Securities Law & Instruments

Headnote

Subsection 80 of the Commodity Futures Act (Ontario) -- relief from the requirements of subsection 22(1)(b) of the CFA in respect of advising certain non-Canadian mutual funds related to commodity futures contracts and options traded on commodity futures exchanges outside Canada and cleared through clearing corporations outside Canada subject to certain terms and conditions.

IN THE MATTER OF

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

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

AND

IN THE MATTER OF

WIZARD TRADING, INC.

 

ORDER

(Section 80)

UPON the application (the "Application") of Wizard Trading, Inc. (the "Adviser") to the Ontario Securities Commission (the "Commission") for an order, pursuant to section 80 of the CFA, that the Advisor and its officers are exempt from the requirements of paragraph 22(1)(b) of the CFA in respect of advising a non-Canadian fund with regard to trades in commodity futures contracts and options traded on commodity futures exchanges primarily outside Canada and cleared through clearing corporations primarily outside Canada (the "Proposed Advisory Business");

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

AND UPON the Adviser having represented to the Commission that:

1. The Adviser is a corporation organized under the laws of the state of Indiana.

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

3. The Adviser is registered as a commodity trading advisor/commodity pool operator with the U.S. Commodity Futures Trading Commission (the "CFTC") and is a member of the U.S. National Futures Association (the "NFA").

4. The Advisor serves as managing member of and/or advisor to Wizard Capital, LLC, a non Canadian mutual fund (the "Fund").

5. 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 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 Securities Act, Ontario (the "OSA) for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of Rule 35-502 - Privately Placed Funds Offered Primarily Abroad (the "Non-Resident Advisor Rule").

6. As would be required under the Non-Resident Advisor Rule, the Fund is and will be non-Canadian and the securities of the Fund will be:

(a) primarily offered outside of Canada;

(b) only distributed in Ontario through one or more registrants under the OSA; and

(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements under the OSA.

7. Prospective investors who are Ontario residents will receive a notice that includes:

(a) a statement that there may be difficulty in enforcing legal rights against the Advisor because it is resident outside of Canada and all or substantially all of its assets are situated outside Canada; and

(b) a statement that the Advisor is not registered with or licensed by any securities regulatory authority in Ontario under the CFA and accordingly, the protections available to clients of a registered advisor will not be available to purchasers of the Fund.

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 the Adviser is not subject to the requirements of paragraph 22(1)(b) of the CFA, in respect of the Proposed Advisory Business until the date when the Fund ceases to meet the criteria of the Non-Resident Advisor Rule provided that:

(a) the Advisor continues to be registered with the CFTC as a commodity trading advisor/commodity pool advisor and to be a member of the NFA;

(b) the Fund invests in futures and options contracts traded on organized exchanges primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada, and in securities primarily outside of Canada;

(c) prospective investors who are Ontario residents will receive a written notice that includes:

(i) a statement that there may be difficulty in enforcing legal rights against the Advisor because it is resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(ii) a statement that the Advisor is not registered with or licensed by any securities regulatory authority in Ontario under the CFA, and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of units of the Fund.

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

May 18, 2004.

"Susan Wolburgh-Jenah"
"Suresh Thakrar"