Under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a firm registered in any jurisdiction of Canada 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 firm registered in any jurisdiction of Canada. The Filers are affiliated entities and have valid business reasons for the individual to be registered with both firms. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the restriction.
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 22, 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 FIDUCIARY TRUST COMPANY OF CANADA (FTCC) AND FRANKLIN TEMPLETON INVESTMENTS CORP. (FTIC, and together with FTCC, 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 Mr. Stephen R. Lingard to be registered as an advising representative of each of FTCC and FTIC (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 of the provinces of Canada and in the Yukon (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. FTCC is registered as a portfolio manager in each of the provinces of Canada and in the Yukon and as a commodity trading manager in Ontario. FTCC is incorporated under the Loan and Trust Companies Act (Canada). The head office of FTCC is located in Toronto, Ontario.
2. FTIC is registered as a portfolio manager, exempt market dealer and mutual fund dealer in each of the provinces of Canada and in the Yukon. FTIC is also registered as an investment fund manager in each of Alberta, British Columbia, Manitoba, Newfoundland & Labrador, Nova Scotia, Ontario and Quebec and as a commodity trading manager in Ontario. FTIC is amalgamated under the laws of Ontario. The head office of FTIC is located in Toronto, Ontario.
3. FTIC is also registered as an investment adviser with the U.S. Securities and Exchange Commission (SEC).
4. FTCC and FTIC are affiliates as FTCC is a wholly-owned subsidiary of FTIC.
5. Mr. Lingard is a Senior Vice-President and Portfolio Manager and co-head of the Equity Strategy team within the Franklin Templeton Solutions (FTS) group, a global investment management team which is part of Franklin Templeton Investments. FTS has group members domiciled in various countries throughout the world. In Canada, the FTS group is part of FTCC. Mr. Lingard is also a voting member of FTS' Global Investment Committee which sets asset allocation policy and overall investment strategy for FTS. His primary responsibilities include portfolio management and investment research globally for the FTS group.
6. Mr. Lingard has been registered in an advisory capacity since April 27, 2007 (from April 27, 2007 to September 28, 2009 as an advising officer and since September 28, 2009 as an advising representative, due to the implementation of NI 31-103) in each of the provinces of Canada and in the Yukon. Mr. Lingard has also been registered as an advising representative pursuant to FTCC's commodity trading manager registration in Ontario since May 7, 2015. Mr. Lingard is a resident of Ontario. As part of Mr. Lingard's portfolio management duties, he is responsible for management and monitoring of the portfolios which he co-leads. These multi-asset portfolios use various asset classes, including stocks, bonds, currencies and other alternative strategies, where appropriate. Implementation of investment ideas are made by internal Franklin Templeton Investments managers and external managers using a variety of strategies and instruments, such as ETFs, alternatives and derivative strategies. He co-manages portfolios in excess of CDN $10 billion in Canada and globally and contributes to the management and research of other portfolios managed by the FTS group with assets in excess of USD $40 billion globally. Within Mr. Lingard's investment research responsibilities as co-head of the Equity Strategy team, he provides research and investment ideas to the FTS global portfolio management team within equities, including advising on the best methods to implement such research and investment ideas, which may include derivative strategies such as futures and options.
7. The FTS group has been retained as a portfolio manager by a third party international financial services complex to advise certain of its U.S.-domiciled and Luxembourg-based mutual funds. Franklin Templeton Investments wishes to appoint Mr. Lingard as the portfolio manager for several of such funds; however, Mr. Lingard is presently only registered with FTCC and is unable to provide investment management services to U.S. clients. Dual registration as an advising representative of both FTIC and FTCC would allow Mr. Lingard to advise U.S. domiciled mutual funds, since FTIC is registered with the SEC and would also allow Mr. Lingard to continue to provide investment management services to FTCC clients.
8. Dual registration is being requested to permit Mr. Lingard to provide portfolio management services to clients located outside of Canada, but from within Canada, under FTIC's SEC registration (in addition to its registrations with the Jurisdiction). Mr. Lingard would continue to advise any current or future Canadian domiciled clients strictly pursuant to his FTCC registration.
9. Mr. Lingard will be subject to supervision by, and the applicable compliance requirements of, both Filers.
10. The Filers' Chief Compliance Officer will ensure that Mr. Lingard has sufficient time and resources to adequately serve each Filer and its clients.
11. The Filers are not in default of any requirement of securities legislation in any jurisdiction of Canada.
12. FTCC and FTIC are affiliated and accordingly, the dual registration of Mr. Lingard will not give rise to the conflicts of interest present in a similar arrangement involving unrelated, arm's length firms. The interests of the Filers are aligned and therefore the potential for conflicts of interest is minimal.
13. 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 Mr. Lingard and will be able to deal appropriately with any such conflicts. Further, it is expected that Mr. Lingard, if the Relief Sought is granted, will only be advising non-Canadian clients in his capacity as an advising representative of FTIC. This will mitigate the risks of conflicts of interest arising from Mr. Lingard's dual registration.
14. The Filers do not expect that the dual registration of Mr. Lingard will create significant additional work for him and are confident that Mr. Lingard will continue to have sufficient time and resources to adequately serve both firms and their clients.
15. The relationship between FTCC and FTIC, and the fact that Mr. Lingard is dually registered with both FTCC and FTIC, will be fully disclosed to clients of each of FTCC and FTIC that deal with Mr. Lingard.
16. Mr. Lingard will act in the best interest of all clients of each Filer and will deal fairly, honestly and in good faith with these clients.
17. In the absence of the Relief Sought, the Filers would be prohibited by the Dual-Registration Restriction from permitting Mr. Lingard to be registered as an advising representative of each Filer, even though the Filers are affiliates and have controls and compliance procedures in place to deal with Mr. Lingard's advising activities.
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 representations described above in paragraphs 13, 14, 15 and 16 remain true.