Mutual Reliance Review System for Exemptive Relief Applications -- Decision pursuant to section 3.1 of Rule 31-501 -- Registrant Relationships (the Rule) exempting salespersons of the applicants, which are affiliated companies, from certain of the dual registration restrictions set out in the Rule.
Determination made pursuant to subsection 127(2)(h) of the Regulations under the Securities Act (Ontario) (the Regulation) that salespersons of the applicants are carrying on activities which will not in the circumstances interfere with their duties and responsibilities as salespersons and there are no conflicts of interest arising from the individuals' duties as salespersons and their outside activities so as to permit the registration of such salespersons despite the fact that they are not employed full-time for either applicant as required by subsection 127(1) of the Regulation.
Ontario Regulation 1015, R.R.O. 1990, as am., ss. 127(1), 127(2)(h).
Ontario Securities Commission Rule 31-501 -- Registrant Relationships, ss. 1(1), 3.1.
June 15, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, ONTARIO, QUEBEC, NEW BRUNSWICK,
NOVA SCOTIA, AND NEWFOUNDLAND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
CALYON FINANCIAL CANADA INC.
CALYON FINANCIAL INC. (the Filers)
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) that a determination be made under the Legislation that individuals who intend to be registered in the Jurisdictions as representatives (the Representatives) of Calyon Financial Canada Inc. (Calyon Canada) will carry out activities which will not in the circumstances interfere with their duties and responsibilities as registered representatives of both Filers, and there are no conflicts of interest arising from the Representatives' duties on behalf of each Filer so as to permit the registration of such Representatives despite the fact that they will not be employed full time with either Filer as required by the Legislation (the Full-Time Salesperson Determination).
The Ontario Securities Commission (the OSC) has also received an application from the Filers for a decision pursuant to section 3.1 of OSC Rule 31-501 -- Registrant Relationships (the Rule) for an exemption from section 1.1 of the Rule which would otherwise prohibit individuals who are registered representatives of one Filer from also being registered representatives of the other Filer (the Dual Registration Relief).
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the OSC is the principal regulator for this application; and
(b) the MRRS decision document evidences the decision of each Decision Maker.
Defined term contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.
This decision is based on the following facts represented by the Filers:
1. Calyon Canada is a corporation formed under the laws of the Province of New Brunswick and is a wholly owned subsidiary of Calyon Financial Inc. (Calyon U.S.). The head office of Calyon Canada is located in Toronto, Ontario.
2. Calyon Canada is a member of the Investment Dealers Association of Canada (the IDA) and is registered as a Futures Commission Merchant under the Commodity Futures Act (Ontario) (the CFA). Calyon Canada has also filed an application for registration as an investment dealer in each of the Jurisdictions.
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 (the SEC), and is a member of the National Association of Securities Dealers (the NASD). Calyon U.S. is also a registered as a Futures Commission Merchant with the U.S. Commodity Futures Trading Commission (the CFTC), and is a member of the National Futures Association. Calyon U.S. is also registered in Ontario with the OSC as an "international dealer".
5. Calyon Canada was established primarily to provide clients who are residents of Canada (Canadian Clients) with access to Canadian and global marketplaces as well as to provide non-Canadian clients with access to Canadian marketplaces and expertise.
6. Upon Calyon Canada being registered as an investment dealer in each of the Jurisdictions, the Representatives will register as salespersons or officers of Calyon Canada in order to provide investment dealer services to Canadian Clients on behalf of Calyon Canada.
7. Calyon U.S. and Calyon Canada also wish to provide clients of Calyon U.S. who are residents of the U.S. (U.S. Clients) with access to Representatives who have experience and expertise in the Canadian futures and securities markets. Although Representatives will primarily act on behalf of Calyon Canada, they may also act on behalf of Calyon U.S. in respect of trades with or on behalf of U.S. Clients. The accounts of the U.S. Clients will be U.S. based accounts.
8. Calyon U.S. and any Representatives who act on behalf of Calyon U.S. are subject to and obliged to comply with the registration and other requirements of applicable legislation in the U.S.
9. The Representatives are, or will also be, registered in the U.S. as representatives of Calyon U.S.
10. The limited trading activities and duties and responsibilities to be carried out by the Representatives on behalf of Calyon U.S. will not interfere with their duties or responsibilities on behalf of Calyon Canada.
11. Section 1.1 of the Rule states that "no person registered as a salesperson of a registrant shall act or be registered as a director, partner or officer of the registrant or as a salesperson, officer, partner or director of another registrant".
12. Section 3.1 of the Companion Policy to the Rule provides that the Director will consider granting an exemption from Section 1.1 of the Rule to salespersons, partners or officers registered in the United States and employed by a United States registered broker-dealer, to trade through an Ontario registered broker or investment dealer that is affiliated with the United States broker-dealer.
13. In order for the Representatives to conduct the trading services provided on behalf of Calyon U.S. to U.S. Clients, they are required to be registered as salespersons or officers of Calyon Canada in Ontario and registered as representatives of Calyon U.S. Pursuant to section 1.1 of the Rule, the Representatives cannot, without the exemption being sought, be registered as a salesperson, officer, partner or director of two different registrants.
14. The Regulations provide that no individual may be registered as a salesperson unless he or she is employed full time as a salesperson. Although it is not explicitly required that the salesperson be registered full time with one registrant, Staff practice has recognized that this was implied by the requirement.
15. As a result of the Legislation, the Representatives cannot, without the exemption from the Legislation being sought hereunder, be registered as salespersons, officers or directors of the Applicant as their registration as representatives of Calyon U.S. and any activities undertaken on behalf of Calyon U.S. would mean that they are not employed full-time with Calyon Canada.
16. IDA By-law 18.14 permits registered representatives or investment representatives to have, and continue in, another gainful occupation provided the conditions outlined in IDA By-law 18.14 are met.
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The Decision Makers have decided that:
(a) the Full-Time Salesperson Determination is granted; and
(b) the OSC, under section 3.1 of the Rule, has decided that the Dual Registration Relief is granted,
(i) the only trading activities to be performed by the Representatives on behalf of Calyon U.S. will be with or to persons or companies that are resident in the U.S.;
(ii) the limited trading activities and duties and responsibilities to be carried out by the Representatives on behalf of Calyon U.S. will not interfere with their duties or responsibilities on behalf of Calyon Canada, and there is no conflict of interest arising from their duties and responsibilities at each dealer registrant as Calyon Canada is a subsidiary of Calyon U.S. and each dealer carries on different lines of business activity;
(iii) Calyon U.S. and the Representatives will comply with applicable U.S. securities laws in respect of all trading activities performed on behalf of U.S. Clients by Calyon U.S. and the Representatives;
(iv) the Representatives will be under the supervision and control of Calyon Canada and subject to all securities related policies and procedures of Calyon Canada, in addition to being under the supervision and control of Calyon U.S. and subject to Calyon U.S.'s securities related policies; and
(v) Calyon Canada and the Representatives will be in, and remain in, compliance with IDA By-law 18.14.