Order granted pursuant to section 218 of Regulation 1015 of the Securities Act (Ontario), that the requirement in section 213 of the Regulation that a registered dealer, if not an individual, must be a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada, does not apply to the Applicant. The order sets out the terms and conditions applicable to a non-resident limited market dealer.
Ontario Regulation 1015, R.R.O. 1990, sec. 213, 218.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5, AS AMENDED (THE "ACT")
IN THE MATTER OF
R.R.O. 1990, REGULATION 1015
AS AMENDED (THE "REGULATION")
IN THE MATTER OF
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
(Section 218 of the Regulation)
UPON the application (the "Application") of Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order, pursuant to section 218 of the Regulation, exempting the Applicant from the requirement in section 213 of the Regulation that the Applicant be incorporated, or otherwise formed or created, under the laws of Canada or a province or territory of Canada, in order for the Applicant to be registered under the Act as a dealer in the category of "limited market dealer";
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant is a corporation formed under the laws of the State of Delaware and is a wholly owned subsidiary of Merrill Lynch & Co., Inc. The head office of the Applicant is located in New York, New York.
2. The Applicant is registered under the Act as an international dealer and an international adviser. The Applicant is also registered as a broker-dealer and an investment adviser with the United States Securities and Exchange Commission.
3. The Applicant provides investment, financing, and related services to individuals and institutions on a global basis. Services provided to clients include securities brokerage, trading, and underwriting; investment banking, strategic services, including mergers and acquisitions, and other corporate finance advisory activities; origination, brokerage, dealer and related activities; securities clearance and settlement services and investment advisory and related record keeping services.
4. The Applicant has applied to the Commission for registration under the Act as a dealer in the category of limited market dealer.
5. Section 213 of the Regulation provides that a registered dealer that is not an individual must be a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada.
6. The Applicant was formed under the laws of Delaware in 1958 and has carried on business in the United States and elsewhere since that time.
7. The Applicant does not require a separate Canadian company in order to carry out its proposed limited market dealer activities in Ontario. It is more efficient and cost-effective to carry out those activities through the existing company.
8. In the absence of this Order, the Applicant would not meet the requirements of the Regulation for registration as a dealer in the category of limited market dealer as it is not a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada.
AND UPON being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to section 218 of the Regulation, that, in connection with the registration of the Applicant as a dealer under the Act in the category of "limited market dealer", the Applicant is exempt from the provisions of section 213 of the Regulation requiring that the Applicant be a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada, provided that:
1. The Applicant appoints an agent for service of process in Ontario.
2. The Applicant shall provide to each client resident in Ontario a statement in writing disclosing the non-resident status of the Applicant, the Applicant's jurisdiction of residence, the name and address of the agent for service of process of the Applicant in Ontario, and the nature of risks to clients that legal rights may not be enforceable.
3. The Applicant will not change its agent for service of process in Ontario without giving the Ontario Securities Commission 30 days' prior notice of such change by filing a new Submission to Jurisdiction and Appointment of Agent for Service of Process.
4. The Applicant and each of its registered directors, officers or partners irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial, and administrative tribunals of Ontario and any administrative proceedings in Ontario, in any proceedings arising out of or related to or concerning its registration under the Act or its activities in Ontario as a registrant.
5. Securities, funds, and other assets of the Applicant's clients in Ontario will be held as follows:
(a) by the client; or
(b) by a custodian or sub-custodian:
(i) that meets the guidelines prescribed for acting as a sub-custodian of the portfolio securities of a mutual fund in Part 6 of National Instrument 81-102 - Mutual Funds;
(ii) that is:
(A) subject to the agreement announced by the Bank for International Settlements (BIS) on July 1, 1988 concerning international convergence of capital measurement and capital standards; or
(B) exempt from the requirements of paragraph 3.7(1)(b)(ii) of OSC Rule 35-502 -- Non Resident Advisers; and
(iii) if such securities, funds and other assets are held by a custodian or sub-custodian that is the Applicant or an affiliate of the Applicant, that custodian holds such securities, funds and other assets in compliance with the requirements of the Regulation.
6. Ontario client's securities may be deposited with or delivered to a recognised depository or clearing agency.
7. The Applicant will inform the Director immediately upon the Applicant becoming aware:
(a) of it ceasing to be registered as a broker-dealer with the United States Securities and Exchange Commission,
(b) of its registration in any other jurisdiction not being renewed or being suspended or revoked,
(c) that it is the subject of an investigation or disciplinary action by any financial services or securities regulatory authority or self-regulatory authority,
(d) that the registration of its salespersons, officers, directors, or partners' who are registered in Ontario have not been renewed or has been suspended or revoked in any Canadian or foreign jurisdiction, or
(e) that any of its salespersons, officers, directors, or partners who are registered in Ontario are the subject of an investigation or disciplinary action by any financial services or securities regulatory authority or self-regulatory authority in any Canadian or foreign jurisdiction.
8. The Applicant will pay the increased compliance and case assessment costs of the Ontario Securities Commission due to the Applicant's location outside Ontario, including the cost of hiring a third party to perform a compliance review on behalf of the Ontario Securities Commission.
9. The Applicant will make its books and records outside Ontario, including electronic records, readily accessible in Ontario, and will produce physical records for the Ontario Securities Commission within a reasonable time if requested.
10. If the laws of the jurisdiction in which the Applicant's books and records are located prohibit production of the books and records in Ontario without the consent of the relevant client the Applicant shall, upon a request by the Commission:
(a) so advise the Commission; and
(b) use its best efforts to obtain the client's consent to the production of books and records.
11. The Applicant, upon the Commission's request, provides a representative to assist the Commission in compliance and enforcement matters.
12. The Applicant and each of its registered directors, officers or partners will comply, at the Applicant's expense, with requests under the Commission's investigation powers and orders under the Act in relation to the Applicant's dealings with Ontario clients, including producing documents and witnesses in Ontario, submitting to audit or search and seizure process or consenting to an asset freeze, to the extent such powers would be enforceable against the Applicant if the Applicant were resident in Ontario.
13. If the laws of the Applicant's jurisdiction of residence that are otherwise applicable to the giving of evidence or production of documents prohibit the Applicant or the witnesses from giving the evidence without the consent or leave of the relevant client or any third party, including a court of competent jurisdiction, the Applicant shall:
(a) so advise the Commission; and
(b) use its best efforts to obtain the client's consent to the giving of the evidence.
14. The Applicant will maintain appropriate registration and SRO membership, in the jurisdiction of its principal operations and if required, in its jurisdiction of residence.
June 25, 2004.
“Wendell S. Wigle” “Robert W. Davis”