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DWM Securities Inc. and Scotia Capital Inc.
Headnote
Multilateral Instrument 11-102 Passport System -- National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 33-109 Registration Information (NI 33-109) -- Derivatives Regulation (Quebec) -- Relief from certain filing requirements of NI 33-109 and Derivatives Regulation (Quebec) in connection with a bulk transfer of business locations and registered and non-registered individuals under an amalgamation in accordance with section 3.4 of Companion Policy 33-109CP to NI 33-109.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 33-109 Registration Information, ss. 2.2, 2.3, 2.5, 3.2, 4.2, 7.1.
Companion Policy 33-109CP to National Instrument 33-109 Registration Information, s. 3.4.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
October 31, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO and QUÉBEC
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DWM SECURITIES INC.
AND
SCOTIA CAPITAL INC.
DECISION
ONTARIO and QUÉBEC
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DWM SECURITIES INC.
AND
SCOTIA CAPITAL INC.
DECISION
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DWM SECURITIES INC.
AND
SCOTIA CAPITAL INC.
DECISION
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DWM SECURITIES INC.
AND
SCOTIA CAPITAL INC.
DECISION
IN THE MATTER OF
DWM SECURITIES INC.
AND
SCOTIA CAPITAL INC.
DECISION
AND
SCOTIA CAPITAL INC.
DECISION
DECISION
Background
The principal regulator in Ontario (the Jurisdiction) has received an application from DWM Securities Inc. (DWM) and Scotia Capital Inc. (SCI, and together with DWM, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the requirements contained in sections 2.2, 2.3, 2.5, 3.2 and 4.2 of National Instrument 33-109 Registration Information (NI 33-109) pursuant to section 7.1 of NI 33-109 to allow the bulk transfer (the Bulk Transfer) from DWM to SCI of (i) the DWM registered individuals and permitted individuals carrying on the full service retail brokerage business and (ii) all DWM business locations on November 1, 2013 (the Amalgamation Date) in accordance with section 3.4 of the Companion Policy to NI 33-109, (the Exemption Sought).
The securities regulatory authority in Québec (the Derivatives Decision Maker) has received an application from the Filers for a decision under the securities legislation of Québec, which includes derivatives legislation, for relief from section 11.1 of the Derivatives Regulation (Québec) pursuant to section 86 of the Derivatives Act (Québec) to allow the Bulk Transfer of all registered individuals and permitted individuals under Québec derivatives legislation and all of the associated locations of DWM to SCI on the Amalgamation Date in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Derivatives Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a hybrid application):
(a) the Ontario Securities Commission is the principal regulator for this application;
(b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filers in each other jurisdiction of Canada outside of Ontario;
(c) the decision with respect to the Exemption Sought is the decision of the principal regulator; and
(d) the decision with respect to the Derivatives Exemption Sought evidences the decision of the Derivatives Decision Maker.
Interpretation
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filers:
1. DWM is registered as a dealer in the category of investment dealer in each jurisdiction of Canada and in the category of derivatives dealer in Québec. DWM is also a dealer member of the Investment Industry Regulatory Organization of Canada (IIROC) and has its head office in Ontario.
2. DWM is an indirect wholly-owned subsidiary of The Bank of Nova Scotia (BNS), a Canadian chartered bank validly existing under the laws of Canada.
3. SCI is registered as a dealer in the category of investment dealer in each jurisdiction of Canada, in the category of futures commission merchant in each of Manitoba and Ontario, and in the category of derivatives dealer in Québec. SCI is also a dealer member of IIROC and has its head office in Ontario. SCI is a member of: the TSX Venture Exchange; the Canadian National Stock Exchange; and the Canadian Derivatives Clearing Corporation.
4. SCI is a direct wholly-owned subsidiary of BNS.
5. DWM and SCI are not, to the best of their knowledge, in default of any requirement of securities legislation or derivatives legislation in any jurisdiction of Canada.
6. Effective as of the Amalgamation Date, SCI will carry on business that consists of the combined business and operations of SCI and DWM.
7. All appropriate notifications to, and requests for non-objections/approvals from, the securities regulatory authorities, IIROC, and certain exchanges have been made by letter regarding the DWM and SCI amalgamation. As at the date hereof, all required approvals and non-objections have been obtained.
8. In accordance with the requirements in section 14.11 of NI 31-103 and as at the date hereof, all DWM clients to be transferred from DWM to SCI, effective as of the Amalgamation Date, have been mailed notice of the proposal that their accounts may be transferred from DWM to SCI. In this notice, these clients have also been told of their right to close their account and have their assets returned to them, or to have their account transferred to another appropriately registered firm at no cost.
9. The national registration database (NRD) number of each registered business location to be transferred from DWM to SCI effective as of the Amalgamation Date has been provided to the principal regulator.
10. The Filers do not anticipate that the completion of the amalgamation of DWM and SCI will result in any business process interruptions or any disruption in the ability of DWM and/or SCI, as the case may be, to trade on behalf of their respective clients as of the Amalgamation Date.
11. Effective as of the Amalgamation Date, SCI will be registered in the same categories of registration and in the same jurisdictions as SCI and DWM were registered immediately prior to the Amalgamation Date. Accordingly, as a result of the amalgamation of DWM and SCI, SCI will continue to be registered as an investment dealer in each jurisdiction of Canada and will continue to be a dealer member of IIROC and will be subject to, and will comply with, all applicable securities legislation and the rules of IIROC. Effective as of the Amalgamation Date, SCI will also continue to be registered as a derivatives dealer in Québec and a futures commission merchant in Ontario and Manitoba, and will be subject to, and will comply with, all applicable derivatives legislation.
12. Effective as of the Amalgamation Date, SCI will, by operation of law, assume all of the existing registrations and approvals for all of the registered individuals and permitted individuals of the Filers, and will also assume all of the locations of the Filers.
13. Effective as of the Amalgamation Date, SCI will carry on substantially the same full service retail brokerage business in substantially the same manner and with substantially the same personnel as was carried on by DWM and SCI separately, immediately prior to the Amalgamation Date.
14. Given the significant number of DWM individuals to be transferred to SCI, comprising approximately 630 registered individuals and permitted individuals, and affected business locations of DWM to be transferred to SCI, it would be unduly time-consuming to transfer manually through individual NRD submissions all affected individuals and business locations to SCI in accordance with the requirements set out in NI 33-109. Moreover, it is imperative that the transfer of the affected individuals and business locations occur effective as of the same date (i.e., the Amalgamation Date), in order to ensure that there is no interruption in registration.
15. The Bulk Transfer will not impact the ability of the Filers to comply with all applicable regulatory requirements or their ability to satisfy any obligations to their clients.
Decision
Each of the principal regulator and the Derivatives Decision Maker is satisfied that the decision meets the test set out in the Legislation and the Derivatives Act (Québec) for the principal regulator and the Derivatives Decision Maker, respectively, to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the Filers make acceptable arrangements with CDS Inc. for the payment of the costs associated with the Bulk Transfer, and make such arrangements in advance of the Bulk Transfer.
The decision of the Derivatives Decision Maker under the Derivatives Act (Québec) is that the Derivatives Exemption Sought is granted provided that the Filers make acceptable arrangements with CDS Inc. for the payment of the costs associated with the Bulk Transfer, and make such arrangements in advance of the Bulk Transfer.
"Elizabeth King"
Manager
Compliance and Registrant Regulation
Ontario Securities Commission