Securities Law & Instruments

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- relief from the adviser registration requirements of subsection 22(1)(b) of the CFA in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles established outside of Canada in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada, subject to certain terms and conditions.

Statutes Cited:

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.

December 9, 2005

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

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

AS AMENDED (the CFA)

AND

IN THE MATTER OF

JULIUS BAER INVESTMENT MANAGEMENT LLC

 

ORDER

(Section 80 of the CFA)

UPON the application (the Application) of Julius Baer Investment Management LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA that the Applicant and its directors, officers and employees acting on its behalf as an adviser (collectively, the Representatives), be exempt, for a period of three years, from the requirements of paragraph 22(1)(b) of the CFA in respect of advising certain mutual funds, non-redeemable investment funds and similar investment vehicles established outside of Canada in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada;

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 limited liability company organized under the laws of the State of Delaware, with its head office in New York, New York, U.S.A. The Applicant is an indirect subsidiary of Julius Baer Holding Ltd. of Zurich, Switzerland.

2. The Applicant is registered under the Securities Act (Ontario) (the OSA) as an international adviser in the categories of investment counsel and portfolio manager and is not registered in any capacity under the CFA.

3. The Applicant is registered as an investment adviser with the U.S. Securities and Exchange Commission (the SEC), as a commodity pool operator and commodity trading adviser with the U.S. Commodity Futures Trading Commission (the CFTC) and is a member of the National Futures Association (the NFA).

4. The Applicant acts as investment manager to: (i) certain U.S. retail mutual funds, including, Julius Baer International Equity Fund, Julius Baer International Equity II Fund, Julius Baer Total Return Bond Fund, Julius Baer Global High Yield Bond Fund and Julius Baer Global Equity Fund Inc., and (ii) certain private non-Canadian investment funds, including, Julius Baer Institutional International Equity Fund II (collectively, the Julius Baer Funds). The Applicant may in the future manage certain other mutual funds, non-redeemable investment funds or similar investment vehicles (collectively, along with the Julius Baer Funds, the Funds).

5. The Funds invest, or may in the future invest, in commodity futures contracts and commodity futures options traded on organized exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada.

6. The Applicant, as investment manager of the Fund, will make all decisions with respect to the Funds and as such will also provide all investment advice to the Funds.

7. Any of the Funds advised by the Applicant are, or will be, established outside of Canada.

8. By advising the Funds directly on investing in commodity futures contracts and commodity futures options, the Applicant will be providing advice to the Funds with respect to commodity futures contracts and commodity futures options.

9. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures options and commodity futures contracts that is similar to the exemption from the adviser registration requirement in section 25(1)(c) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of OSC Rule 35-502 Non Resident Advisers (Rule 35-502).

10. As would be required under section 7.10 of Rule 35-502, the securities of the Funds will be:

(a) primarily offered outside of Canada;

(b) only distributed in Ontario through one or more registrants under the OSA; and

(c) distributed in Ontario in reliance upon an exemption from the prospectus requirements under the OSA.

11. Prospective investors in the Funds who are Ontario residents will receive disclosure that includes:

(a) a statement that there may be difficulty in enforcing any legal rights against the Funds and or the Applicant which advises the relevant Funds, because such entities are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(b) a statement that the Applicant advising the applicable Funds is not, or will not be, registered with the Commission under the CFA and, accordingly, the protections available to clients of a registered adviser under the CFA will not be available to purchasers of securities of the Funds.

12. None of the Funds has any intention of becoming a reporting issuer in Ontario or in any other Canadian jurisdiction.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;

IT IS ORDERED pursuant to section 80 of the CFA that the Applicant and its Representatives responsible for advising the Funds are not subject to the requirements of paragraph 22(1)(b) of the CFA in respect of their advisory activities in connection with the Fund, for a period of three years, provided that at the time such activities are engaged in:

(a) the Applicant continues to be registered as an investment adviser with the SEC and registered as a commodity trading adviser with the CFTC or otherwise exempt from such registrations;

(b) the Funds invest in commodity futures contracts and commodity futures options traded on organized exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada;

(c) securities of the Funds will be: (i) primarily offered outside of Canada, (ii) only distributed in Ontario through one or more registrants under the OSA, and (iii) distributed in Ontario in reliance upon an exemption from the prospectus requirements of the OSA and upon an exemption from the adviser registration requirement of the OSA under section 7.10 of Rule 35-502; and

(d) prospective investors in the Funds who are Ontario residents will receive disclosure that includes:

(i) a statement that there may be difficulty in enforcing any legal rights against the Funds and or the Applicant which advises the relevant Funds, because such entities are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(ii) a statement that the Applicant advising the applicable Funds is not, or will not be, registered with the Commission under the CFA and, accordingly, the protections available to clients of a registered adviser under the CFA will not be available to purchasers of securities of the Funds.

"Paul M. Moore"
Commissioner
 
"Susan Wolburgh Jenah"
Commissioner