Ameritrade Holding Corporation and Ameritrade Services Company, Inc. - s. 74(1)

Ruling

Headnote

Two US-based applicants will have representatives located in Ontario. They will conduct trades in securities with, or on behalf of, customers or clients who are not residents of Canada and in doing so the representatives will not be required to be registered.

Applicable Provision

Securities Act, R.S.O. 1990, c. S.5, as am., s. 25.

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5,

AS AMENDED (the Act)

AND

IN THE MATTER OF

AMERITRADE HOLDING CORPORATION AND

AMERITRADE SERVICES COMPANY, INC.

 

RULING

(Subsection 74(1))

WHEREAS on July 19, 2002, the Ontario Securities Commission (the Commission) made a ruling pursuant to subsection 74(1) of the Act that representatives of TD Waterhouse Investor Services, Inc. (TDW) who work in a call centre located in London, Ontario that answer inbound phone calls from clients of TDW who are not residents of Canada are not subject to paragraph 25(1)(a) of the Act subject to certain terms and conditions (as amended on July 22, 2005, the Ruling).

AND WHEREAS pursuant to a definitive agreement between Ameritrade Holding Corporation (AHC) and The Toronto-Dominion Bank (TD Bank) among others, (the Acquisition Agreement), AHC will acquire all of the outstanding shares of TD Waterhouse Group, Inc. (TDWG), and thus indirectly acquire all of the outstanding shares of TDW and TD Waterhouse Canadian Call Center Inc. (TDWCCC).

AND UPON the application of AHC and Ameritrade Services Company, Inc (ASCI, together with AHC, the Ameritrade Group) for an order pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) that Ameritrade Representatives (as defined below) located in Ontario who, after the Acquisition, conduct trades in securities with, or on behalf of, customers or clients of Ameritrade Group who are not residents of Canada (Non-Canadian Clients) shall not be subject to paragraph 25(1)(a) of the Act.

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

AND UPON the Ameritrade Group having represented to the Commission as follows:

1. AHC is a corporation formed under the laws of the State of Delaware.

2. ASCI is a corporation formed under the laws of the state of Delaware, and is a wholly owned subsidiary of AHC.

3. TDW is a corporation incorporated under the laws of the State of New York, and is registered as a broker-dealer with the U.S. Securities and Exchange Commission (the SEC). TDWCCC is a corporation incorporated under the federal laws of Canada. Both TDW and TDWCCC are subsidiaries of TDWG.

4. Pursuant to the Acquisition Agreement, AHC will acquire the only the U.S. retail brokerage business of TD Bank by acquiring all of the outstanding shares of TDWG (the Acquisition), including its subsidiaries TDW and TDWCCC.

5. After the Acquisition, AHC will be the indirect owner of TDW and TDWCCC.

6. The Acquisition is expected to close on or about January 24, 2006.

7. On the date of closing of the Acquisition, TD Bank will enter into a Call Centre Services Agreement with the Ameritrade Group (Call Centre Agreement) whereby TD Bank will agree to provide certain call centre services as described therein (Call Centre Services) to the Ameritrade Group.

8. Such Call Centre Services will be provided to the Ameritrade Group until September 30, 2006, or upon the termination of the Call Centre Agreement (the Termination Date). If the parties to the Call Centre Agreement agree to terminate the Call Centre Agreement at a date later than September 30, 2006, the Ameritrade Group shall notify the Director of the Commission, otherwise the Termination Date for the purposes of this ruling shall be September 30, 2006.

9. Pursuant to the Call Centre Agreement, representatives of Ameritrade Group will consist of employees, subcontractors, agents and other third parties of, or appointed by, TD Bank who will provide the Call Centre Services in Ontario and who are either in direct communication with the customers of Ameritrade Group, or are line supervisors (the Ameritrade Representatives). Also pursuant to the Call Centre Agreement, the Ameritrade Representatives will be dedicated solely to providing Call Centre Services to Ameritrade Group only and will not be utilized to provide services to any other entity or business.

10. The Ameritrade Representatives will be dedicated to answering phone calls from Non-Canadian Clients and individuals (NI 35-101 Clients) referred to in section 2.1 of National Instrument 35-101 -- Conditional Exemption from Registration for United States Broker-Dealers and Agents (NI 35-101) subject to obtaining any relief required under NI 35-101 to deal with such clients.

11. Within the call centre located in London, Ontario, Ameritrade Group's call centre operations will be operated in accordance with all applicable rules established by various U.S. regulatory authorities including all applicable rules established by the SEC and the New York Stock Exchange (NYSE), and will continue to be subject to the same procedures that apply to TDW's existing U.S. business. Ameritrade Group's call centre operations will be examined at least annually by representatives from Ameritrade Group's compliance staff, and will be supervised by one or more properly qualified individuals acceptable to the NYSE.

12. Ameritrade Representatives will continue to comply with all registration and other requirements of applicable U.S. securities legislation in respect of trades conducted with, or on behalf of, Non-Canadian Clients.

13. Ameritrade Group will not establish accounts for, or trade securities with, or on behalf of, persons or companies who are resident in Canada except to the extent that TDW and its agents now conduct trading in Canada in accordance with dealer registration and prospectus exemptions that are available pursuant to NI 35-101.

14. Within the call centre located in London, Ontario, the Ameritrade Group's call centre operations will be an opaque presence, inaccessible to any person or company other than Non-Canadian Clients and NI 35-101 Clients who direct inquiries to the Ameritrade Group.

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

IT IS RULED, pursuant to subsection 74(1) of the Act that:

(a) the Ameritrade Representatives shall not be subject to the requirements of paragraph 25(1)(a) of the Act where the Ameritrade Representatives act on behalf of Ameritrade Group in respect of trades in securities with or on behalf of Non-Canadian Clients conducted through the call centre located in London, Ontario, subsequent to the closing of the Acquisition, provided that the Ameritrade Representatives comply with all registration and other requirements of applicable securities legislation in the U.S.;

(b) Ameritrade Group the shall not be subject to the requirements of paragraph 25(1)(a) of the Act in respect of trading by it in securities with or on behalf of Non-Canadian Clients conducted through the call centre located in London, Ontario, subsequent to the closing of the Acquisition, provided that:

(i) an Ameritrade Representative acts on behalf of Ameritrade Group in respect of such trading; and

(ii) Ameritrade Group complies with all registration and other requirements of applicable securities legislation in the U.S.; and

(c) this ruling shall be in effect until the Termination Date.

January 24, 2006

"Paul M. Moore"

"Suresh Thakrar"