Application for relief from (1) the requirements relating to segregation of funds and securities in section 116, 117 and 118 of the Ontario Regulation, and (2) the requirement in subsection 2.1(c) and section 3.3 of Multilateral Instrument 33-109 - Registration Information that the applicant submit a completed Form 33-109F4 - Registration Information for an Individual for all of its officers and directors.
Order 1 was granted on March 29, 2005 pursuant to section 147 of the Securities Act and relieved the applicant from the segregation requirements. A previous order had granted permission to act as custodian for its Ontario clients; however a subsequent order granting non-resident limited market dealer status to the applicant required compliance with the Regulation, including sections 116, 117 and 118. Relief was granted on the basis that compliance with U.S. S.E.C. requirements and certain additional safeguards may be considered equivalent to requirements of the Regulation.
Order 2 was granted on April 15, 2005 pursuant to section 7.1 of MI 33-109 and relieved the applicant from the Form 33-109 requirements in respect of certain of its nominal officers. The exempted officers are without significant authority over any part of the applicant's operations and have no connection with its Ontario operation. The applicant is still required to submit 33-109 F4's on behalf of its directing minds, who are the directors and certain "Executive Officers."
Securities Act, R.S.O. 1990, c. S.5, as am., s. 147.
Regulation made under the Securities Act, R.R.O., Reg. 1015, as am., ss. 116, 117, 118.
Multilateral Instrument 33-109 - Registration Information.
Ontario Securities Commission Notice 35-701 -- Residency Requirements for Advisers and their Partners and Officers.
April 15, 2005
IN THE MATTER OF
THE SECURITIES ACT (ONTARIO)
R.S.O. 1990, c.S.5, AS AMENDED
IN THE MATTER OF
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
(Section 7.1 of Multilateral Instrument 33-109)
UPON the application (the Application) of Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Applicant) pursuant to section 7.1 of Multilateral Instrument 33-109 (MI 33-109) for an exemption from the requirement in subsection 2.1(c) and section 3.3 of MI 33-109 that the Applicant submit a completed Form 33-109F4 for all Non-Registered Individuals of Applicant;
AND UPON considering the Application;
AND UPON the Applicant having represented to the Director 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 currently registered under the Securities Act (Ontario) (the Act) as a dealer in the category of International Dealer and an adviser in the category of International Adviser.
3. The Applicant has applied for registration as a Non-Canadian Adviser (investment counsel and portfolio manager) and as a non-resident Limited Market Dealer (the Proposed Registration Applications).
4. Less than 1% of the aggregate consolidated gross revenues from advisory activities of the Applicant and its affiliates in any one financial year would be expected to arise from their acting as advisers or dealers for clients in Ontario.
5. The Applicant provides investment, financing, and related services to individuals and institutions on a global basis. The Applicant has approximately 14,000 Financial Advisors, and approximately 13,800 officers, of whom five are also directors.
6. All individuals who intend to trade in securities and/or act as advisers in Ontario on behalf of the Applicant (Registerable Activity) will first seek to become Registered Individuals in accordance with the registration requirement under section 25(1) of the Act and the requirements of MI 31-102 - National Registration Database by submitting a Form 33-109F4 completed with all the information required for a Registered Individual. It is currently anticipated that approximately 25 officers of the Applicant will seek to become Registered Individuals.
7. The Applicant's remaining over 13,000 directors and officers will be Non-Registered Individuals, as defined in MI 33-109. There are currently no individuals who are not directors or officers of the Applicant who would be included in the definition of Non-Registered Individual by reason of an ownership interest in the Applicant or other criteria set out in MI 33-109. Of the Applicant's Non-Registered Individuals, over 13,000 would not reasonably be considered to be directors or officers of the Applicant from a functional point of view. These individuals (the Nominal Officers) have the title "vice president" or a similar title but are not in charge of a principal business unit, division or function of the Applicant and, in any event, will not be involved in or have oversight of the Applicant's advisory and/or dealer activities in Ontario. For purposes of reporting to securities regulatory authorities in its home jurisdiction of the United States, the Applicant considers only the holders of its most senior executive positions to be officers (the Executive Officers). There are currently eight Executive Officers, five of whom are the only directors of the Applicant.
8. The Applicant seeks relief from the requirement to submit Form 33-109F4s for the Nominal Officers. The Applicant proposes to submit Form 33-109F4s on behalf of each of its directors and the Executive Officers completed with all the information required for a Non-Registered Individual. The Applicant also proposes to submit a Form 33-109F4 for the designated compliance officer under the Applicant's proposed Non-Resident Limited Market Dealer registration and the Chief Compliance Officer and the Ultimately Responsible Person under the Applicant's proposed Non-Canadian Adviser registration (each, a Compliance Officer position). At present, it is intended that one of the Executive Officers will act in all of the Compliance Officer positions.
9. In the absence of the requested exemption, subsection 2.1(c) of MI 33-109 would require that in conjunction with the Proposed Registration Applications, the Applicant submit a completed Form 33-109F4 for each of its more than 13,000 Nominal Officers, rather than limiting this filing requirement to the much smaller number of directors, Executive Officers and Compliance Officer(s). In addition, section 3.3 of MI 33-109 would require that the Applicant submit a completed Form 33-109F4 for any new Nominal Officers, if the requested exemption is not granted. The information contained in the filed Form 33-109F4s would also need to be monitored on a constant basis to ensure that notices of change were submitted in accordance with the requirements of section 5.1 of MI 33-109.
10. Given the relatively small scope of the Applicant's proposed activities in Ontario and the large number of Nominal Officers, none of whom will have any involvement in the Applicant's Ontario activities, the preparation and filing of Form 33-109F4s on behalf of each Nominal Officer would achieve no regulatory purpose, while imposing an unwarranted administrative and compliance burden on the Applicant that would effectively preclude the Applicant from undertaking the Proposed Registration Applications.
AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to make the requested Order on the basis of the terms and conditions proposed;