Securities Law & Instruments

Headnote

Sub-adviser to registered adviser exempted from the adviser registration requirement in paragraph 22(1)(b) of the Commodity Futures Act, in connection with the registered adviser acting as an adviser, in respect of commodity futures contracts and commodity futures options, to one or more mutual funds -- Exemption for this sub-adviser under the CFA parallels the exemption from the adviser registration requirement in the Securities Act contained in section 7.3 of Ontario Securities Commission Rule 35-502 Non-Resident Advisers -- Exemption expires in three years.

Statutes Cited

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

Securities Act, R.S.O. 1990, c. S.5, as am.

Rules Cited

Ontario Securities Commission Rule 35-502 Non-Resident Advisers, s. 7.3.

IN THE MATTER OF

THE COMMODITY FUTURES ACT, R.S.O. 1990,

CHAPTER C.20, AS AMENDED (the "CFA")

AND

IN THE MATTER OF

FIDELITY INTERNATIONAL LIMITED

AND FIDELITY INVESTMENTS CANADA LIMITED

 

ORDER

(Section 80)

UPON the application (the "Application") of Fidelity International Limited (the "Sub-Adviser") to the Ontario Securities Commission (the "Commission") for an order, pursuant to section 80 of the CFA, that, with respect to the Sub-Adviser acting as an adviser to Fidelity Investments Canada Limited (the "Principal Adviser") in connection with the Principal Adviser acting as an adviser to certain Funds (as defined below), neither the Sub-Adviser, nor any of its directors, officers or employees ("Sub-Adviser Representatives") acting on its behalf as an adviser, shall be subject to paragraph 22(1)(b) of the CFA;

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

AND UPON the Sub-Adviser having represented to the Commission that:

1. The Sub-Adviser is a corporation organized under the laws of Bermuda that is resident in Bermuda.

2. The Sub-Adviser is not registered under the CFA as either an adviser or dealer.

3. The Sub-Adviser is not registered pursuant to any applicable commodity futures legislation in Bermuda and such registration is not required in order to provide the services to the Principal Adviser described in paragraph 8, below.

4. The Principal Adviser is a corporation amalgamated under the laws of Ontario that is resident in Ontario.

5. The Principal Adviser is registered under the CFA as an adviser, in the category of "commodity trading manager".

6. The Principal Adviser is also registered under the Securities Act (the "OSA") as an adviser in the categories of "investment counsel" and "portfolio manager," and, as a dealer, in the category of "mutual fund dealer".

7. Where the Principal Adviser acts as the trustee and manager of certain mutual funds (each, a "Fund"), the Principal Adviser may, pursuant to written agreement made between the Principal Adviser and the Fund:

(i) acts as an adviser (as defined in the OSA) to the Fund, in respect of securities, and

(ii) acts as an adviser to the Fund, in respect of trading commodity futures contracts and commodity futures options,

by exercising discretionary authority in respect of the investment portfolio of the Fund, with discretionary authority to purchase or sell on behalf of the Fund:

(iii) securities, and

(iv) commodities futures contracts and commodities futures options.

8. In connection with the Principal Adviser acting as an adviser to a Fund, in respect of the purchase or sale of commodity futures contracts and commodity futures options, the Principal Adviser, may, from time to time, pursuant to a written agreement made between the Principal Adviser and the Sub-Adviser, retain the Sub-Advisers to act as an adviser to the Principal Adviser, by exercising discretionary authority, on behalf of the Principal Adviser, in respect of the investment portfolio of the Fund, with discretionary authority to buy or sell commodity futures options and commodity futures contracts for the Fund, provided that:

(i) in each case, the option or contract must be cleared through an acceptable clearing corporation; and

(ii) in no case will any trading in commodity futures contracts or commodity futures options constitute the primary focus or investment objective of the Fund.

9. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA, for a person or company acting as an adviser to another registered adviser in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in clause 25(1)(b) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities, in section 7.3 of the Ontario Securities Commission Rule 35-502 Non-Resident Advisers.

AND UPON the Commission being of the opinion that to do would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 80 of the CFA, that neither the Sub-Adviser, nor any Sub-Adviser Representative acting on behalf of the Sub-Adviser, is subject to paragraph 22(1)(b) of the CFA, in respect of their acting as an adviser to the Principal Adviser, in connection with the Principal Adviser acting as an adviser to one or more Funds, provided that, at the relevant time and in the case of each Fund:

(a) the Principal Adviser is registered under the CFA as an adviser, in the category of "commodity trading manager";

(b) the duties and obligations of the Sub-Adviser are set out in a written agreement with the Principal Adviser;

(c) the Principal Adviser has contractually agreed with the Fund to be responsible for any loss that arises out of any failure of the Sub-Adviser:

(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Fund and its securityholders, or

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

(d) the Principal Adviser cannot be relieved by the Fund or its securityholders from its responsibility for any loss referred to in paragraph (c), above;

(e) the securityholders of the Fund have received written disclosure, in a prospectus or other offering document, disclosing:

(i) the responsibility of the Principal Adviser for losses arising out of any failure of the Sub-Adviser referred to in paragraph (c), above, and

(ii) that there may be difficulty in enforcing legal rights against the Sub-Adviser because it is resident outside of Canada and all or substantially all of the Sub-Adviser's assets may be situated outside of Canada; and

(f) this Order shall terminate on the day that is three years after the date of the Order.

March 12, 2004.

"Paul M. Moore"
"Suresh Thakrar"