Relief under paragraph 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. 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.
October 16, 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 EVANGELINE SECURITIES LIMITED (ESL) AND IN THE MATTER OF INVESTIA FINANCIAL SERVICES INC. (Investia) (Investia and ESL are, collectively, the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (the 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 requirement 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 Trevor I. Hughes to be registered as a dealing representative of Investia and a dealing representative, ultimate designated person (UDP), chief compliance officer (CCO), officer and director of ESL for a limited period of time (the Exemption Sought) to maintain the registration of ESL to facilitate the transfer of ESL's client accounts (the Accounts) to Investia, and servicing the Accounts until their transfer out of ESL is complete.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) The Autorite des marches 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 Nova Scotia, Alberta, British Columbia, New Brunswick, Prince Edward Island, Saskatchewan, Newfoundland and Labrador, and the Northwest Territories;
(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 registered as: (i) a mutual fund dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan and Yukon; (ii) an exempt dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan and Yukon; (iii) a scholarship plan dealer in Quebec; and (iv) a restricted dealer in Quebec. Investia is a member of the Mutual Fund Dealers Association of Canada (MFDA).
2. Investia engages primarily in mutual fund dealing and distribution in Canada. Its head office is located in Quebec.
3. The principal regulator of Investia is the AMF.
4. ESL is registered as a mutual fund dealer in Nova Scotia, Alberta, British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan, Newfoundland and Labrador, and in the Northwest Territories. ESL is a member of the MFDA.
5. ESL engages primarily in mutual fund dealing and distribution in Nova Scotia. Its head office is located in Nova Scotia.
6. The principal regulator of ESL is the Nova Scotia Securities Commission (NSSC).
7. The Filers are not in default of any requirement of securities legislation in any jurisdiction where they are registered.
8. Investia has provided notice pursuant to Section 11.9 of NI 31-103 of the proposed transfer of substantially all of the Accounts of ESL to Investia (the Proposed Transaction). In addition to the Proposed Transaction, Trevor I. Hughes will be registered with Investia as a dealing representative.
9. The Proposed Transaction is designed to permit Investia to acquire the Accounts of ESL and expand its operations in the functional area of mutual fund dealing in Nova Scotia in a timely and efficient manner.
10. Trevor I. Hughes is currently a registered dealing representative, director, officer, CEO, UDP and CCO of ESL. Following the closing of the Proposed Transaction, it is intended that Trevor I. Hughes will be registered with Investia as a dealing representative, and will be the sole registered dealing representative, the sole director, sole officer, CEO, UDP and CCO of ESL for a limited period of time (the Dual Registration).
11. Prior to the closing date of the Proposed Transaction, clients of ESL will be provided with notice of the Proposed Transaction that includes information about the transfer of client accounts to Investia as well as information that ESL will no longer offer services to its clients.
12. Upon registration as a dealing representative with Investia, Trevor I. Hughes will limit his trading activities on behalf of ESL to trades on behalf of existing ESL clients pending transfer of their accounts from ESL to Investia or another registered firm.
13. Upon Trevor I. Hughes's registration as a dealing representative with Investia, ESL has agreed to certain terms and conditions being placed on its registration, including:
ESL, including its registered individual Trevor Hughes, will limit its trading activities to trades on behalf of existing ESL clients pending transfer of their accounts from ESL to Investia Financial Services Inc. or to another registered firm.
14. The Dual Registration will facilitate the completion of the Proposed Transaction, and will permit Trevor Hughes to:
(a) facilitate the orderly wind-up of ESL's business and operations, including the transferring out of the Accounts, the resignation of ESL's MFDA membership, and the voluntary surrender of ESL's registration in the jurisdictions in which it is registered; and
(b) provide services to the ESL client accounts that have not yet transferred out of ESL 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 ESL.
15. After the closing of the Proposed Transaction, ESL will cease its registerable activities and will not open any new client accounts. On or immediately after the closing date of the Proposed Transaction, ESL will submit an application for voluntary surrender of its registration to the NSSC, its principal regulator.
16. ESL has agreed to certain terms and conditions being placed on its registration after the Proposed Transaction closes which include that:
(a) ESL and all its registered individuals shall not trade in securities under securities law and will not open any new client accounts; and
(b) Trevor I. Hughes, as ESL's sole dealing representative, sole director, sole officer, UDP and CCO of ESL, will act in such capacity only to comply with regulatory requirements including as necessary to resign the membership of ESL with the MFDA, and has agreed to abide by, and ensure that ESL adheres to the terms and conditions imposed on the registration of ESL.
17. The terms and conditions referred to in paragraph 13 of this decision will be removed from ESL's registration when the terms and conditions referred to in paragraph 16 of this decision are placed on its registration.
18. Trevor I. Hughes will have sufficient time and resources to adequately meet his obligations to each firm.
19. The Filers have in place policies and procedures to address any conflicts of interest that may arise as a result of the Dual Registration and the inactive status of ESL will facilitate this, by largely or entirely avoiding any conflicts of interest.
20. Furthermore, Investia has compliance and supervisory policies and procedures in place to monitor the conduct of its representatives (including Trevor I. Hughes) and to ensure that Investia can deal appropriately with any conflict of interest that may arise.
21. Investia will supervise the activities that Trevor I. Hughes, will conduct on behalf of ESL, including by holding meetings regularly with him and by obtaining regular status reports from him.
22. In the absence of the Exemption Sought, Trevor I. Hughes, 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 ESL.
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 shall expire on the earlier of the following:
(i) one year from the date hereof,
(ii) the date on which the surrender of ESL's registration is approved.