Securities Law & Instruments

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- foreign adviser exempted from the adviser registration requirement in paragraph 22(1)(b) of the CFA where such adviser acts as an adviser in respect of commodity futures contracts or commodity futures options (commodities) for institutional investors in Ontario who meet the definition of "permitted client" in NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- commodities are primarily traded on commodity futures exchanges outside of Canada and primarily cleared outside of Canada -- foreign adviser also exempted from the adviser registration requirement in paragraph 22(1)(b) of the CFA with respect to commodities generally when providing advice to an affiliated insurance company in Ontario only so long as that affiliate remains an affiliate of the foreign adviser -- conditions on exemption correspond to the relevant conditions on the comparable exemption from the adviser registration requirement available to international advisers in respect of securities set out in section 8.26 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- exemption also subject to a "sunset clause" condition.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss.s 1(1), 22(1)(b), 80.

Instruments Cited

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1, 8.26.

OSC Rule 13-502 Fees.

IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, c. C. 20, AS AMENDED
(the CFA)

AND

IN THE MATTER OF
AEGON USA INVESTMENT MANAGEMENT, LLC

ORDER
(Section 80 of the CFA)

UPON the application (the Application) of AEGON USA Investment Management, LLC (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA that the Applicant and any individuals engaging in, or holding themselves out as engaging in, advisory services on behalf of the Applicant (the Representatives) be exempted, subject to the conditions and limitations contained herein, from the provisions of section 22(1)(b) of the CFA that prohibit a person or company from acting as an adviser unless the person or company satisfies the applicable provisions of section 22 of the CFA;

AND UPON considering the Application and the recommendation of staff of the Commission;

ND WHEREAS for the purposes of this Order:

"CFA Adviser Registration Requirement" means the requirement in the CFA that prohibits a person or company from acting as an adviser unless the person or company in registered in the appropriate category registration under the CFA;

"CFTC" means the United States Commodity Futures Trading Commission;

"Contract" has the meaning ascribed to that term in subsection 1(1) of the CFA;

"Existing Order" means the Order of the Ontario Securities Commission in favour of the Applicant providing relief from the CFA Adviser Registration Requirement dated December 16, 2008;

"Foreign Contract" means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;

"International Adviser Exemption" means the exemption set out in section 8.26 of NI31-103 from the OSA Adviser Registration Requirement;

"NI 31-103" means National Instrument 31-103 Registration Requirements, Exemption and Ongoing Registrant Obligations;

"OSA" means the Securities Act (Ontario);

"OSA Adviser Registration Requirement" means the requirement in the OSA that prohibits a person or company from acting as an adviser unless the person or company is registered in the appropriate category of registration under the OSA;

"Permitted Client" means a client in Ontario that is a "permitted client", as that term is defined in section 1.1 of NI31-103, except that for the purposes of the Order such definition shall exclude a person or company registered under the securities or commodities legislation of a jurisdiction of Canada as an adviser or dealer;

"SEC" means the United States Securities and Exchange Commission;

"specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information; and

"U.S. Advisers Act" means the United States Investment Advisers Act of 1940.

AND UPON the Applicant having represented to the Commission and the Director as follows:

1. The Applicant is a limited liability company existing under the laws of the State of Iowa and is registered as an investment adviser under the U.S. Investment Advisers Act. The Applicant is exempt from registration as a Commodity Trading Adviser (CTA) pursuant to section 4m(1) of the Commodity Exchange Act which provides an exemption from registration for a person who, in the preceding twelve months, has not furnished commodity trading advice to more than 15 persons and who does not hold himself out generally to the public as a CTA .

2. The Applicant is not ordinarily resident in Ontario and is not registered in any capacity under the CFA or the OSA.

3. The Applicant advises institutional clients and is part of a corporate group of financial companies headquartered in Europe known as AEGON N.V. (AEGON) The Applicant is a sister company of Transamerica Life Canada, a federally licensed and regulated life insurance company (TLC). Accordingly, TLC is an affiliate, as defined in the OSA, of the Applicant.

4. There is no requirement for a federally licensed life insurance company, nor employees of a federally licensed life insurance company, to be registered as advisers under the CFA if trading and advice is confined to the assets of such federally licensed life insurance company (CFA, s.31). TLC has outsourced some of its investment and advisory services with respect to its portfolio assets including futures. Outsourcing the investment management and advisory functions is expressly permitted under the Insurance Companies Act (Canada) and the Office of the Superintendent of Financial Institutions' Guideline B-10 -- Outsourcing of Business Functions, Activities and Processes.

5. The Applicant has been providing advisory services in commodity futures contracts and commodity futures options (Advisory Services) to TLC under the Existing Order since 2008. The Advisory Services have been in respect of two types. First, the Applicant has been providing Advisory Services with respect to Contracts to funds beneficially owned by TLC and for which there are no external stakeholders (such as, example, holders of variable annuity contracts or segregated funds/ separate accounts for policy holders) (the Internal Services). Second, the Applicant has been providing Advisory Services with respect to primarily Foreign Contracts to TLC in respect of segregated funds offered by TLC.

6. The Applicant desires to continue to provide Advisory Services on a basis consistent with past practice under the Existing Order, or as permitted by this order.

7. There is currently no exemption under the CFA Adviser Registration Requirement that is equivalent to the International Adviser Exemption. Consequently, except in respect of Internal Services, in order to advise Permitted Clients as to trading in Foreign Contracts, in the absence of this Order, the Applicant would be required to satisfy the CFA Adviser Registration Requirement and would have to apply for, and obtain, registration in Ontario as an adviser under the CFA in the category of commodity trading manager.

8. Section 80 of the CFA provides that an order may be issued subject to terms and conditions as the Commission may consider necessary.

AND UPON the Commission and Director being satisfied that it would not be prejudicial to the public interest to grant the order requested;

IT IS ORDERED pursuant to section 80 of the CFA that the Applicant and its Representatives are exempt, for a period of five years, from the adviser registration requirements of subsection 22(1)(b) of the CFA in respect of them acting as an adviser relating to the Advisory Services, provided that:

(a) the Applicant's head office or principal place of business remains in the United States;

(b) the Applicant is registered, or operates under an exemption from registration, under the applicable securities or commodity futures legislation in the United States in a category of registration that permits it to carry on the activities in the United States that registration under the CFA as an adviser in the category of commodity trading manager would permit it to carry on in Ontario;

(c) the Applicant continues to engage in the business of an adviser, as defined in the CFA, in the United States;

(d) as at the end of the Applicant's most recently completed financial year, not more than 10% of the aggregate consolidated gross revenue of the Applicant, its affiliates and its affiliated partnerships (excluding the gross revenue of an affiliate or affiliated partnership of the Applicant if the affiliate or affiliated partnership in registered under securities legislation, commodities legislation or derivative legislation in a jurisdiction of Canada) is derived from the portfolio management activities of the Applicant, its affiliates and its affiliated partnerships in Canada (which, for greater certainty, includes both securities-related and commodity-futures-related activities);

(e) before advising a Permitted Client that is not an affiliate of the Applicant within the meaning of the OSA with respect to Foreign Contracts, the Applicant notifies the Permitted Client of all of the following:

(i) the Applicant is not registered in the local jurisdiction to provide the advice described under paragraph (a) of this Order;

(ii) the foreign jurisdiction in which the Applicant's head office or principal place of business is located;

(iii) all or substantially all of the Applicant's assets may be situated outside of Canada;

(iv) there may be difficulty enforcing legal rights against the Applicant because of the above; and

(v) the name and address of the Applicant's agent for service of process in Ontario;

(f) the Applicant has submitted to the Commission a completed submission to jurisdiction and appointment of agent for service in the form attached as Appendix A;

(g) the Applicant notifies the Commission of any regulatory action initiated after the date of this Order with respect to the Applicant or any predecessor or specified affiliates of the Applicant by completing and filing Appendix B within 10 days of the commencement of each such action; provided that this condition shall not be required to be satisfied for so long as either of Aegon Fund Management Inc. or Aegon Capital Management Inc. remains a registrant in good standing under Ontario securities law;

(h) the Applicant complies with the filing and fee payment requirements applicable to an unregistered exempt international firm under Ontario Securities Commission Rule 13-502 Fees.

(i) with respect to Internal Services:

(i) the Applicant provides Advisory Services in Ontario only to its affiliate that is licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; and

(ii) with respect to its affiliate, the investment advice and portfolio management services are provided only as long as that affiliate remains an "affiliate" of the Applicant, as defined in the OSA.

(j) with respect to Advisory Services other than the Internal Services:

(i) the Applicant provides advice to Permitted Clients only as to trading in Foreign Contracts and does not advise any Permitted Client as to trading in Contracts that are not Foreign Contracts, unless providing such advice in incidental to its providing advice on Foreign Contracts.

Dated this 6th day of December, 2013

"Christopher Portner"
"Deborah Leckman"
Commissioner
Commissioner
Ontario Securities Commission
Ontario Securities Commission

 

APPENDIX "A"

SUBMISSION TO JURISDICTION AND

APPOINTMENT OF AGENT FOR SERVICE

INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO

1. Name of person or company ("International Firm"):

2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:

3. Jurisdiction of incorporation of the International Firm:

4. Head office address of the International Firm:

5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.

Name:

E-mail address:

Phone:

Fax:

6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):

[ ] Section 8.18 [international dealer]

[ ] Section 8.26 [international adviser]

[ ] Other [specify]:

7. Name of agent for service of process (the "Agent for Service"):

8. Address for service of process on the Agent for Service:

9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.

10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.

11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator:

a. a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated; and

b. an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service.

12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.

Dated:

_______________

 

By:

_______________

 

(Signature of the International Firm or authorized signatory)

 

 

____________________

 

(Name of signatory)

 

 

____________________

 

(Title of signatory)

 

By:

_________________________

 

(Signature of the International Firm or authorized signatory)

 

 

_______________

 

(Name of signatory)

 

 

_______________

 

(Title of signatory)

Acceptance

The undersigned accepts the appointment as Agent for Service of [Insert name of International Firm] under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.

Dated: _______________

_________________________

(Signature of the Agent for Service or authorized signatory)

____________________

(Name of signatory)

_______________

(Title of signatory)

This form is to be submitted to the following address:

Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, ON M5H 3S8
Attention: Registration Supervisor, Portfolio Manager Team
Telephone: (416) 593-8164
email: amcbain@osc.gov.on.ca

 

APPENDIX B

NOTICE OF REGULATORY ACTION

1. Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?

Yes _____ No _____

If yes, provide the following information for each settlement agreement:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Regulator/organization

Date of settlement (yyyy/mm/dd)

Details of settlement

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

2. Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:

 

Yes

No

 

(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?

_____

_____

 

(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?

_____

_____

 

(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?

_____

_____

 

(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?

_____

_____

 

(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?

_____

_____

 

(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?

_____

_____

 

(g) Issued an order (other than en exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?

_____

_____

If yes, provide the following information for each action:

- - - - - - - - - - - - - - - - - - - -

Name of Entity

Type of Action

- - - - - - - - - - - - - - - - - - - -

Regulator/organization

 

Date of action (yyyy/mm/dd)

Reason for action

 

Jurisdiction

3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?

Yes _____ No _____

If yes, provide the following information for each investigation:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Reason or purpose of investigation

Regulator/organization

Date investigation commenced (yyyy/mm/dd)

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

Name of firm

Name of firm's authorized signing officer or partner

Title of firm's authorized signing officer or partner

Signature

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

Witness

The witness must be a lawyer, notary public or commissioner of oaths.

- - - - - - - - - - - - - - - - - - - -

Name of witness

Title of witness

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

This form is to be submitted to the following address:

Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, ON M5H 3S8
Attention: Registration Supervisor, Portfolio Manager Team
Telephone: (416) 593-8164
email: amcbain@osc.gov.on.ca

{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 - Registration Information.