Under paragraph 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 is registered as a dealing, advising or associate advising representative of another registered firm. The Filers are affiliated entities and have valid business reasons for the individuals to be registered with both firms. The Filers have agreed that up to a maximum of ten individuals will be dually registered under the exemption at any point in time. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the prohibition.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 4.1(b).
July 20, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF COUNSEL PORTFOLIO SERVICES INC. (COUNSEL) AND IPC SECURITIES CORPORATION (IPC, and together with COUNSEL, the Filers)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the restriction under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the Dual-Registration Restriction), pursuant to section 15.1 of NI 31-103 to permit Jenifer Rush, and future individuals, to be registered as a dealing representative of IPC and to be also registered as an associated advising representative or advising representative of Counsel (collectively, the Representatives) (the Relief Sought).
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 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 by the Filers in each jurisdiction of Canada outside of Ontario (together with Ontario, the 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.
This decision is based on the following facts represented by the Filers:
1. Counsel is registered as an investment fund manager in each of Newfoundland and Labrador, Ontario and Québec and as an adviser in the category of portfolio manager in Ontario. The head office of Counsel is located in Ontario. Counsel manages mutual funds offered by Fund Facts, simplified prospectus and annual information form (collectively, prospectus documents) and known as the Counsel Funds. As explained more completely in the representations that follow, Counsel also acts as the sub-adviser to IPC's Private Wealth program.
2. IPC is registered as a dealer in the category of investment dealer in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Ontario, Prince Edward Island, Québec, Saskatchewan and Yukon. IPC is a member of the Investment Industry Regulatory Organization of Canada (IIROC). The head office of IPC is located in Ontario.
3. IPC and Counsel are affiliated registrants.
(a) IPC is a direct wholly-owned subsidiary of Investment Planning Counsel Inc. (IPCI). IPCI is in turn majority-owned by IGM Financial Inc.
(b) Counsel is a wholly-owned subsidiary of IPC Portfolio Services Inc., which in turn is a majority-owned subsidiary of IPCI.
(c) Since each of Counsel and IPC are under IPCI's common control, each such entity is an affiliate of the other.
4. IPC offers a Private Wealth program with managed model portfolios operated pursuant to IIROC rules regulating "managed accounts". IPC Private Wealth program clients are invested in securities according to a model portfolio that is suitable for that client having regard to their investment objectives and financial goals. Clients of the IPC Private Wealth program are IPC clients and all investments for their accounts (that is, the model portfolio) are approved of and monitored by an IPC registered portfolio manager.
5. IPC has engaged Counsel as a sub-adviser to develop model portfolios for the IPC Private Wealth program and to manage those model portfolios. Counsel also engages its own sub-advisers (registered adviser firms) to develop model portfolios and then monitors the various sub-advisers' adherence to their mandates and evaluates changes within their corporate structure or their investment management teams to determine if any such change(s) might impact their ability to meet stated investment objectives. Counsel manages the various model portfolios and makes the investment decisions as to which securities, including securities of the Counsel Funds, each model portfolio will be invested. Counsel also works with IPC dealing representatives to assist them in constructing portfolios for IPC clients and in conducting asset allocation analysis.
6. At the present time, two portfolio manager representatives of IPC are also registered with Counsel as advising representatives (the Existing Representatives), with the applicable approvals of IIROC and the Ontario Securities Commission. The reason for this dual registration is to allow for efficient and effective management of the IPC Private Wealth program, through the Existing Representatives' participation in the management of the program directly for IPC (for example, the Existing Representatives in their capacity as IPC portfolio managers approve all recommendations and monitor the investments of each managed account), and also for Counsel, in its capacity as sub-adviser to IPC in respect of the IPC Private Wealth program. The dual registration of Representatives represented by the Relief Sought will allow for appropriate succession planning, in that there will a number of portfolio managers for IPC and also for Counsel who are familiar with managing the IPC Private Wealth Program.
7. Ms. Rush is registered as a dealing representative of IPC. She is authorized by IIROC to manage investment portfolios on a discretionary basis. As part of this role, Ms. Rush manages and maintains model portfolios and the underlying fixed income mandate portion of the models. She is resident in Ontario.
8. Ms. Rush is familiar with the business model of the IPCI group of companies, including that of Counsel. IPC and Counsel consider it desirable that Ms. Rush also be registered as an advising representative of Counsel. Ms. Rush qualifies as an advising representative of a registered adviser under applicable securities regulations.
9. IPC may wish to engage additional Representatives to work for IPC in connection with the IPC Private Wealth program, and it may be beneficial that these Representatives also become registered with Counsel as advising representatives or associate advising representatives, provided they so qualify under applicable securities regulations. IPC and Counsel expect that additional Representatives will be so engaged as necessary depending on the status of the Existing Representatives (i.e. whether or not the Existing Representatives continue to be engaged by IPC and Counsel) and also the growth of the IPC Private Wealth program. At the present time, IPC and Counsel foresee the need for up to four additional Representatives, in addition to Ms. Rush and the Existing Representatives, to be so dually registered (but this may change depending on the growth of the IPC Private Wealth program and succession planning needs).
10. It is expected that the role of Ms. Rush, and any other Representative, as an advising representative at Counsel will not involve advising clients of Counsel directly, but will be in connection with the management and administration of the IPC Private Wealth program and will include (among other things):
(a) assisting IPC dealing representatives with portfolio construction and asset allocation analysis;
(b) participating in Counsel's due diligence, selection and oversight of sub-advisers; and
(c) conducting asset allocation analysis and rebalancing in respect of portfolio services offered by Counsel in respect of the IPC Private Wealth program.
11. Ms. Rush and any other Representatives so dually registered will continue to be representatives of IPC and in such capacity will not generally be client facing at IPC but will have such duties relating to the IPC Private Wealth program as considered appropriate, this may involve direct discussions with IPC clients about the program and their investments, as well as sign-off and approval of recommendations to IPC clients regarding a model portfolio.
12. Ms. Rush and any other Representative will be registered with both Filers for valid business reasons, namely efficiencies in managing and administering the IPC Private Wealth program and succession planning. They will become:
(a) Registered as advising representatives or associate advising representatives under the registration of Counsel in the jurisdictions where Counsel is registered; and
(b) Approved by IIROC to provide discretionary management in respect of managed accounts in the jurisdictions where IPC is registered.
13. Ms. Rush and any other Representative will be subject to supervision by, and the applicable compliance requirements of, both Filers. The Filers' respective Chief Compliance Officers will ensure that Ms. Rush and each other Representative has sufficient time and resources to adequately serve each Filer and its clients.
14. The Filers are not in default of any requirement of securities legislation in any jurisdiction of Canada.
15. In the absence of the Relief Sought, the Filers would be prohibited by the Dual-Registration Restriction from permitting Ms. Rush to act as an advising representative of Counsel and any other Representative to act as an advising, associate advising, and/or dealing representative of both Filers, even though the Filers are affiliates and have controls and compliance procedures in place to deal with their advising and/or dealing activities.
16. The Filers are related entities and are members of the IPCI group of companies. Accordingly, the dual registration of Ms. Rush and the Representatives will not give rise to the conflicts of interest that may be present in a similar arrangement involving unrelated, arm's length firms. The interests of Counsel and IPC are aligned in connection with the appropriate management and administration of the IPC Private Wealth program, and as the role of Ms. Rush and the Representatives at Counsel will be to support the business activities and interest of both IPC and Counsel in respect of the program, the potential for conflicts of interest arising from the dual registration is remote. Further, since it is expected that Ms. Rush and the Representatives will not be advising clients directly as advising representatives of Counsel, there is minimal potential for conflicts of interest or client confusion in this respect.
17. The Filers each have adequate policies and procedures in place to address any potential conflicts of interest that may arise as a result of the dual registration of Ms. Rush and the Representatives and will be able to appropriately deal with any such conflicts, should they arise.
18. The Filers do not expect that the dual registration of Ms. Rush and the Representatives will create significant additional work and are confident that Ms. Rush and the Representatives will continue to have sufficient time to adequately serve both firms. The Filer's management will ensure that Ms. Rush and Representatives will have sufficient time and resources to adequately serve both firms.
19. The dual registration of the Representatives, including the Existing Representatives, will be disclosed to clients of IPC. The disclosure will be made in writing prior to the respective Representative providing services to the applicable client. The securityholders of the Counsel Funds are provided disclosure of Counsel's affiliated registrant relationship with IPC in the prospectus disclosure documents for such funds.
20. There is adequate supervision of the identified conflicts of interest to ensure that Representatives, and each of the Filers, can deal appropriately with any conflict of interest that may arise. The Representatives are currently and will continue to be under the supervision of both Filers and are subject to all policies and procedures addressing conflicts of interest that may arise as a result of the Dual Registration.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Relief Sought is granted provided that the circumstances described above remain in place and at any point in time, the Filers have no more than ten Representatives (for these purposes including the Existing Representatives) who are registered with both Filers.