Securities Law & Instruments


Relief from adviser registration requirements under section 25(3) of the Securities Act (Ontario) for pension fund administrator to provide portfolio management services to certain third parties that have been authorized by Orders in Council and incorporated into filer's governing statute.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 25(3) and 74(1).



R.S.O. 1990, c. s.5, AS AMENDED

(the Act)





(Subsection 74(1) of the Act)


The Ontario Securities Commission (the Commission) has received an application from OMERS Administration Corporation (OAC) for a ruling pursuant to subsection 74(1) of the Act that each of OAC and its directors, officers and employees is not subject to the requirement to register as an adviser under subsection 25(3) of the Act in respect of its provision of portfolio management services to the Third Party Administered Funds (as defined below) under agreements that have been authorized by specified Orders in Council pursuant to subsection 35.2(3) of the Ontario Municipal Employees Retirement System Act, 2006, R.S.O. 2006, c. 2, as amended from time to time (the OMERS Act) (the Requested Relief).


This ruling is based on the following facts represented by OAC:

1. OAC (previously the Ontario Municipal Employees Retirement Board) is the administrator of the OMERS pension plans, which includes the OMERS Primary Pension Plan (the Plan). OAC was continued as a corporation without share capital under the OMERS Act. Its head office is in Toronto, Ontario. OAC is not registered in any capacity under the securities legislation of any jurisdiction.

2. OAC and the Plan are regulated by the OMERS Act, the Pension Benefits Act (Ontario) (the PBA) and the Income Tax Act (Canada) (the ITA), and are subject to supervision by the Financial Services Commission of Ontario (FSCO) as well as the Registered Plans Division of the Canada Revenue Agency (CRA). The regulatory oversight and supervision by FSCO is pursuant to the PBA and the regulatory supervision by the CRA is pursuant to the ITA. Pursuant to the PBA, the Plan pension fund investments are subject to a codified prudent person standard of care (section 22 of the PBA) and various quantitative and related party investment restrictions which are set out in the federal Pension Benefits Standards Regulations, 1985 (the federal investment regulations). The federal investment regulations are incorporated into the PBA and are fully applicable to OAC and the Plan. The PBA also requires that OAC (as administrator of the Plan) establish and adhere to a written statement of investment policies and procedures (SIP&P). FSCO has under the PBA general authority to supervise and monitor the investment activities of a pension plan that is registered under the PBA including the Plan. Under the PBA, OAC (in its capacity as administrator of the Plan) is required, among other things, to certify annually its compliance with the PBA including the investment regulations thereunder. OAC and the Plan are also subject to various investment limitations imposed under the ITA including prohibitions against various types of investments relating to employers which participate in the Plan (Income Tax Regulation 8514) and strict limitations on borrowing money (Income Tax Regulation 8502(i)). Such limitations are enforced by the CRA and if not complied with would (like any other registered pension plan) jeopardize the registration of the Plan under the ITA.

3. The Plan was established in 1962 as the pension plan for employees of local governments (and various agencies of local governments) in Ontario. As of November 30, 2012 there were approximately 966 employers participating in the Plan. As administrator of the Plan, OAC manages as part of the Plan a diversified portfolio of stocks and bonds, as well as real estate, infrastructure and private equity investments, holding more than $55 billion in net assets as of December 31, 2011.

4. The Ontario Municipal Employees Retirement System was created by the Ontario Government for the purpose of aggregating investment assets held in pension plans for the benefit of local government employees in order that they may be managed with a high level of investment expertise in a cost-effective manner. As administrator of those assets, OAC is not subject to registration under the Act for this purpose, but is subject to supervision and regulation under the PBA and the ITA. The investment by OAC of the Plan is also subject to common law fiduciary duties.

5. In addition to acting as administrator of the Plan, OAC provides portfolio management services to The Ryerson Retirement Pension Plan Trust Fund (Ryerson), the Ontario Hydro Guarantee Fund and The Contributory Pension Plan for Employees of Transit Windsor (collectively, the Third Party Administered Funds) pursuant to agreements authorized by Orders in Council 808/80, 2211/95 and 368/2003. The first of these arrangements was made with Ryerson on February 1, 1965.

6. OAC invests funds on behalf of the Third Party Administered Funds under contractual agreements approved by the Ontario Lieutenant-Governor in Council. OAC is authorized under the terms of the various agreements to recover its expenses for administering such funds. OAC does not receive a management fee from the Third Party Administered Funds nor does it otherwise generate any profit from providing its investment management services. In each of these arrangements, OAC makes investments on the basis of the investment criteria of the Plan without taking into account the investment criteria of the Third Party Administered Funds. Further, OAC is under no contractual obligation with the Third Party Administered Funds to make investments in a particular manner or in particular asset classes.

7. There are two categories of investment powers provided under the OMERS Act; namely (i) the authority given to OAC to administer and invest the OMERS pension plans under sections 34(1) and 35(2)(a) (the administrator powers), and (ii) the provision of eligible services by authorized subsidiaries to enumerated categories of clients under sections 34(3) and 35.1 of the OMERS Act and the provision of services by OAC pursuant to 35.2 of the OMERS Act (the third party services powers).

8. In amending the OMERS Act in 2009, the Ontario Government expressly approved the arrangements with the Third Party Administered Funds in subsection 35.2(3), which states that OAC "itself may continue to provide eligible services to clients under agreements that were authorized by Orders in Council 808/80, 2211/95 and 368/2003, as those agreements read on the day this section comes into force and, for that purpose, [OAC] has the powers of an authorized subsidiary under subsections 35.1(4), (5) and (7)". Subsection 35.1(5) of the OMERS Act provides that "each of the following is an eligible service if it is carried out in compliance with all applicable laws:

1. Providing advice to an administrator of a pension plan regarding the administration of the pension plan or the investment policies for the pension fund maintained to provide benefits in respect of that pension plan.

2. Providing advice to a client on investing in, holding, buying or selling securities or other assets.

3. Buying, selling, holding and managing investments for a client, with or without discretionary authority granted by the client to manage the client's investment portfolio.

4. Activities and services ancillary to the services listed in paragraphs 1 to 3, including,

i. activities relating to the distribution or sale to clients of securities issued by an investment entity [incorporated, established, managed or operated by an authorized subsidiary of OAC for the purpose of providing eligible services], and

ii. entering into derivative contracts in which the return is based in whole or in part of the performance of all or part of the pension fund maintained to provide benefits in respect of any of the OMERS pension plans or of any of pension fund's investments.

5. Providing administrative services to an administrator of a pension plan."

9. Under the Act, the requirement to register as an adviser is imposed on a person or company that engages in the business of, or holds himself, herself or itself out as engaging in the business of, advising anyone with respect to investing in, buying or selling securities.

10. OAC manages the assets of the Third Party Administered Funds as an extension of its management of the Plan and accordingly OAC may be subject to a requirement to register as an adviser under the Act.

11. The assets of the Third Party Administered Funds represent less than two per cent of the assets managed by OAC. Permitting OAC to provide portfolio management services to the Third Party Administered Funds, as authorized by the OMERS Act, enables those funds to receive the benefit of the same pension fund investment expertise as members of the OMERS pension plans. These benefits include greater access to investments in private market assets, such as infrastructure, real estate and private equity and lower costs than would otherwise generally be available in respect of such investments.


The Commission, being satisfied that to do so would not be prejudicial to the public interest, hereby rules that the Requested Relief is granted.

January 25, 2013

"Judith Robertson"
Ontario Securities Commission


"Paulette Kennedy"
Ontario Securities Commission