Securities Law & Instruments

Headnote

Section 5.1 of the OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions (Rule) -- exemption granted from trading restrictions imposed by sections 2.1(a) and 2.2 of the Rule.

Rules Cited

Ontario Securities Commission Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions.

IN THE MATTER OF

THE SECURITIES ACT,

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

(the Act)

AND

ONTARIO SECURITIES COMMISSION RULE 48-501

TRADING DURING DISTRIBUTIONS, FORMAL

BIDS AND SHARE EXCHANGE TRANSACTIONS

(the Rule)

AND

IN THE MATTER OF

THE TORONTO-DOMINION BANK

THE CANADA TRUST COMPANY

TD ASSET MANAGEMENT INC.

TD WATERHOUSE CANADA INC.,

TD WATERHOUSE PRIVATE INVESTMENT COUNSEL INC.,

TD ASSET MANAGEMENT USA INC. AND

TD SECURITIES INC.

DECISION

(Section 5.1 of the Rule)

UPON the Director (as defined in the Act) having received an application (the Application) from The Toronto-Dominion Bank (TD Bank), The Canada Trust Company (TCTC), TD Asset Management Inc. (TDAM), TD Waterhouse Canada Inc. (TDWCI), TD Waterhouse Private Investment Counsel Inc. (TDWPIC), TD Asset Management USA Inc. (TDAM USA) and TD Securities Inc. (TDSI) for a decision (or its equivalent) pursuant to section 5.1 of the Rule exempting certain insiders of TD Bank, and exempting TCTC, TDAM, TDWCI, TDWPIC and TDAM USA (the Asset Managers), from trading restrictions imposed upon issuer-restricted persons by section 2.2 of the Rule, and exempting TDSI from certain trading restrictions imposed upon dealer-restricted persons by section 2.1(a) of the Rule;

AND UPON considering the Application and the recommendation of staff of the Ontario Securities Commission (the Commission);

AND UPON TD Bank, each of the Asset Managers and TDSI having represented to the Director that:

1. TD Bank is a Schedule I bank under the Bank Act (Canada).

2. Certain insiders of TD Bank (Non-Access Insiders) do not in the ordinary course receive, or have access to, undisclosed material facts or material changes (Material Information) concerning TD Bank or its securities and are exempt from insider reporting requirements pursuant to section 9.2 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104).

3. TCTC is a wholly-owned subsidiary of TD Bank. Its principal business is acting as a trustee for personal and corporate clients. It is regulated by the Office of the Superintendent of Financial Institutions Canada.

4. TDAM is a wholly-owned subsidiary of TD Bank that carries on the business of a portfolio manager throughout Canada. It is registered as a portfolio manager under the securities legislation of all provinces and territories of Canada, as an exempt market dealer under the Act and the Securities Act (Newfoundland and Labrador), and as a commodity trading manager under the Commodity Futures Act (Ontario).

5. TDWCI is a wholly-owned subsidiary of TD Bank. It is registered as an investment dealer under the securities legislation of all provinces and territories of Canada, and it is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and an approved participant of the Montreal Exchange (ME).

6. TDWPIC is a wholly-owned subsidiary of TD Bank, is registered as a portfolio manager under the securities legislation of all provinces and territories of Canada and as an exempt market dealer under the Act and the Securities Act (Newfoundland and Labrador).

7. TDAM USA is a wholly-owned subsidiary of TD Bank. It carries on the business of an adviser in the United States and is registered as such with the U.S. Securities and Exchange Commission (the SEC).

8. Each of the Asset Managers manages accounts on behalf of clients at arms length to TD Bank and its affiliates who have granted the Asset Manager discretionary investment authority over the assets in the clients' accounts (Managed Accounts) and who have provided the Asset Manager with express written consent to exercise such discretionary investment authority to purchase Shares on behalf of the Managed Accounts (Authorized Managed Accounts).

9. TDAM is the manager of investment funds that have an Independent Review Committee that has approved the purchase of common shares of TD Bank (Shares) by the investment funds, both in the ordinary course and during the Restricted Period, as defined below, in accordance with either section 6.2 of National Instrument 81-107 Independent Review Committee for Investment Funds or the terms and conditions of an exemption that has been granted by the Commission (an Authorized TDAM Fund);

10. TD Bank is the sponsor and administrator of the Employee Future Builder Savings Plan (EFBSP) and the Employee Ownership Plan (EOP), two voluntary savings programs that are available to all employees of TD Bank and its affiliates that are resident in Canada including, without limitation, insiders of TD Bank that are not Non-Access Insiders (Access Insiders).

11. TDSI is a wholly-owned subsidiary of TD Bank that conducts an institutional brokerage business throughout Canada. It is registered as an investment dealer under the securities legislation of all provinces and territories of Canada, and it is a member of IIROC and the TSX Venture Exchange, a participating organization of The Toronto Stock Exchange and an approved participant of the ME.

12. TD Bank and The South Financial Group, Inc. (South Financial) have entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which South Financial will be acquired by TD Bank. Pursuant to the Merger Agreement, a newly-formed wholly-owned subsidiary of TD Bank will merge with and into South Financial with South Financial surviving the merger.

13. In connection with TD Bank's acquisition of South Financial (the Acquisition), South Financial's common shareholders will be entitled to receive, in exchange for each share of South Financial common stock owned by the shareholder, either (i) U.S. $0.28 in cash, if a cash election is made, or (ii) 0.004 shares plus cash in lieu of any factional share interests.

14. The Acquisition is subject to the approval of South Financial's shareholders.

15. TDSI has been appointed by TD Bank as TD Bank's advisor in respect of the Acquisition and its compensation for such services is dependant upon the outcome of the Acquisition.

16. The Shares that are to be delivered to the shareholders of South Financial pursuant to the Merger Agreement are being registered under the Securities Act of 1933 pursuant to a registration statement on Form F-4 that has been filed with the SEC. South Financial proposes to mail a proxy statement/prospectus (the Proxy Statement) to its shareholders as soon as practicable following the declaration of the Form F-4s effectiveness. The meeting of South Financial's shareholders that is being held to consider the Acquisition will be convened approximately 20 business days following the date of the mailing.

17. TD Bank could issue up to approximately 900,000 Shares (the "Merger Distribution") as consideration for the shares of South Financial that it will acquire pursuant to the Acquisition.

18. As a result of the Merger Distribution, each of the Non-Access Insiders, each Access Insider, the Asset Managers and TDSI is an issuer-restricted person, and TDSI is also a dealer-restricted person, for purposes of the Rule.

19. As an issuer-restricted person, each of the Non-Access Insiders, the Access Insiders, the Asset Managers and TD Bank is subject to trading restrictions (the Trading Restrictions) that prohibit it from purchasing Shares for either its own account or for any account over which it exercises control or direction during the issuer-restricted period applicable to the Merger Distribution (the Restricted Period).

20. The Restricted Period will begin on the date of dissemination of the Proxy Statement and end on the date on which the proposed Acquisition is approved by the shareholders of South Financial or the proposed Acquisition is terminated.

21. The Shares meet the requirements in the Rule to be considered a "highly-liquid security".

22. As a dealer-restricted person, TDSI is exempt from the Trading Restrictions because the Shares are highly-liquid securities.

23. As a dealer-restricted person, TDSI is prohibited from purchasing Shares for an account which TDSI knows, or reasonably ought to know, is an account of an issuer-restricted person.

24. The Non-Access Insiders comprise officers of TD Bank and its subsidiaries other than executive officers of TD Bank, directors of TD Bank subsidiaries, and directors and officers of issuers that are insiders of TD Bank and the subsidiaries of such issuers that do not in the ordinary course of business receive, or have access to, undisclosed Material Information concerning TD Bank or its securities. Accordingly, although the Non-Access Insiders are therefore removed from the orbit of the executive officers of TD Bank who may have access to undisclosed Material Information in relation to the proposed Acquisition, they will be unable to purchase Shares during the Restricted Period for either their own accounts or accounts over which they exercise control or direction that have beneficiaries that would not be prohibited from purchasing Shares for their own accounts in the absence of the exemption sought on behalf of TD Bank and the Non-Access Insiders pursuant to the Application even though the Shares are highly-liquid securities for purposes of the Rule.

25. In the absence of an exemption from the Trading Restrictions that has been sought on behalf of the Non-Access Insiders, a Non-Access Insider would be unable to purchase Shares for either his or her own account or an account over which the Non-Access Insider exercises control or direction during the Restricted Period.

26. In the absence of an exemption from the Trading Restrictions that has been sought on behalf of the Asset Managers pursuant to the Application, each Asset Manager would be unable to purchase Shares during the Restricted Period on behalf of Authorized Managed Accounts.

27. In the absence of an exemption from the Trading Restrictions that has been sought on behalf of TDAM pursuant to the Application, TDAM will be unable to purchase Shares on behalf of Authorized TDAM Funds throughout the Restricted Period.

28. In the absence of the exemptions sought by the Asset Managers pursuant the Application, each Asset Manager would be precluded from discharging its fiduciary obligation to its Authorized Managed Accounts, and TDAM would be precluded from discharging its fiduciary obligation to the Authorized TDAM Funds, in accordance with their investment objectives throughout the Restricted Period even though the Shares are highly-liquid securities.

29. As the administrator of the EFBSP and the EOP (collectively, the Employee Plans), TD Bank pays all administration and investment management fees associated with the execution of the investment options that are selected by Employee Plan participants. TD Bank makes all Share purchases on behalf of the Employee Plans and their participants through TDSI.

30. Each of the Employee Plans is an automatic securities purchase plan for purposes of Part 5 of all NI 55-104.

31. In the absence of an exemption from the Trading Restrictions that has been sought on behalf of the Access Insider, an Access Insider who is a participant in an Employee Plan would be unable to purchase Shares in accordance with the terms and conditions of the Employee Plan during the Restricted Period.

32. In the absence of an exemption from the Trading Restrictions that has been sought on behalf of TD Bank, TD Bank would be unable to purchase Shares in accordance with the terms and conditions of an Employee Plan on behalf of an insider of TD Bank who is a participant in the Employee Plan (a "Participating Insider") during the Restricted Period.

33. Although TDSI will be able to purchase Shares for its own account or for accounts over which it exercises control or direction throughout the Restricted Period in reliance upon the exemption for highly-liquid securities that is available pursuant to section 3.1(1)(b) of the Rule, it will be unable to purchase Shares on behalf of the Non-Access Insiders when they are purchasing Shares for their own accounts, and it will be unable to purchase Shares on behalf of TD Bank when it is purchasing Shares on behalf of a Participating Insider, during the Restricted Period in the absence of an exemption from section 2.1(a) of the Rule.

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

IT IS THE DECISION of the Director pursuant to section 5.1 of the Rule that for purposes of the Acquisition, the following are exempt from section 2.2 of the Rule:

(a) purchases of Shares by a Non-Access Insider for either his or her own account or an account over which the Non-Access Insider exercises control or direction;

(b) purchases of Shares in accordance with the terms and conditions of an Employee Plan by an Access Insider who is a participant in the Employee Plan;

(c) purchases of Shares by an Asset Manager on behalf of an Authorized Managed Account;

(d) purchases of Shares by TDAM on behalf of an Authorized TDAM Fund; and

(e) purchases of Shares by TD Bank on behalf of a Participating Insider in accordance with the terms and conditions of an Employee Plan.

IT IS ALSO THE DECISION of the Director pursuant to section 5.1 of the Rule that for the purposes of the Acquisition, TDSI is exempt from section 2.1(a) of the Rule in respect of any purchases of Shares on behalf of a Non-Access Insider who is purchasing the Shares for his or her own account and on behalf of a Participating Insider when it is purchasing shares in accordance with the terms and conditions of an Employee Plan.

July 30, 2010

 

"Susan Greenglass"
Director, Market Regulation Branch