Calyon Financial Canada Inc. and Calyon Financial Inc. - s. 80 of the CFA and s. 74(1) of the OSA

Order

Headnote

Trades in Canadian securities and commodities futures contracts and options by U.S. licensed broker dealer, which is an affiliate of an Ontario registered investment dealer, exempted from requirements of section 22(1)(a) of the CFA and section 25(1)(a) of the OSA, for trades made to persons or companies that are resident in the U.S.A., where the trade is made by the U.S. dealer (in its own right, or on behalf of another person or company resident in the U.S.) through individuals that are officers or salespersons of both the U.S. licensed dealer and Ontario registrant -- Individuals must be appropriately registered to make the trade on behalf of the Ontario registrant if instead the Ontario registrant were making the trade to an Ontario resident.

Statutes Cited

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

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1)(a), 74(1).

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

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

AS AMENDED (the CFA)

AND

IN THE MATTER OF

THE ONTARIO SECURITIES ACT

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

AS AMENDED (the OSA)

AND

IN THE MATTER OF

CALYON FINANCIAL CANADA INC.

(Calyon Canada) AND

CALYON FINANCIAL INC. (Calyon U.S.)

 

ORDER

(Section 80 of the CFA and

Subsection 74(1) of the OSA)

UPON the application of Calyon U.S. to the Ontario Securities Commission (the Commission or the OSC) for an order, pursuant to section 80 of the CFA, that Calyon U.S. and the Dual Representatives (as defined below) shall not be subject to section 22(1)(a) of the CFA where the Dual Representatives act on behalf of Calyon U.S. in respect of trades in commodity futures contracts or commodity futures options in Ontario with, or on behalf of, clients who are residents of the U.S. (U.S. Clients);

AND UPON the application of Calyon U.S. to the Commission for an order, pursuant to subsection 74(1) of the OSA, that, Calyon U.S. and the Dual Representatives (as defined below) shall not be subject to section 25(1)(a) of the OSA where the Dual Representatives act on behalf of Calyon U.S. in respect of certain trades in securities in Ontario with, or on behalf of, U.S. Clients, which are not permitted by Calyon U.S.'s registration as an international dealer.

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

AND UPON the Applicants having represented to the Commission that:

1. Calyon Canada is a corporation formed under the laws of the Province of New Brunswick and is a wholly owned subsidiary of Calyon U.S. The head office of Calyon Canada is located in Toronto, Canada.

2. Calyon Canada is a member of the Investment Dealers Association of Canada and is registered as a Futures Commission Merchant under the CFA. Calyon Canada also has filed an application to register with the OSC as an "investment dealer".

3. Calyon U.S. is a corporation formed under the laws of the State of Delaware. The head office of Calyon U.S. is located in Chicago, Illinois. Calyon U.S. primarily engages in trading securities and futures contracts for institutional clients.

4. Calyon U.S. is registered as a "broker-dealer" by the U.S. Securities and Exchange Commission (SEC). Calyon U.S. is also a registered as a Futures Commission Merchant with the U.S. Commodity Futures Trading Commission (CFTC), and is a member of the National Futures Association. Calyon U.S. is registered in Ontario as an "international dealer".

5. Calyon U.S. and Calyon Canada wish to provide U.S. clients with access to representatives who have experience and expertise in the Canadian futures and securities markets. Such U.S. activities would require Calyon Canada to obtain registration in the U.S.

6. The primary purpose of establishing Calyon Canada was to provide Canadian clients with access to Canadian and global marketplaces as well as to provide non-Canadian clients with access to Canadian marketplaces and expertise.

7. Calyon Canada expects that the amount of revenue derived from non-Canadian clients will be insignificant compared to the revenue generated by Canadian clients.

8. The cost and time involved in having Calyon Canada become registered with and approved by the SEC and CFTC, as well as the continuing regulatory oversight and burden would be duplicative and unduly burdensome considering the benefits generated by such an incremental amount of business.

9. Certain registered representatives of Calyon Canada in Ontario are, or will also be, U.S. registered representatives of Calyon U.S. (Dual Representatives).

10. Although Dual Representatives will primarily act on behalf of Calyon Canada, they may also act in Ontario on behalf of Calyon U.S. in respect of trades with or on behalf of U.S. Clients. In particular, Dual Representatives may execute trades for U.S. Clients which are not permitted under its registration in the category of international dealer.

11. When acting on behalf of Calyon U.S., the Dual Representatives will not be serving Canadian clients, except as permitted by its international dealer registration.

12. Where Calyon U.S. trades with or on behalf of U.S. Clients, Calyon U.S. and any Dual Representatives who act on behalf of Calyon U.S. in respect of such trades, are subject to and obliged to comply with the registration and other requirements of applicable legislation in the U.S.

13. Calyon Canada will file with the OSC such reports as to trading activities by the Dual Representative pursuant to this Order as the OSC may require from time to time.

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 trades in commodity futures contracts or commodity futures options made by Dual Representatives on behalf of Calyon U.S., with or on behalf of U.S. Clients, shall not be subject to the requirements of section 22(1)(a) of the CFA, provided that, at the time of each trade:

(a) Calyon Canada is registered under the CFA in a category that would permit Calyon Canada to act as a dealer for the trade, in compliance with section 22(1)(a) of the CFA, if the trade were instead being made by Calyon Canada to a person or company resident in Ontario; and

(b) the registration of the Dual Representative effecting the trade would permit the Dual Representative to act on behalf of Calyon Canada in respect of such trade, in compliance with section 22(1)(a) of the CFA, if the trade were instead being made by the Dual Representative on behalf of Calyon Canada to a person or company resident in Ontario.

AND IT IS ORDERED pursuant to subsection 74(1) of the OSA, that trades in Canadian securities not permitted by Calyon U.S.' registration as an international dealer that are made by Dual Representatives on behalf of Calyon U.S. with, or on behalf of, U.S. Clients, shall not be subject to the requirements of section 25(1)(a) of the OSA, provided that, at the time of each trade:

(a) Calyon Canada is registered under the OSA as a dealer in a category that would permit Calyon Canada to act as a dealer for the trade, in compliance with section 25(1)(a) of the OSA, if the trade were instead being made by Calyon Canada to a person or company resident in Ontario; and

(b) the registration of the Dual Representative effecting the trade would permit the Dual Representative to act on behalf of Calyon Canada in respect of such trade, in compliance with section 25(1)(a) of the OSA, if the trade were instead being made by the Dual Representative on behalf of Calyon Canada to a person or company resident in Ontario.

May 16, 2006

"Wendell S. Wigle"

"Robert W. Davis"