the following services by WestLBto the entity, namely,
(i) lending money,
(ii) dealing in foreign exchange, or
(iii) dealing in securities, other thandebt obligations of WestLB;
(i) any other person if the trade is ina security which has an aggregate acquisition cost to thepurchaser of $150,000 or more;
6. The only advising activities which WestLBintends to undertake will be incidental to its primary businessand it will not advertise itself as an adviser or allow itselfto be advertised as an adviser in the Jurisdictions;
7. Under the current Legislation, banks charteredunder Schedules I and II to the Bank Act have numerousexemptions from various aspects of the Legislation. SinceWestLB's foreign bank branch will not be chartered under ScheduleI or II of the Bank Act, the existing exemptions willnot be available to it;
8. In order to ensure that WestLB, as an entitylisted on Schedule III to the Bank Act, is able toprovide banking services to businesses in the Jurisdictionsit requires similar exemptions enjoyed by banking institutionsincorporated under the Bank Act to the extent thatthe current exemptions applicable to such banking institutionsare relevant to the banking business being undertaken by WestLBin the Jurisdictions;
AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of each DecisionMaker (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 pursuantto the Legislation is that upon the establishment by WestLBof a branch designated on Schedule III to the Bank Actand in connection with the banking business to be carried onby WestLB in the Jurisdictions by such branch:
1. WestLB is exempt from the requirement underthe Legislation, where applicable, to be registered as anunderwriter with respect to trading in the same types of securitiesthat an entity listed on Schedule I or II to the Bank Actmay act as an underwriter in respect of without being requiredto be registered under the Legislation as an underwriter;
2. WestLB is exempt from the requirement underthe Legislation to be registered as an adviser where the performanceof the service as an adviser is solely incidental to its primarybanking business;
3. A trade of a security to WestLB where WestLBpurchases the security as principal shall be exempt from theregistration and prospectus requirements of the Legislationof the Jurisdiction in which the trade takes place (the "ApplicableLegislation") provided that:
(i) the forms that would have been filedand the fees that would have been paid under the ApplicableLegislation if the trade had been made, on an exempt basis,to an entity listed on Schedule I or II to the Bank Actpurchasing as principal are filed and paid in respect ofthe trade to WestLB;
(ii) except in Quebec, the first trade ina security acquired by WestLB pursuant to this Decisionis deemed a distribution or primary distribution to thepublic under the Applicable Legislation unless the conditionsin subsections 2 or 3, as applicable, of section 2.5 ofMultilateral Instrument 45-102 - Resale of Securitiesare satisfied; and
(iii) in Quebec, the first trade in a securityacquired by WestLB pursuant to this Decision will be a distributionunless,
(a) at the time WestLB acquired the security:(i) the issuer of the security is a reporting issuer inQuebec; (ii) the issuer is not a Capital Pool Companyas defined in Policy 2.4 of The Canadian Venture ExchangeInc.; (iii) the issuer has a class of securities listedon an acceptable exchange, has not been advised that itdoes not meet the requirements to maintain that listingand is not designated inactive, or the issuer has a classof securities that has an approved rating from an approvedrating organization; for purposes of this Decision, theacceptable exchanges include the Toronto Stock Exchange,tier 1 and 2 of The Canadian Venture Exchange Inc., theAmerican Stock Exchange, Nasdaq National Market, NasdaqSmallCap Market, the New York Stock Exchange and the LondonStock Exchange Limited; and (iv) the issuer has filedan annual information form required under section 159of the Regulation made under the Securities Act(Quebec), as amended from time to time, (the "QuebecAct") within the time period contemplated by thatsection, or, if not required to file an annual informationform, has filed a prospectus that contains the most recentannual financial statements;
(b) the issuer has been a reporting issuerin Quebec for 4 months immediately preceding the trade;
(c) WestLB has held the securities forat least 4 months;
(d) no extraordinary commission or otherconsideration is paid;
(e) no effort is made to prepare the marketor to create a demand for the securities;
(f) if WestLB is an insider of the issuer,WestLB has no reasonable grounds to believe that the issueris in default under the Quebec Act; and
(g) WestLB files a report within 10 daysof the trade prepared and executed in accordance withthe requirements of the Quebec Act that would apply toa trade made in reliance on section 43 or 51 of the QuebecAct.
4. Provided WestLB only trades the types ofsecurities referred to in this paragraph with Authorized Purchasers,trades of bonds, debentures or other evidences of indebtednessof or guaranteed by WestLB shall be exempt from the registrationand prospectus requirements of the Legislation.
5. Evidences of deposit issued by WestLB toAuthorized Purchasers, as permitted under the Bank Act, shallbe exempt from the registration and prospectus requirementsof the Legislation.
THE FURTHER DECISION of the DecisionMaker in Ontario is that:
A. Subsection 25(1)(a) of the SecuritiesAct (Ontario) R.S.O. 1990 c. S.5 (as amended) (the "Act")does not apply to a trade by WestLB:
(i) of a type described in subsection 35(1)of the Act or section 151 of the Regulations made underthe Act; or
(ii) subject to paragraph 4 above, in securitiesdescribed in subsection 35(2) of the Act;
B. Subsection 25(1)(a) and section 53 of theAct do not apply to a trade by WestLB in:
(i) a security of a mutual fund, if thesecurity is sold to a pension plan, deferred profit sharingplan, retirement savings plan or other similar capital accumulationplan maintained by the sponsor of the plan for its employees,and
(a) the employees deal only with the sponsorin respect of their participation in the plan and thepurchase of the security by the plan, or
(b) the decision to purchase the securityis not made by or at the direction of the employee; or
(ii) in a security of a mutual fund that:
(a) is administered by a body corporateto which the Trust and Loan Companies Act (Canada)applies or a trust, loan or insurance corporation incorporatedby or under an Act of the legislature of a province orterritory in Canada;
(b) consists of a pool of funds that:
(A) results from, and is limited to,the combination or commingling of funds of pension orother superannuation plans registered under the IncomeTax Act (Canada), and
(B) is established by or related topersons or companies that are associates or affiliatesof or that otherwise do not deal at arms length withthe promoters of the mutual fund, except the trust,loan or insurance corporation that administers the fund;and
(c) is managed, in whole or in part, bya person who is registered or who is exempt from registrationunder the Act; and
C. Except as provided for in paragraph 3 ofthis Decision, section 28 of Schedule I to the Regulationsmade under the Act shall not apply to trades made by WestLBin reliance on this Decision.
November 22, 2002.
"Robert L. Shirriff" "HaroldP. Hands"