Securities Law & Instruments

Headnote

Section 78(1) of the Commodity Futures Act (Ontario) (the CFA) -- Revocation of the decision of the Commission, dated September 20, 2002 entitled In the Matter of Morgan Stanley Alternative Investment Partners LP, Morgan Stanley AIP GP LP, MSDW AIP (Cayman) Ltd., and Morgan Stanley AIP (Cayman) GP Ltd.

Section 80 of the Commodity Futures Act (Ontario) - 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 mutual funds, non-redeemable investment funds and similar investment vehicles (the "Funds"), the securities of which will be offered primarily outside of Canada, in respect of investments in investment vehicles that may invest in, commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada, and, in certain cases, direct investments by the Funds in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada, subject to certain terms and conditions.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., s. 78(1).

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 "CFA")

AND

IN THE MATTER OF

MORGAN STANLEY ALTERNATIVE INVESTMENT PARTNERS LP,

MORGAN STANLEY AIP GP LP,

MSDW AIP (CAYMAN) LTD.,

MORGAN STANLEY AIP (CAYMAN) GP LTD.,

AND

MSAIP (CAYMAN) LIMITED

 

ORDER

(Subsection 78(1) and Section 80 of the CFA)

WHEREAS the Ontario Securities Commission (the "Commission") has received an application (the "Application") from Morgan Stanley Alternative Investment Partners LP, Morgan Stanley AIP GP LP, MSDW AIP (Cayman) Ltd., Morgan Stanley AIP (Cayman) GP Ltd., and MSAIP (Cayman) Limited (the "Applicants") for an order pursuant to subsection 78(1) of the CFA to revoke a decision of the Commission dated September 20, 2002 entitled In the Matter of Morgan Stanley Alternative Investment Partners LP, Morgan Stanley AIP GP LP, MSDW AIP (Cayman) Ltd., and Morgan Stanley AIP (Cayman) GP Ltd. and an order pursuant to section 80 of the CFA that each of the Applicants and their respective directors, partners, officers, and employees are exempt from the requirements of paragraph 22(1)(b) of the CFA in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles (the "Funds"), the securities of which will be offered primarily outside of Canada, in respect of investments in investment vehicles that may invest in, commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada, and, in certain cases, direct investments by the Funds in commodity futures contracts and commodity futures options principally traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada, subject to certain terms and conditions;

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

AND UPON the Applicants having represented to the Commission that:

1. The Applicants are Morgan Stanley Alternative Investment Partners LP, Morgan Stanley AIP GP LP, MSDW AIP (Cayman) Ltd., Morgan Stanley AIP (Cayman) GP Ltd., and MSAIP (Cayman) Limited. Each of the Applicants is an indirect affiliate of Morgan Stanley, a global financial services firm incorporated under the laws of the State of Delaware, the common stock of which is listed on the New York Stock Exchange and on the Pacific Exchange. Morgan Stanley Alternative Investment Partners LP is a limited partnership organized under the laws of the state of Delaware. Morgan Stanley AIP GP LP is a limited partnership organized under the laws of the state of Delaware. MSDW AIP (Cayman) Ltd. is an exempted company organized under the laws of the Cayman Islands. Morgan Stanley AIP (Cayman) GP Ltd. is an exempted company organized under the laws of the Cayman Islands. MSAIP (Cayman) Limited is an exempted company organized under the laws of the Cayman Islands. None of the Applicants is resident in Canada.

2. The Funds include funds that are offshore feeder funds (the "Feeder Funds") that are established outside of Canada and outside of the United States. Three of the Applicants (MSDW AIP (Cayman) Ltd., Morgan Stanley AIP (Cayman) GP Ltd., and MSAIP (Cayman) Limited) serve as general partners of the respective Feeder Funds they manage and cause the assets of the Feeder Funds to be invested primarily in funds established in the United States ("U.S. Funds").

3. The Funds (being comprised of the Feeder Funds and U.S. Funds) advised by the Applicants are or will be established outside of Canada. Securities of the Funds are or will be primarily offered outside of Canada to institutional investors and high net worth individuals. Securities of the Funds will be offered to a small number of Ontario residents who will be at the time of their investment institutional investors or high net worth individuals. Such securities will be offered and distributed in Ontario through registrants (as defined under the Securities Act (Ontario) (the "OSA")), which have the appropriate registration, in reliance upon an exemption from the requirements of sections 53 and 62 of the OSA.

4. All of the Funds are or will be "fund of funds" which will primarily invest in certain investment vehicles unaffiliated with the Applicants and which are, or will be, established outside of Canada (the "Underlying Funds"). The Feeder Funds invest in the Underlying Funds indirectly by investing directly in the U.S. Funds that invest directly in the Underlying Funds.

5. Certain of the Underlying Funds may invest in commodity futures contracts and commodity futures options principally traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada. Certain of the Funds advised by the Applicants may also invest directly in commodity futures contracts and commodity futures options principally traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada.

6. The Underlying Funds in which the Funds will from time to time invest are, or will be, managed by certain third party managers outside of Canada (the "Managers") and are investing, or will invest, in investments selected by the Managers which may include commodity futures contracts and commodity futures options. The Managers are unaffiliated with the Applicants and do not, and will not in the future, provide advice directly to the Funds.

7. One or more of the Applicants have selected, or will select, the Underlying Funds in which the Funds have invested, or will invest, based on the investment strategies implemented by the Manager of the relevant Underlying Fund and the respective investment objectives and policies of the Fund that has invested, or will invest, in the Underlying Fund. The investment strategies implemented by the Managers may include investing in commodity futures contracts and commodity futures options.

8. By selecting an Underlying Fund based upon the Underlying Fund's investment strategy, where such strategy may specifically involve investing in commodity futures contracts and commodity futures options, and by advising the Funds directly on investing in commodity futures contracts and commodity futures options, the Applicants currently provide, or will in the future provide, advice with respect to commodity futures contracts and commodity futures options or securities to the Funds.

9. Certain affiliates of the Applicants are registered with the Commission. Morgan Stanley & Co. Incorporated is registered under the OSA in the categories of international dealer and international adviser (investment counsel and portfolio manager). An affiliate of the Applicants, Morgan Stanley Investment Management Inc., is registered under the OSA in the category of international adviser (investment counsel and portfolio manager). Another affiliate of the Applicants, Morgan Stanley Canada Limited, is registered under the OSA as a broker and investment dealer (equities). Morgan Stanley & Co. Limited and Morgan Stanley & Co. International Limited, two other affiliates of the Applicants, are registered under the OSA as international dealers. The Applicants are not, and have no current intention of becoming registered, in any capacity under the OSA or the CFA.

10. Each of the Applicants, where required, is registered or licensed under the applicable legislation of its principal jurisdiction to provide advice to the Funds, or is entitled to rely on appropriate exemptions from such registrations or licences pursuant to the applicable legislation of its principal jurisdiction. In particular:

(a) Morgan Stanley Alternative Investment Partners LP is a registered investment adviser with the Securities and Exchange Commission (the "SEC") in the United States of America (the "USA"), a registered commodity pool operator with the Commodity Futures Trading Commission (the "CFTC") in the USA, and a member of the National Futures Association (the "NFA") in the USA;

(b) Morgan Stanley AIP GP LP is a registered investment adviser with the SEC, a registered commodity trading advisor and a registered commodity pool operator with the CFTC, and is a member of the NFA;

(c) MSDW AIP (Cayman) Ltd. is not required to be, and accordingly is not, currently registered as an investment adviser with the SEC but is a registered commodity pool operator with the CFTC, and is a member of the NFA;

(d) Morgan Stanley AIP (Cayman) GP Ltd. is not required to be, and accordingly is not, currently registered as an investment adviser with the SEC but is a registered commodity pool operator with the CFTC, and is a member of the NFA;

(e) MSAIP (Cayman) Limited is not required to be, and accordingly is not, currently registered as an investment adviser with the SEC; and is not required to be, and accordingly is not, currently registered as a commodity pool operator with the CFTC.

11. None of the Funds is, and none has any current intention of becoming, a reporting issuer in Ontario or in any other Canadian jurisdiction.

12. Prospective investors in the Funds who are Ontario residents will receive disclosure that includes (i) a statement that there may be difficulty in enforcing any legal rights against any of the applicable Funds (or any of the Underlying Funds), the Applicant advising the relevant Funds, the trustee or manager of the applicable Funds (or of any of the Underlying Funds) 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 advising the relevant Funds and, where applicable, the Managers advising the relevant Underlying Funds are not, or will not be, 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 such Fund.

AND UPON being satisfied that it would not be prejudicial to public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed,

IT IS ORDERED pursuant to subsection 78(1) of the CFA that the decision of the Commission, dated September 20, 2002, entitled In the Matter of Morgan Stanley Alternative Investment Partners LP, Morgan Stanley AIP GP LP, MSDW AIP (Cayman) Ltd., and Morgan Stanley AIP (Cayman) GP Ltd., is revoked.

IT IS FURTHER ORDERED pursuant to section 80 of the CFA that each of the Applicants and their respective directors, partners, officers, and employees responsible for advising the Funds are not subject to the requirements of paragraph 22(1)(b) of the CFA in respect of their advisory activities in connection with the Funds, for a period of three years, provided that at the time such activities are engaged in:

(a) The Applicants, where required, are or will be, registered or licensed under applicable legislation of a jurisdiction in Canada, other than Ontario, or a foreign jurisdiction to provide advice to the Funds, or are, or will be entitled to rely on appropriate exemptions from such registrations or licences pursuant to the applicable legislation of a jurisdiction in Canada, other than Ontario, or a foreign jurisdiction;

(b) the Funds and the Underlying Funds invest in commodity futures contracts and commodity futures options principally traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada and other derivative instruments traded over the counter;

(c) securities of the Funds and Underlying Funds will be offered primarily outside of Canada and will only be distributed in Ontario through a registrant (as defined under the OSA), and in reliance upon an exemption from the requirements of sections 53 and 62 of the OSA and upon an exemption from the adviser registration requirement provided under section 7.10 of Commission Rule 35-502 Non-Resident Advisers; and

(d) prospective investors in the Funds who are Ontario residents will receive disclosure that includes (i) a statement that there may be difficulty in enforcing any legal rights against any of the applicable Funds (or any of the Underlying Funds), the Applicant advising the relevant Funds, the trustee or manager of the applicable Funds (or of any of the Underlying Funds) 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 advising the relevant Funds and, where applicable, the Managers advising the relevant Underlying Funds are not, or will not be, 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 such Fund.

March 23, 2004.

"Paul M. Moore"
"Suresh Thakrar"