BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Ltee/Ltd.

Decision

Headnote

MI 11-102 and NI 31-103 -- Exemption from section 4.1 of NI 31-103 to allow dealing, advising or associate advising representatives of one applicant be registered in same capacity with its subsidiary, the second applicant, for purposes of serving retail clients in Province of Quebec, separate subsidiaries for tax reasons.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 15.1.

December 2, 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

BMO NESBITT BURNS INC. AND

BMO NESBITT BURNS LTEE/LTD.

(the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) of the principal regulator for relief from paragraph 4.1(1)(b) of National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit individuals who are dealing, advising or associate advising representatives of one of the Filers to also be dealing, advising or associate advising representatives of the other Filer (the Relief Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this Application, and

2. the Filers have provided notice that section 4.7 of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (the Jurisdictions).

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

1. Each of the Filers is an indirectly wholly-owned subsidiary of Bank of Montreal (BMO), a Schedule I Canadian chartered bank. Further, BMO Nesbitt Burns Ltee/Ltd. (BMO NB Ltee) is a wholly-owned subsidiary of BMO Nesbitt Burns Inc. (BMO NB Inc.).

2. Each of the Filers is a Member Firm of the Investment Industry Regulatory Organization of Canada (IIROC) and an Approved Participant of the Montreal Exchange. In addition, BMO NB Inc. is (i) registered in each of the jurisdictions of Canada in the category of investment dealer and in Ontario in the categories of futures commission merchant and investment fund manager, (ii) a Participating Organization of the Toronto Stock Exchange, (iii) a Member Firm of the TSX Venture Exchange and (iv) a Participant of ICE Futures Canada. BMO NB Ltee is registered in Québec as an investment dealer, derivatives dealer and financial planner.

3. For tax planning purposes, BMO has historically caused, and continues to require, the securities brokerage businesses of its subsidiaries to be carried out through two registrants whereby, in the Province of Québec, retail brokerage business is carried out through one registrant while institutional brokerage business is carried out through both registrants. Currently, this is reflected through the respective businesses of BMO as follows:

(a) institutional brokerage business of BMO is carried out through both Filers;

(b) retail brokerage business in all provinces other than Quebec is carried out through BMO NB Inc.; and

(c) retail brokerage business in the Province of Quebec is carried out through BMO NB Ltee.

4. For purposes of discharging their obligations under applicable securities legislation, stock exchange requirements and IIROC requirements, the Filers are considered in all material respects as a combined entity, including:

(a) for reporting purposes and regulatory capital adequacy purposes, the Filers prepare a single monthly financial report in which their net capital is computed on a joint basis;

(b) a single statement of policies governs each of the Filers; and

(c) in compliance with IIROC requirements, the respective obligations of the Filers are cross-guaranteed.

5. Each of the Filers carries on business under the name "BMO Nesbitt Burns" and it is on this basis that clients deal with each of the Filers.

6. A fully harmonized compliance organization has been established for the Filers.

7. BMO's compliance structure has been in place for a significant period and, accordingly, the persons responsible for compliance for the Filers are particularly sensitive to, and well structured to effectively monitor and address, the respective compliance obligations of the Filers relating to institutional client trading on the one hand and retail client trading on the other hand. In addition, the persons responsible for overseeing compliance in respect of client trading are already required, in certain provinces, including Ontario, to monitor the conduct of both institutional client trading and retail client trading.

8. The Filers have determined that certain of their salespersons could, as a practical matter, successfully establish accounts for both retail and institutional clients and have sufficient time to adequately serve both Filers, and have requested the right to do so.

9. With the current BMO structure, in the Province of Québec, such individuals could only do so through being a registered dealing, advising or associate advising representative with both BMO NB Inc. (through which institutional brokerage business is carried out) and BMO NB Ltee (through which both institutional and retail brokerage business is carried out).

10. Paragraph 4.1(1)(b) of NI 31-103 provides that a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual is registered as a dealing, advising or associate advising representative of another registered firm.

11. Section 15.1 of NI 31-103 provides that the regulator or securities regulatory authority may grant an exemption from NI 31-103, in whole or in part.

12. As BMO NB Ltee is a wholly-owned subsidiary of BMO NB Inc., and as clients in the Province of Quebec will be either retail or institutional clients in the case of BMO NB Ltee or institutional clients of BMO NB Inc., it is unlikely that there will be any conflicts of interest arising from registration with both Filers.

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 Relief Sought is granted.

"Erez Blumberger"
Deputy Director
Ontario Securities Commission