Securities Law & Instruments

Headnote

Application for relief from registration requirements under section 25(1) of the Securities Act (Ontario) and relief from section 206(1) of the Regulations, for a municipal government proposing to engage in pooling of assets with other municipalities for common investments, subject to investment restrictions under the Municipal Act.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am.

Municipal Act, S.O. 2001, c. 25.

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., s.206(1).

August 30, 2005

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5, AS AMENDED (the ACT)

AND

IN THE MATTER OF

ONTARIO REGULATION 1015,

R.R.O. 1990, AS AMENDED (the REGULATION)

AND

IN THE MATTER OF

THE REGIONAL MUNICIPALITY OF HALTON

 

ORDER

(Section 74(1) of the Act)

UPON the application (the Application) of the Regional Municipality of Halton (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 74(1) of the Act exempting the Applicant from section 25(1) of the Act, and an order pursuant to section 211 of the Regulation, exempting the Applicant from section 206(1) of the Regulation,

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

AND UPON the Applicant having represented to the Commission as follows:

1. The Applicant is a municipal corporation incorporated by the Province of Ontario in 1974.

2. The Applicant is an upper-tier municipality which covers the geographic area of four lower-tier municipalities: the City of Burlington, the Town of Halton Hills, the Town of Milton and the Town of Oakville.

3. Section 418(1) of the Municipal Act (Ontario), 2001, S.O. 2001, c. 25, as amended (the Municipal Act) allows a municipality to invest money that it does not require immediately in securities (Eligible Investments) prescribed by O. Reg. 438/97, as amended (the Municipal Regulation), which are predominantly fixed-income investments that are traded over-the-counter.

4. The Applicant currently employs a proprietary trader (the Trader) to invest its surplus funds in Eligible Investments. As an employee of the Applicant, the Trader is not registered as a dealer or adviser under the Act.

5. Pursuant to section 420 of the Municipal Act, the Applicant wishes to enter into an investment management agreement (the Agreement) with one or more municipalities incorporated in Ontario (collectively, the Participating Municipalities).

6. Under the terms of the Agreement, (i) the Applicant and each of the Participating Municipalities will pool their surplus funds (the Pooled Assets) for investment purposes and will adopt the same investment policy and investment objectives (the Policy), (ii) the Trader will invest the Pooled Assets in accordance with the Policy and the Municipal Regulation, (iii) each of the Participating Municipalities will pay a nominal management fee to the Applicant to cover certain expenses incurred by the Applicant in connection with the management of the Pooled Assets, and (iv) the Trader will continue to be employed by the Applicant and will report to an investment committee comprised of representatives appointed by the Applicant and each of the Participating Municipalities.

7. In managing the Pooled Assets the Applicant will be trading in Eligible Investments which form part of the Pooled Assets and could be considered to be (a) carrying on business or holding itself out as carrying on the business of advising a Participating Municipality as to the investing in or the buying or selling of securities and (b) engaged in the business of trading in securities as an agent for a Participating Municipality, thereby necessitating registration pursuant to Section 25(1) of the Act.

8. The Applicant will be a "market intermediary" for the purposes of Section 204(1) of the Regulations.

9. As a market intermediary, the Applicant cannot rely on those exemptions from the Registration Requirements which are not available to a market intermediary: (a) pursuant to section 206 of the Regulation, the registration exemption for municipal corporations in section 35(1)(3) of the Act; and (b) pursuant to section 3.4 of Commission Rule 45-501 -- Exempt Distributions (Rule 45-501), the exemption for trades to accredited investors in section 2.3 of Rule 45-501. Consequently, the Applicant would be prohibited from trading in Eligible Investments which form part of the Pooled Assets and from advising the Participating Municipalities as contemplated by the Agreement.

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

IT IS ORDERED that pursuant to subsection 74(1) of the Act, that the Applicant is exempt from the requirement to register under section 25(1) of the Act, in connection with its investment advisory activities engaged in by Agreement on behalf of the Participating Municipalities,

IT IS ALSO ORDERED pursuant to section 211 of the Regulations, that the Applicant is exempt from subsection 206(1) of the Regulations in connection with trades in Eligible Investments which form part of the Pooled Assets.

"Paul M. Moore"
Commissioner
 
"M. Theresa McLeod"
Commissioner