Filer exempted from section 13.12 [restriction on lending to clients] of National Instrument 31-103 Registration Requirements and Exemptions -- The filer is applying for registration as an exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec and Saskatchewan -- The filer is a registered broker-dealer with the SEC and a member of FINRA -- Terms and conditions on the exemptions require that: (i) the head office or principal place of business of the filer be in the USA; (ii) the filer be registered under the securities legislation of the USA in a category of registration that permits it to carry on the activities in the USA that registration as an investment dealer would permit it to carry on in Ontario, (iii) by virtue of the regulation of the USA filer under the securities legislation of the USA, the USA filer is subject to requirements in respect of lending money, extending credit or providing margin to clients that result in substantially similar regulatory protections to those provided for under the capital and margin requirements of IIROC, that would be applicable if the filer if it were registered under the Act as an investment dealer and were a member of IIROC.
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 14-101 Definitions.
National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.12, 15.1.
October 14, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO (the Jurisdiction)
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
UBS SECURITIES LLC (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the requirement contained in section 13.12 [restriction on lending to clients] of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) that a registrant must not lend money, extend credit or provide margin to a client (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Quebec and Saskatchewan (the Non-principal Jurisdictions, or together with the Jurisdiction, the Filing Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined or the context otherwise requires.
This decision is based on the following facts represented by the Filer:
1. The Filer is a limited liability company organized under the laws of the State of Delaware. Its head office is located in Stamford, Connecticut, United States of America (U.S.A.).
2. The Filer is an indirect wholly-owned subsidiary of UBS AG, a publicly owned Swiss banking corporation.
3. The Filer is registered as a broker-dealer with the United States Securities and Exchange Commission (SEC), and is a member of the Financial Industry Regulatory Authority (FINRA). This registration permits the Filer to carry on in the U.S.A., being its home jurisdiction, substantially similar activities that registration as an investment dealer would authorize it to carry on in the Jurisdiction if the Filer were registered under the Legislation as an investment dealer.
4. The Filer is a member of a number of major securities exchanges in the U.S.A., including the New York Stock Exchange (NYSE) and NASDAQ.
5. The Filer is a Foreign Approved Participant of the Montreal Exchange and a Registered Futures Commission Merchant of ICE Futures Canada, Inc. The Filer is also a member of the Chicago Board of Trade, the Chicago Mercantile Exchange, ICE Futures Exchange, and other principal U.S.A. commodity exchanges.
6. The Filer provides a variety of capital raising, investment banking, market making, brokerage, and advisory services, including fixed income and equity sales and research, commodities trading, foreign exchange trading, emerging markets activities, securities lending, investment banking and derivatives dealing for governments, corporate and financial institutions. The Filer also conducts proprietary trading activities.
7. The Filer acts as a dealer in reliance on section 8.18 [international dealer] of NI 31-103 in the Filing Jurisdictions. In conjunction with this application for exemptive relief, the Filer is applying to be registered as an exempt market dealer in the Filing Jurisdictions.
8. Upon registration as an exempt market dealer under the securities legislation of the Filing Jurisdictions, the Filer will be subject to the prohibition on lending money, extending credit or providing margin to a client in section 13.12 of NI 31-103.
9. In certain comments received on NI 31-103, after it was published for comment, it was suggested that the prohibitions in section 13.12 should not apply to exempt market dealers that are members of foreign self-regulatory organizations, or subject to regulatory requirements in a foreign jurisdiction, where the dealer is subject to margin regimes similar to that imposed by the Investment Industry Regulatory Organization of Canada (IIROC). The Canadian Securities Administrators responded to these comments by suggesting that these circumstances could be considered on a case-by-case basis, through exemption applications, and that an exemption should be made available to registrants who have "adequate measures in place to address the risks involved and other related regulatory concerns".
10. The Filer is subject to regulations of the Board of Governors of the U.S.A. Federal Reserve System, the SEC, FINRA and the NYSE regarding the lending of money, extension of credit and provision of margin to clients (the U.S.A. Margin Regulations) that provide protections that are substantially similar to the protections provided by the requirements regarding the lending of money, extension of credit and provision of margin to clients to which dealer members of IIROC are subject. In particular, the Filer is subject to the margin requirements imposed by the Board, including Regulations T, U and X, under applicable SEC rules and under NYSE Rule 431. The Filer is in compliance in all material respects with all applicable U.S.A. Margin Regulations.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought by the Filer is granted so long as:
(a) the head office or principal place of business of the Filer is in the U.S.A.;
(b) the Filer is registered under the securities legislation of the U.S.A. in a category of registration that permits it to carry on the activities in the U.S.A. that registration as an investment dealer would permit it to carry on in the Jurisdiction; and
(c) by virtue of the registration referred to in paragraph (b), including required membership in one or more self-regulatory organizations, the Filer is subject to requirements in respect of its lending money, extending credit or providing margin to clients (including clients that are located in Canada) that result in substantially similar regulatory protections to those provided for under the capital and margin requirements of IIROC that would be applicable to the Filer if it were registered under the Legislation as an investment dealer and were a member of IIROC.