Securities Law & Instruments

Headnote

Section 80 of the Commodity Futures Act (Ontario) (the CFA) - Relief from the adviser registration requirement of paragraph 22(1)(b) of the CFA granted to a non-resident adviser in respect of advising certain non-Canadian mutual funds regarding trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada, subject to certain terms and conditions.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., s. 22(1)(b) and s. 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT

R.S.O. 1990, CHAPTER C.20, AS AMENDED (the "ACT")

AND

IN THE MATTER OF

CONQUEST CAPITAL, LLC

 

ORDER

(Section 80 of the Act)

UPON the application of Conquest Capital, LLC (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to section 80 of the Act that the Applicant and its directors, officers and employees are exempt from the requirements of paragraph 22(1)(b) of the Act in respect of advising Conquest Macro Fund Ltd. (the "Company") and Conquest Macro Master Fund Ltd. (the "Master Fund") in respect of trades in commodity futures contracts and options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada (the "Proposed Advisory Business");

AND UPON considering the application and the recommendation of staff of the Commission;

AND UPON the Applicant having represented to the Commission as follows:

1. The Applicant is a limited liability company organized under the laws of the state of Delaware.

2. The Applicant is registered as a commodity trading adviser and as a commodity pool operator with the Commodity Futures Trading Commission (the "CFTC") in the United States of America (the USA) and is a member of the National Futures Association (the "NFA") in the USA.

3. The Company and the Master Fund are organized in a "master/feeder" structure. The Company, as a feeder fund, invests, or will invest, substantially all of its assets in the Master Fund and cash equivalents. Discretionary portfolio investments are made through the Master Fund which include investments in commodity futures and options contracts traded on commodity futures exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada. Other than through the Master Fund, the Company does not invest in commodity futures and options contracts.

4. Securities of the Company are being offered to Ontario residents who are institutional investors or high net worth individuals. Securities of the Company are primarily offered outside of Canada, and are offered and distributed in Ontario through Ontario-registered dealers, in reliance upon an exemption from the prospectus requirements of the Securities Act, and in reliance upon an exemption from the adviser registration requirements of the Securities Act under section 7.10 of Commission Rule 35-502.

5. The Master Fund may, as part of its investment objective and policy, invest in commodity futures and options contracts traded on organized exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada.

6. The Applicant provides advice with respect to commodity futures and options contracts or securities to the Company and the Master Fund and makes all trading decisions for the Company and the Master Fund.

7. Prospective investors who are Ontario residents will receive disclosure that includes (i) a statement that there may be difficulty in enforcing legal rights against the Applicant and its directors, officers, or employees because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada, and (ii) a statement that the Applicant and its directors, officers, and employees are not registered with or licensed by any securities regulatory authority in Ontario and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Company.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemptions requested.

IT IS ORDERED pursuant to section 80 of the Act that the Applicant and its directors, officers and employees responsible for advising the Funds are not subject to the requirements of paragraph 22(1)(b) of the Act in respect of the Proposed Advisory Business in connection with the Funds, for a period of three years, provided that at the time such Proposed Advisory Business is engaged in:

1. the Applicant continues to be registered with the CFTC as a commodity trading adviser/commodity pool operator and be a member of the NFA;

2. the Master Fund may invest in commodity futures and options contracts traded on organized exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada;

3. securities of the Company will be offered primarily outside of Canada and will only be distributed in Ontario through Ontario-registered dealers, in reliance on an exemption from the prospectus requirements of the Securities Act and upon an exemption from the adviser registration requirements of the Securities Act under section 7.10 of Commission Rule 35-502; and

4. prospective investors who are Ontario residents will receive disclosure that includes (i) a statement that there may be difficulty in enforcing legal rights against the Applicant and its directors, officers, or employees because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada, and (ii) a statement that the Applicant and its directors, officers, and employees are not registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Company.

January 20, 2004.

"Robert L. Shirriff"
"Robert W. Korthals"