Subsection 74(1) of the Securities Act (Ontario) -- relief from the registration requirements of paragraph 25(1)(a) of the Act granted to non-Ontario registered salespersons of the Applicant trading on behalf of an Ontario charitable foundation in connection with a charitable giving program.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1)(a), 74(1).
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
INVESTORS GROUP SECURITIES INC.
UPON the application (the Application) of Investors Group Securities Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 74(1) of the Act that the dealer registration requirements contained in paragraph 25(1)(a) of the Act (the Dealer Registration Requirements) shall not apply to the salespersons, investment representatives, consultants, or financial advisers (collectively, the Salespersons) of the Applicant, in respect of trading on behalf of a public foundation (the Foundation, as described below) in connection with the Applicant's charitable gift program (the Investors Group Charitable Giving Program, as described below);
AND UPON considering the Application and the recommendation of the Staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a corporation incorporated under the Canada Business Corporation Act and is registered as a dealer in the category of investment dealer in Ontario and in all other provinces and territories in Canada. The Applicant is also a member of the Investment Dealers Association of Canada (the IDA).
2. Each Salesperson is an independent contractor of the Applicant and is registered in one or more provinces or territories in Canada as a salesperson of the Applicant. Each Salesperson is also approved by the IDA as a registered representative.
3. The Strategic Charitable Giving Foundation (the Foundation) is an independent non-profit charitable organization with registered charitable status as a public foundation under the Income Tax Act (Canada) (the Tax Act). The Foundation was formed by Mackenzie Financial Corporation (Mackenzie), Investors Group Financial Services Inc. (Investors) and Quadrus Investment Services Ltd. (Quadrus, together with the Applicant, Mackenzie and Investors, the Affiliates), all of which are affiliates of the Applicant. The head office of the Foundation is located in Ontario.
4. The purpose of the Foundation is to support charities and other permitted entities as defined under the Tax Act (Qualified Donees) through charitable gifts received from donors. The Foundation specializes in the management and administration of donor-advised charitable gift funds and has entered into agreements with the Affiliates in connection with charitable giving programs.
5. Mackenzie is a corporation governed by the laws of Ontario. Mackenzie is registered as an adviser in the categories of investment counsel and portfolio manager in each of Ontario, Manitoba and Alberta, as a dealer in the category of limited market dealer in Ontario and also as a commodity trading counsel & commodity trading manager in Ontario.
6. Mackenzie, pursuant to a charitable administration services agreement with the Foundation, serves as the Foundation's charitable administrative services provider to assist with the charitable back-office functions for all of the Foundation's charitable giving programs.
7. Mackenzie is not a registered mutual fund dealer or investment dealer in Ontario and does not have an internal team of representatives to serve as its sales force. Instead Mackenzie relies upon a diversified network of third party representatives (the Third Party Representatives) and their sponsoring mutual fund dealer or investment dealer firms (the Mackenzie Network Dealers) to distribute its products.
8. Mackenzie has entered into an agreement with the Foundation to establish a charitable giving program known as the "Mackenzie Charitable Giving Program".
9. Investors is a corporation governed by the laws of Canada. Investors is registered as a dealer in the category of mutual fund dealer, or equivalent, in all provinces and territories of Canada, and is a member of the Mutual Fund Dealers Association of Canada (the MFDA). Investors distributes its services through a sales force of representatives (the Investor Representatives) that are registered under the applicable legislation of all provinces and territories of Canada as salespersons, or the equivalent, of the Applicant.
10. Investors has entered into an agreement with the Foundation to establish a charitable giving program known as the "Investors Group Charitable Giving Program".
11. Quadrus is a corporation governed by the laws of Canada and Quadrus is registered as a dealer in the category of mutual fund dealer in all provinces and territories of Canada, and as a limited market dealer in Ontario and is a member of the MFDA. Quadrus distributes its services through a sales force of representatives (the Quadrus Representatives, and together with the Third Party Representatives, the Investor Representatives and the Salespersons, the Representatives) that are registered under the applicable legislation of all provinces and territories of Canada as salespersons, or the equivalent, of the Applicant.
12. Quadrus has entered into an agreement with the Foundation to establish a charitable giving program known as the "Quadrus Charitable Giving Fund". The Quadrus Charitable Giving Fund, the Mackenzie Charitable Giving Program and the Investors Group Charitable Giving Program are collectively referred to as the Charitable Giving Programs.
13. As set out in the order dated July 7, 2006, the Commission granted exemptive relief from the Dealer Registration Requirements to:
(a) Mackenzie and the Mackenzie Network Dealers; and
(b) the Third Party Representatives, the Investor Representatives and Quadrus Representatives
in connection with the charitable giving programs established by Mackenzie, Investors and Quadrus.
14. As a related party to Investors, the Applicant desires to offer and promote the Investors Group Charitable Giving Program in conjunction with Investors to members of the public through the Salespersons.
The Charitable Giving Programs
15. Prospective charitable donors to the Foundation will, prior to making a donation, receive a program guide (a Program Guide) which will outline the details of the operation of the relevant Charitable Giving Program and its fees. For example, the Program Guide applicable to the Investors Group Charitable Giving Program will, among other things, describe the Foundation and the Applicant, how prospective charitable donors (each, a Donor) can establish an Account (as defined below), the types of acceptable donations, the eligible mutual funds, along with the associated fees, expenses and commissions, and other matters relating to the Investors Group Charitable Giving Program.
16. Donors make an irrevocable charitable gift of cash, securities and/or a life insurance policy to the Foundation and receive a tax receipt generally equal to the cash, fair market value of securities, or the net surrender value of the life insurance policy donated to the Foundation. Securities donated to the Foundation will be liquidated through an investment dealer affiliated with one of the Affiliates.
17. The Foundation will deposit the proceeds of each Donor's gift into an individual account which it will open with whichever of the Applicant, Investors, Quadrus or one of the Mackenzie Network Dealers is the sponsoring dealer firm of the Representative servicing the account (each, an Account).
18. The Foundation's Board of Directors will pre-select a list of mutual funds offered by each of the respective Affiliates for their respective Charitable Giving Program (the Eligible Funds) and every Account opened as a result of a donation to a Charitable Giving Program will be restricted to investments in the Eligible Funds of that Charitable Giving Program. Each of the Eligible Funds will be a mutual fund governed under the laws of Ontario or Manitoba, qualified by way of a National Instrument 81-101 (NI 81-101) simplified prospectus. Each of the Eligible Funds is expected to be categorized as either a Canadian or Global Fixed Income or Balanced Fund.
19. In order to comply with the Tax Act, each of the Charitable Giving Programs will require that 95% of each donation be subject to a ten year hold period by the Foundation. During the hold period, each Account will have an annual disbursement percentage determined by the Foundation, which must be disbursed to Qualified Donees each year. After the hold period, if the Donor wishes, the annual disbursement percentage may be increased by the Foundation.
20. Donors will recommend to the Foundation what an Account should be named and what Qualified Donees should receive grants from the Account. Each Account will have a designated account holder (the Account Holder). While the Account Holder will usually be the Donor, the Donor may designate another person, or a legal representative, to be the Account Holder for the Account set up with their donation. The Account Holder will be responsible for providing the Foundation advice regarding the grants from the Account to Qualified Donees, and will be provided an opportunity to express a preference regarding which Eligible Fund the Account should be invested in, through the Representative servicing the Account, to the Foundation.
21. The Representative that solicits the Donor's gift to the Foundation will have an ongoing relationship with the Donor or Account Holder and will service the Account set up with the proceeds of that Donor's gift. The Representative, with input from the Account Holder, will initially recommend to the Board which Eligible Fund the Account should invest in, and provide any future recommendations on changes to which Eligible Fund the Account is invested in.
22. The Foundation will have final authority over all investment decisions in each of the Accounts. After receiving a recommendation from the Representative, the Foundation will make a final decision on the investment for that Account, and will send trading instructions to the Representative servicing that Account.
23. The Applicant will deliver trade confirmations and account statements (Account Statements) to the Foundation with respect to each Account as required under the securities legislation in the jurisdiction where such Account is located. The Applicant will make a copy of any or all Account Statements available to the applicable Donor upon request. Further, regardless of whether a Donor requests copies of Account Statements, the Foundation will deliver a quarterly Account Statement to each Donor.
24. By trading securities on behalf of an Ontario client (the Foundation) in connection with the Investors Group Charitable Giving Program, the Salespersons (who may or may not be located in Ontario) will trigger the Dealer Registration Requirement. Consequently, in the absence of being granted the requested relief, the Salespersons not already registered in Ontario would be required to register as dealers under the Act.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS HEREBY ORDERED, pursuant to subsection 74(1) of the Act, that the Dealer Registration Requirements shall not apply to the Salespersons in respect of registrable activities undertaken on behalf of the Foundation in connection with the Investors Group Charitable Giving Program, provided that:
(i) each Salesperson undertaking registrable activities on behalf of the Foundation is registered in one or more provinces or territories in Canada as a salesperson of the Applicant and is approved by the IDA as a registered representative;
(ii) all fees, expenses and commissions related to the Investors Group Charitable Giving Program will be fully disclosed in the Investors Group Charitable Giving Program's Program Guide, or equivalent document, and the Investors Group Charitable Giving Program's Program Guide Program Guide, or equivalent document, shall be provided to every Donor by the Applicant or the applicable Salesperson prior to the Donor making a gift to the Foundation;
(iii) the Donor making a gift to the Foundation receives a duplicate copy of any or all Account Statements delivered to the Foundation by the Applicant upon request; and
(iv) the Foundation delivers a quarterly Account Statement to each Donor.
December 4, 2007