Securities Law & Instruments

Headnote

Relief from the adviser registration requirement of paragraph 22(1)(b) of the Commodity Futures Act (Ontario) (CFA) granted to a non-resident adviser in connection with the proposed advisory services to be provided to a registered commodity trading manager under the CFA for a term of 3 years, subject to certain terms and conditions, pursuant section 80 of the CFA.

Statutes Cited

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

Securities Act, R.S.O. 1990, c. S.5 (as am.) - OSC Rule 35-502 -- Non-Resident Advisers, s. 7.3.

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

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

AND

IN THE MATTER OF

QUAY CAPITAL MANAGEMENT LIMITED

 

ORDER

(Section 80 of the CFA)

UPON the application of Quay Capital Management Limited ("Quay") to the Ontario Securities Commission (the "Commission") for a ruling under section 80 of the CFA that Quay, its officers, directors and representatives are not subject to the requirements of subsection 22(1)(b) of the CFA;

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

AND UPON Quay having represented to the Commission as follows:

1. Quay is a private limited company organized under the laws of Ireland.

2. Quay is regulated by the Irish Financial Services Regulatory Authority in Ireland as an investment business under the Investment Intermediaries Act (1995). Quay is registered with the Commodity Futures Trading Commission (the "CFTC") in the United States of America as a commodity trading advisor and is a member of the National Futures Association (the "NFA") in the United States of America.

3. Quay is proposing to enter into a sub-advisory agreement with Toron Capital Markets Inc. ("Toron") and the Horizons Tactical Hedge Fund (the "Fund") whereby Toron would act as the portfolio adviser to the Fund including ancillary activities, in respect of purchases and sales of commodity futures contracts or related products traded on commodity futures exchanges and cleared through acceptable clearing corporations, such as standard futures contracts based on currency, bonds and short-term fixed income securities, and Quay would act as sub-adviser to Toron (the "Proposed Advisory Services").

4. Toron is currently registered under the Securities Act (Ontario) as an adviser in the categories of investment counsel and portfolio manager and as a dealer in the category of limited market dealer. Toron is also currently registered under the CFA as an adviser in the category of commodity trading manager.

5. In connection with the Proposed Advisory Services, Quay will enter into a written agreement with Toron and the Fund setting out the obligations and duties of Quay.

6. Under this agreement, Toron will assume responsibility to the Fund for all advice provided by Quay to the Fund.

7. Quay will only provide advice to Toron where Toron has represented that it has contractually agreed with the Fund to be responsible for any loss that arises out of the failure of Quay to:

(a) exercise its powers and discharge its duties honestly, in good faith and in the best interests of Toron and the Fund; or

(b) exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;

(the "Standard of Care"), and that this responsibility cannot be waived.

8. Quay will only provide advice to Toron in connection with the Fund.

9. The Fund has advised Quay that the offering documents will disclose that:

(a) Toron has responsibility for the investment advice or portfolio management services provided by Quay; and

(b) to the extent applicable, there may be difficulty in enforcing any legal rights against Quay because it is resident outside of Canada and all or a substantial portion of its assets are situated outside of Canada.

10. Quay will only provide advice to Toron so long as Toron remains a registrant under the CFA while the Proposed Advisory Services are provided by Quay.

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 CFA that Quay, its officers, directors and representatives are not subject to the requirements of subsection 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided that:

(a) the obligations and duties of Quay are set out in a written agreement with Toron;

(b) Quay will only provide advice to Toron where Toron has contractually agreed with the Fund to be responsible for any loss that arises out of the failure of Quay to meet the Standard of Care and such responsibility cannot be waived;

(c) Quay will only provide advice to Toron where the offering documents for the Fund disclose that Toron is responsible for any loss that arises out of the failure of Quay to meet the Standard of Care, and that

(i) Toron has responsibility for the investment advice or portfolio management services provided by Quay, and

(ii) there may be difficulty in enforcing any legal rights against Quay because it is resident outside of Canada and all or a substantial portion of its assets are situated outside of Canada;

(d) Quay remains regulated by the Irish Financial Services Regulatory Authority as an investment business, registered as a commodity trading adviser with the CFTC, and a member of the NFA;

(e) Quay will only provide advice to Toron so long as Toron remains a registrant under the CFA while the Proposed Advisory Services are provided by Quay; and

(f) this order shall terminate three years from the date of the order.

February 13, 2004.

"Robert W. Korthals"
"Suresh Thakrar"