Under paragraphs 4.1(1)(a) and 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations 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 acts as an officer, partner or director of another registered firm that is not an affiliate of the first-mentioned firm, or if the individual is registered as a dealing, advising or associate advising representative of another registered firm. The firms require relief for a limited period of time. The individual will have sufficient time to adequately serve both firms. As one firm is winding down its operations, conflicts of interest are unlikely to arise. The firms have policies in place to handle potential conflicts of interest. The firms are exempted from the prohibition.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 15.1.
May 5, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUEBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF TEN STAR FINANCIAL INC. (TSF) AND INVESTIA FINANCIAL SERVICES INC. (Investia) (the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the requirements in paragraphs 4.1(1)(a) and 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) pursuant to section 15.1 of NI 31-103 to permit David Baird to be registered as a dealing representative of Investia and as a dealing representative, director, officer, ultimate designated person (UDP) and chief compliance officer (CCO) of TSF for a limited period of time (the Exemption Sought) for the purposes of (i) maintaining the registration of TSF to facilitate the transfer of TSF's client accounts (the Accounts) to Investia, the resignation of TSF's membership from the Mutual Fund Dealers Association of Canada (MFDA) and the approval by the Ontario Securities Commission (OSC) of TSF's voluntary surrender of its registration and (ii) servicing the Accounts until their transfer out of TSF is complete.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) The Autorité des marchés financiers (AMF) is the principal regulator for this application;
(b) The Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan and Manitoba; and
(c) The decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. Investia is a company constituted by amalgamation under the Canada Business Corporations Act (CBCA) on September 1, 2009. It is a wholly-owned subsidiary of Industrial Alliance Insurance and Financial Services Inc.
2. Investia is registered in Québec as a firm in the following categories: exempt market dealer, mutual fund dealer, restricted dealer and scholarship plan dealer. In the other provinces and territories of Canada, Investia is registered as a dealer in the categories of exempt market dealer and mutual fund dealer. Investia is a member of the MFDA.
3. Investia's activities are primarily in mutual fund dealing and distribution in Canada. Its registered head office is located in Quebec, Province of Quebec.
4. Investia is not in default of any requirement of securities legislation of any jurisdiction of Canada.
5. The principal regulator of Investia is the AMF.
6. TSF is a corporation constituted under the CBCA. It is a wholly-owned subsidiary of Ten Star Holdings Inc. Ten Star Holdings Inc. is owned by two individuals, David Baird and his spouse, Joyce Baird. David and Joyce Baird are residents of Ontario.
7. TSF is registered as a dealer in the category of mutual fund dealer in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec and in the category of exempt market dealer in Ontario. TSF is a member of the MFDA.
8. TSF's activities are primarily in mutual fund dealing and distribution in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. Its registered head office is located in Waterdown, Ontario.
9. TSF is not in default of any requirement of securities legislation of any jurisdiction in which it is registered.
10. The principal regulator of TSF is the OSC.
11. The application is made in relation to the acquisition by Investia of all dealer rights and interest in TSF's mutual fund and segregated fund business (the Transaction), which included the transfer of most of the Accounts to Investia. The purpose of the Transaction was for Investia to acquire the Accounts and expand its mutual fund and exempt market dealer operations in a timely and efficient manner.
12. The transfer of the Accounts from TSF to Investia was initiated on December 1, 2014 (the Transaction Date.) A bulk transfer of client accounts from one mutual fund dealer to another mutual fund dealer can take at least one month, if not longer, to be completed.
13. A small number of client accounts remain at TSF and are still in the process of transferring out.
14. David Baird is the sole director and sole registered dealing representative as well as the President, Treasurer, Secretary, UDP and CCO of TSF. David Baird is now seeking to be registered as a dealing representative at Investia.
15. It is intended that David Baird will be registered with Investia as a dealing representative, and will continue to be a dealing representative, director, President, Treasurer, Secretary, UDP and CCO of TSF for a limited period of time (the Dual Registration).
16. Upon registration as a dealing representative with Investia, David Baird will limit his trading activities on behalf of TSF to trades on behalf of existing TSF clients pending transfer of their accounts from TSF to Investia or another registered firm.
17. Upon David Baird's registration as a dealing representative with Investia, TSF has agreed to certain terms and conditions being placed on its registration, including:
TSF, including its registered individual David Baird, will limit its trading activities to trades on behalf of existing TSF clients pending transfer of their accounts from TSF to Investia Financial Services Inc. or to another registered firm.
18. The Dual Registration will facilitate the completion of the Transaction, and will permit David Baird to:
(a) facilitate the orderly wind-up of TSF's business and operations, including the transferring out of the Accounts, the resignation of TSF's MFDA membership and the voluntary surrender of TSF's registration in the jurisdictions in which it is registered; and
(b) provide services to the TSF client accounts that have not yet transferred out of TSF that are similar to the services those accounts would have received (from Investia or another receiving dealer) had they already been transferred out, until all Accounts have transferred out of TSF (the Account Transfer Completion Date).
19. Upon the Account Transfer Completion Date, TSF will cease its registerable activities and will not open any new client accounts. On or immediately after the Account Transfer Completion Date, TSF will notify the MFDA and the OSC of the Account Transfer Completion Date and submit an application for voluntary surrender of its registration to the OSC, its principal regulator.
20. TSF has agreed to certain terms and conditions being placed on its registration immediately on or after the Account Transfer Completion Date, including:
(a) TSF and its registered individual David Baird will not trade in securities under securities law and will not open any new client accounts; and
(b) David Baird, as TSF's sole director, officer, UDP and CCO, will act in such capacity only to comply with regulatory requirements including, as necessary, to resign the membership of TSF with the MFDA, and has agreed to abide by, and ensure that TSF adheres to the terms and conditions imposed on the registration of TSF by the OSC.
21. The terms and conditions referred to in paragraph 17 of this decision will be removed from TSF's registration when the terms and conditions referred to in paragraph 20 of this decision are placed on its registration.
22. A filing to add Investia as an additional sponsoring firm for David Baird will be made via the National Registration Database as soon as the Exemption Sought has been granted.
23. David Baird will have sufficient time and resources to adequately meet his obligations to both TSF and Investia.
24. The Filers have in place policies and procedures to address any conflicts of interest that may arise as a result of the Dual Registration. The limited activities of TSF and David Baird will facilitate this, by largely or entirely avoiding any conflicts of interest.
25. Furthermore, Investia has compliance and supervisory policies and procedures in place to monitor the conduct of its representatives (including David Baird) and to ensure that Investia can deal appropriately with any conflict of interest that may arise.
26. Investia will supervise the activities that David Baird will conduct on behalf of TSF, including by holding meetings regularly with him and by obtaining regular status reports from him.
27. In the absence of the Exemption Sought, David Baird would be prohibited under paragraphs 4.1(1)(a) and 4.1(1)(b) of NI 31-103 from acting as a dealing representative of Investia while also acting as a dealing representative, officer, director, UDP and CCO of TSF.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that (1) the circumstances described above remain in place, and (2) the Exemption Sought expires on the earlier of the following:
i) one year from the date hereof;
ii) the date on which the surrender of TSF's registration is approved by the OSC.