Securities Law & Instruments


NP 11-203 -- relief from prospectus and dealer registration requirements to allow U.S. cooperative to issue shares to Canadian members -- distributions not covered by legislative exemptions -- not a traditional investment decision -- same disclosure to be provided to Canadian shareholders as current U.S. shareholders -- not a reporting issuer in Canada -- Canadian members required to meet certain qualifying standards -- relief granted.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).

January 22, 2013




(the Jurisdiction)








(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 registration and prospectus requirements so that such requirements do not apply in respect of the distribution of Shares (as hereafter defined) of the Filer to Canadian Travel Agencies (as hereafter defined) resident in each of the Jurisdiction and the Passport Jurisdictions (defined below) (the Requested Relief).

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 the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (collectively, the Passport 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.


The decision is based on the following facts represented by the Filer:

1. The Filer was incorporated in 1968 under the laws of the State of New York as a cooperative.

2. The Filer is a consortium of separately owned and operated travel agents each of which owns one (1) share of stock in the Filer (each such share, a Share, and each such holder of a Share, a Shareholder). Each Shareholder's ownership is limited to one (1) Share in accordance with the Filer's by-laws (as amended from time to time, the By-laws). The Share is purchased at a price set by the Board of Directors (the Purchase Price), currently US$2,000, and redeemed, upon termination as a Shareholder, for the same Purchase Price, in accordance with the Filer's By-laws.

3. The Filer is not, and has no current intention of becoming, a reporting issuer (or equivalent) in the Jurisdiction or any of the Passport Jurisdictions.

4. The Shares are not registered in the United States (U.S.) as the Filer has determined that the Shares are not "securities" as defined by U.S. statute and U.S. case law which would require registration.

5. There is no market for the Shares and the Shares are not traded on any marketplace as defined in National Instrument 21-101 Marketplace Operation. The Shares cannot be transferred (except in limited circumstances as noted in paragraph 7 below).

6. Currently, there are 1,200 Shares authorized for issuance, without par value, with 255 Shares currently issued to 255 Shareholders located in the U.S.

7. The Filer's By-laws provide that only travel agents who meet the requirements of good standing (within the meaning of the By-laws) may become Shareholders and that a Shareholder may in no way transfer its Share to any person upon termination as a Shareholder (other than to a successor entity with permission of the Board of Directors or to the Filer).

8. A Shareholder may terminate its ownership in the Filer by tendering its Share for redemption, or, the Filer may redeem a Shareholder's Share if it fails to meet the requirements of good standing (within the meaning of the By-laws).

9. The Filer pools its buying power and as a result is able to negotiate favorable commission rates for the Shareholders and to secure additional bonus payments from various preferred suppliers of travel, including major cruise lines and tour operators.

10. There are no stock dividends or distributions to Shareholders on a per Share basis. Rather, Shareholders receive distributions based upon their pro rata sales of preferred supplier products. For example, if a preferred supplier pays bonus monies to the Filer, the net amount, after deductions for operating expenses, is distributed to Shareholders based upon their proportionate sales of that preferred suppliers products.

11. Currently, the only Shareholders of the Filer are U.S. owned and operated travel agencies. There are approximately 274 Canadian owned and operated travel agencies who are members (not Shareholders) of Ensemble Travel Ltd., a Canadian corporation which is a wholly-owned subsidiary of the Filer. As members, the Canadian travel agencies pay a membership fee but own no Shares and have no equity in the Filer or in Ensemble Travel Ltd.

12. It is the intention of the Filer to issue one (1) Share to each current Canadian member and any other Canadian travel agency in the Jurisdiction or any Passport Jurisdiction who meets the requirements of good standing as set forth in the Filer's By-laws (collectively, Canadian Travel Agencies). Each Canadian Travel Agency will be offered the opportunity to purchase one (1) Share on the same basis and at the same Purchase Price as U.S. travel agencies. If they purchase Shares, they will have the same rights and be subject to the same obligations as U.S. Shareholders, including the right to vote for the Board of Directors, and to receive distributions, as described above.

13. Each certificate representing a Share shall bear a legend stating that the Share represented by such certificate and the right to transfer the said Share is subject to the restrictions on transfer contained in the Filer's By-laws.

14. As a Shareholder, each Canadian Shareholder will be provided with the same financial information that has typically been provided to U.S. Shareholders on an annual basis. As well, the Filer will hold an annual Shareholders' meeting at which time all Shareholders will be provided a review of operating results of the Filer, an opportunity to ask questions of management of the Filer, and an opportunity to vote for the Board of Directors. Each Shareholder is entitled to one (1) vote for the one (1) Share held, in accordance with the By-laws.

15. In order to become a Shareholder, each Shareholder will be obligated to execute a Shareholder's agreement and pay the Purchase Price (currently set at US$2,000) which will be payable over eighteen months. Until the full Purchase Price is paid, the prospective Shareholder will only receive a portion of the distributions described above.

16. It is not expected that the majority of prospective Canadian Shareholders will be, at the time they acquire a Share, "accredited investors" as defined in section 1.1 of National Instrument 45-106 -- Prospectus and Registration Exemptions.


The principal regulator in the Jurisdiction is satisfied that the decision meets the test set out in the Legislation for the principal regulator in the Jurisdiction to make the decision.

The decision of the principal regulator in the Jurisdiction under the Legislation is that the Requested Relief is granted, provided that:

(a) prior to the initial issuance of a Share to a Canadian Travel Agency as permitted by this decision, the Filer delivers to the Canadian Travel Agency a copy of :

(i) the articles of incorporation and By-laws of the Filer, and all amendments thereto;

(ii) this decision; and

(iii) a statement to the effect that as a consequence of this decision, certain protections, rights and remedies provided by the Jurisdiction and Passport Jurisdictions including statutory rights of rescission or damages, will not be available to purchasers of Shares and that certain restrictions are imposed on the subsequent disposition of the Shares;

(b) all Share certificates representing the Shares bear a legend stating that the right to transfer the Shares is subject to restrictions contained in the By-laws of the Filer;

(c) the exemptions contained in this decision cease to be effective if any one of the provisions of the articles of incorporations or By-laws of the Filer relevant to the exemptions granted in this decision are amended in any material respect without written notice to, and consent by, the principal regulator in the Jurisdiction and the regulator in each Passport Jurisdiction; and

(d) the first trade of a Share to a person (other than to a Canadian Travel Agency for the purpose of becoming a Shareholder of the Filer or to the Filer itself) shall be deemed a distribution of such securities within the meaning of the Legislation.

DATED at Toronto this 22nd day of January, 2013.

"Edward P. Kerwin"
Ontario Securities Commission
"Sarah B. Kavanagh"
Ontario Securities Commission