Application to the Commission for an order, pursuant to section 218 of Regulation 1015 of the Securities Act (Ontario), that the requirement in section 213 of the Regulation, which 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, shall 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, ss. 213, 218.
October 21, 2005
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
MILLENNIUM WAVE SECURITIES, LLC
(Section 218 of the Regulation)
UPON the application (the Application) of Millennium Wave Securities, LLC (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 subsection 213(1) 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 the staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant was formed in 1999 under the laws of the State of Texas in the United States. The head office of the Applicant is located at 1000 Ballpark Way, Suite 216, Arlington, Texas.
2. The Applicant is not registered in any capacity under the Act.
3. The Applicant is registered in the U.S. as a broker-dealer under the Securities Exchange Act of 1934 and is a member in good standing of the U.S. National Association of Securities Dealers, Inc.
4. All directors, officers and employees of the Applicant who seek registration in Ontario are also registered in the U.S.
5. The primary focus of the Applicant's activities is on the marketing and sale of specialized alternative investments, including hedge funds and related private offerings, to high net worth individuals and institutions.
6. In Ontario, the Applicant intends to market and sell to accredited investors, units, limited partnership interests or other securities, of funds that are primarily offered outside of Canada. These limited market dealer activities may be undertaken directly, or in conjunction with or through another registered dealer, including providing referrals to such dealer.
7. The Applicant is resident outside of Canada, will not maintain an office in Canada and will only participate in the distribution of securities in Ontario pursuant to registration and prospectus exemptions contained in the Act and Commission Rule 45-501 -- Exempt Distributions.
8. Subsection 213(1) 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.
9. Without the relief requested, the Applicant would not meet the requirements of the Regulation for registration as a limited market dealer as it is not incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED THAT, pursuant to section 218 of the Regulation, and in connection with the registration of the Applicant as a dealer in the category of limited market dealer, section 213 of the Regulation shall not apply to the Applicant for a period of three years, 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 for the Applicant in Ontario, and the nature of the 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 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 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. The Applicant will not have custody of, or maintain customer accounts in relation to, securities, funds, and other assets of clients resident in Ontario.
6. The Applicant will inform the Director immediately upon the Applicant becoming aware:
(a) that it has ceased to be registered in the U.S. as a broker-dealer; or
(b) of its registration in any other jurisdiction not being renewed or being suspended or revoked; or
(c) that it is the subject of an investigation or disciplinary action by any financial services or securities regulatory authority or self-regulatory authority; or
(d) that the registration of any of its salespersons, officers or directors who are registered in Ontario are not being renewed or being suspended or revoked in any Canadian or foreign jurisdiction; or
(e) that any of its salespersons, officers or directors 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.
7. The Applicant will pay the increased compliance and case assessment costs of the 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 Commission.
8. The Applicant will make its books and records outside Ontario, including electronic records, readily accessible in Ontario, and produce physical records for the Commission within a reasonable time if requested.
9. If the laws of the jurisdiction in which the Applicant's books and records are located prohibit production of 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 the books and records.
10. The Applicant will, upon the Commission's request, provide a representative to assist the Commission in compliance and enforcement matters.
11. The Applicant and each of its registered directors or officers 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.
12. 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.
(c) The Applicant will maintain appropriate registration and regulatory organization membership in the jurisdiction of its principal operations, and if required, in its jurisdiction of residence.