Goldman, Sachs & Co. and Goldman Sachs Execution & Clearing, L.P.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the requirements to calculate excess working capital using the Form 31-103F1 Calculation of Excess Working Capital (Form 31-103F1), and the requirement to deliver a completed Form 31-103F1 showing the calculation of its excess working capital as at the end of the financial year and as at the end of the immediately preceding financial year, granted to two registrants, registered in the category of exempt market dealer and portfolio manager, so long as each Filer calculates its excess net capital using the U.S. Securities and Exchange Commission (SEC) Form X-17a-5 (the FOCUS Report) and delivers the FOCUS Report in lieu of delivering its respective Form 31-103F1 as required by NI 31-103.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 12.1, 12.12.

Multilateral Instrument 11-102 Passport System, s. 4.7(1).

July 27, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GOLDMAN, SACHS & CO. AND

GOLDMAN SACHS EXECUTION & CLEARING, L.P.

(the Filers; each, a Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers (the Application) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filers from:

(i) the requirements of section 12.1 -- Capital Requirements (Section 12.1) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that each Filer maintain excess working capital calculated using Form 31-103F1 Calculation of Excess Working Capital (Form 31-103F1), and

(ii) the requirements of section 12.12 Delivering financial information -- dealer and section 12.13 Delivering financial information -- adviser of NI 31-103 as applicable, that each Filer deliver a completed Form 31-103F1showing the calculation of its excess working capital as at the end of the financial year and as at the end of the immediately preceding financial year,

so long as each Filer calculates excess net capital using the U.S. Securities and Exchange Commission (SEC) Form X-17a-5 (the FOCUS Report) and delivers the FOCUS Report in lieu of delivering Form 31-103F1 as required by NI 31-103 (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 Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, and the Yukon Territory (the Passport Jurisdictions and together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer(s):

1. Goldman, Sachs & Co. (GSCO) is a limited partnership formed under the laws of the State of New York. The head office of GSCO is located in New York, New York, United States of America. GSCO is an indirect, wholly-owned subsidiary of The Goldman Sachs Group, Inc. (GS Group). GSCO is registered as a broker-dealer and investment adviser with the SEC and is a member of the Financial Industry Regulatory Authority (FINRA). GSCO is a member of all major U.S. stock exchanges and U.S. commodity futures exchanges. GSCO is registered as an exempt market dealer (EMD) and as a portfolio manager (PM) in each of the provinces of Canada and the Yukon Territory.

2. Goldman Sachs Execution & Clearing, L.P. (GSEC) is a limited partnership formed under the laws of the State of New York. The head office of GSEC is located in New York, New York, United States of America. GSEC is an indirect, wholly owned subsidiary of GS Group. GSEC is registered as a broker-dealer with the SEC and is a member of FINRA. GSEC is a member of all major U.S. stock exchanges and U.S. commodity futures exchanges. GSEC is registered as an EMD in each of the provinces of Canada and the Yukon Territory.

3. Under NI 31-103, EMDs are generally permitted to act as dealers in trading securities being distributed under a prospectus exemption or securities that, if the trades were distributions, would be exempt from the prospectus requirement, and are subject to capital, insurance and proficiency requirements and other ongoing compliance requirements. In particular, an EMD is required to calculate its excess working capital using Form 31-103F1. A PM is also required to calculate its excess working capital using Form 31-103FI.

4. The Filers are subject to regulatory capital requirements under the Securities Exchange Act of 1934 that are designed to meet regulatory protections comparable to the capital requirements of NI 31-103, including the requirement to maintain excess working capital calculated using Form 31-101F1. These regulatory capital requirements are set forth in SEC Rule 15c3-1 -- Net Capital Requirements for Brokers or Dealers (SEC Rule 15c3-1). SEC Rule 15c3-1 requires each Filer to be in compliance with all applicable net capital requirements on a moment-to-moment basis, to notify the SEC immediately if excess capital declines by 20% or more or declines to a level below the Filer's minimum net capital requirement, and to suspend all business operations during any period in which the Filer is not in compliance with SEC Rule 15c3-1. FINRA has responsibility for ensuring that the Filers operate in compliance with SEC Rule 15c3-1.

5. The net capital calculations prescribed by SEC Rule 15c3-1 for credit risk and operational risk are generally more conservative than the calculations prescribed by Form 31-103F1. SEC Rule 15c3-1 also requires each Filer to account for any guarantee of debt of a third party in calculating its excess net capital.

6. Each Filer will, in the event that it provides a guarantee of any debt of a third party, deduct the total amount of the guarantee from its excess net capital on the FOCUS Report, consistent with the required treatment of such a guarantee under Form 31-103F1.

7. GSCO has been approved by the SEC pursuant to SEC Rule 15c3-1 to use the alternative method of computing net capital contained in Appendix E to SEC Rule 15c3-1, and therefore files such supplemental and alternative reports as may be prescribed by the SEC. The Alternative Net Capital (ANC) method provides large broker/dealers meeting specified criteria with an alternative to use mathematical models such as the value at risk model to calculate capital requirements for market and derivatives related credit risk. Firms must document and implement a comprehensive internal risk management system which addresses market, credit, liquidity, legal and operational risk at the firm. The ANC model better recognizes the true underlying risk from the hedging positions held versus the traditional "haircut" method which can overstate the true risk of certain security positions.

8. Section 12.1 of NI 31-103 provides that (1) if, at any time, the excess working capital of a registered firm, as calculated using the Form 31-103F1, is less than zero, the registered firm must notify the regulator as soon as possible; and (2) a registered firm must ensure that its excess working capital, as calculated using Form 31-103F1, is not less than zero for two consecutive days.

9. Subsection 12.12(1)(b) and section 12.13(b) of NI 31-103 require that a registered dealer or adviser, as applicable, must deliver a completed Form 31-103F1 showing the excess working capital as at the end of the financial year and as at the end of the immediately preceding financial year, if any.

10. Compliance with sections 12.1, 12.12(1)(b) and 12.13(b) of NI 31-103 would present undue burden and additional costs for the Filers, who are already subject to regulatory capital requirements under the SEC rules that are designed to meet comparable regulatory protections.

Decision

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 is granted so long as:

(a) each Filer is registered, and in good standing, under the securities legislation of the United States in a category of registration that permits it to carry on the activities in the United States that registration as an investment dealer would permit it to carry on in the Jurisdictions;

(b) by virtue of the registration referred to in paragraph (a), including required membership in one or more self-regulatory organizations, each Filer is subject to SEC Rule 15c3-1 and SEC Rule 17a-5 Reports to be Made by Certain Brokers and Dealers (SEC Rule 17a-5); and that the protections provided by SEC Rule 15c3-1and SEC Rule 17a-5 in respect of maintaining excess net capital are substantially similar to the protections provided by the capital requirements of IIROC that would be applicable to each Filer respectively if they were registered under the Legislation as an investment dealer and were a member of IIROC;

(c) each Filer delivers to the principal regulator no later than the 90th day after the end of its respective financial year its FOCUS Report as filed with the SEC and FINRA;

(d) each Filer prepares the FOCUS Report on an unconsolidated basis;

(e) each Filer notifies the principal regulator as soon as possible if at any time its excess net capital as reported in box 3920 of its most recently filed FOCUS Report, declines to or is less than zero for 2 consecutive days;

(f) each Filer submits to the principal regulator as soon as possible a copy of any notification made by the Filer to the SEC and/or FINRA if its excess net capital, as reported in box 3910 of its most recently filed FOCUS Report, declines by 20% or more or declines to a level below the Filer's minimum net capital as required by SEC Rule 15c3-1 or if the Filer suspends its business operations during any period in which the Filer is not in compliance with applicable net capital requirements set forth in SEC Rule 15c3-1;

(g) each Filer gives prompt written notice to the principal regulator if the Filer has received written notice from the SEC or FINRA of any material non-compliance in the calculation of its excess net capital as reported in a FOCUS Report filed by the Filer pursuant to SEC and FINRA requirements; and

(h) each Filer provides the principal regulator with at least five days written notice prior to any repayment of subordinated intercompany debt or termination of a subordination agreement with respect to intercompany debt.