Securities Law & Instruments

Headnote

Exemption regarding the calculation of Capital Markets Participation Fees payable by a registrant registered as an adviser in the category of commodity trading manager under the Commodity Futures Act (Ontario). The registrant's revenues include revenues earned from advice provided to clients located outside of Ontario and which are regulated by other jurisdictions. Because the registrant does not have a permanent establishment in any other jurisdiction in Canada, the income allocated to Ontario in its corporate tax filings is not an accurate proxy for the registrant's use of the Ontario capital markets and the OSC's cost of regulation of the registrant's activities. Exemption granted so that the "Ontario percentage" is calculated as the percentage of its income allocated to Ontario in its corporate tax filings less the percentage of revenues generated in those other jurisdictions in which it is also registered.

Ontario Rules

Ontario Securities Commission Rule 13-503 -- Fees.

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C.20, AS AMENDED

AND

IN THE MATTER OF

ADA INVESTMENTS INC.

 

DECISION

(Subsection 5.1 of Rule 13-503 Fees)

WHEREAS the Ontario Securities Commission (the "Commission") has received an application from ADA Investments Inc. ("ADA"), pursuant to section 5.1 of the Rule, for an order exempting ADA, in part, from the requirement to pay participation fees calculated in the manner prescribed by Part 2 of the Rule;

AND WHEREAS, the Rule requires that certain registrants under the Act which have a permanent establishment in Ontario determine their participation fees by taking into account income allocated to Ontario in the corporate income tax filings for the registrant under the Income Tax Act (Canada);

AND WHEREAS, unless otherwise defined, the terms herein have the meanings set out in Ontario Securities Commission Rule 14-501- Definitions;

AND WHEREAS the Registrant has represented to the Commission that:

1. ADA was incorporated under the laws of the Province of Ontario with its head office in Toronto. Other than its Toronto office, ADA has no other permanent establishment in Canada.

2. ADA is registered as an adviser in Ontario under the Commodity Futures Act (Ontario) in the category of Commodity Trading Manager and is also registered in the United States under the Commodity Exchange Act (the "CEA") as a Commodity Trading Advisor and a Commodity Pool Operator and is a member of the National Futures Association which is the self regulatory organization in the United States responsible for the administration and enforcement of the CEA.

3. ADA principally provides discretionary management to its clients with respect to the trading of futures contracts on regulated exchanges outside Canada. Its clients are almost exclusively non-Canadian.

4. ADA is not in default of any of the requirements of the securities and/or commodity futures legislation of Ontario.

5. As a registrant firm in Ontario, ADA must pay, for each of its financial years, the participation fee shown in Appendix A of the Rule that applies to it according to ADA's specified Ontario revenues earned from its CFA activities.

6. In accordance with section 2.6 of the Rule, ADA's specified Ontario revenue for a financial year is calculated by multiplying the gross revenues earned by it as disclosed in its annual financial statements for the financial year less specified deductions, by its Ontario percentage.

7. Registrants that have a permanent establishment in Ontario must calculate their Ontario percentage by referring to the amount allocated to Ontario in their corporate income tax filings made under Income Tax Act (Canada). Registrants who do not have a permanent establishment in Ontario must calculate their Ontario percentage by determining the percentage of its total revenues which are attributable to its CFA activities in Ontario.

8. ADA does not have a permanent establishment in any other jurisdiction in Canada other than Ontario. Accordingly, ADA reports all of its Ontario income and all of its non-Ontario income in its Ontario corporate income tax returns. ADA does not file corporate income tax returns in any other jurisdiction in Canada. ADA's corporate tax filings do not distinguish between income earned in Ontario and income earned in jurisdictions outside of Ontario in which it is also registered.

9. Based on the calculation method disclosed above there is a material difference between the Ontario percentage for ADA and the percentage of its total revenues which are attributable to its CFA activities in Ontario.

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS THE DECISION of the Director pursuant to section 5.1 of Rule 13-503, that for purposes of calculating the Participation Fee pursuant to Part 2 of Rule 13-503, ADA is granted relief to the extent that the "Ontario percentage" for each financial year of ADA should be calculated as the amount allocated to Ontario in ADA's corporate income tax filings made under the Income Tax Act (Canada) less the percentage of revenues generated in the United States pursuant to ADA's registration under the CEA.

January 10, 2005.

"David M. Gilkes"