Register today for OSC Dialogue 2024: Inviting, thriving and secure capital markets
Euro Pacific Canada Inc. (ECI) and Dundee Securities Ltd. (DSL)
Headnote
Multilateral Instrument 11-102 Passport System -- National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 33-109 Registration Information (NI 33-109) and Derivatives Regulation (Québec) -- relief from certain filing requirements of NI 33-109 and Derivatives Regulation (Québec) in connection with a bulk transfer of business locations and registered individuals pursuant to an asset purchase in accordance with section 3.4 of Companion Policy 33-109CP to NI 33-109.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System.
National Instrument 33-109 Registration Information and Companion Policy 33-109CP.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
Derivatives Act (Québec) and Derivatives Regulation (Québec).
March 22, 2016
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO AND QUÉBEC AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF EURO PACIFIC CANADA INC. (ECI) AND DUNDEE SECURITIES LTD. (DSL) (the Filers)
DECISION
Background
The principal regulator in Ontario has received an application from the Filers for a decision under the securities legislation of Ontario (the Legislation) for relief from the requirements contained in sections 2.2, 2.3, 3.2 and 4.2 of National Instrument 33-109 Registration Information (NI 33-109) pursuant to section 7.1 of NI 33-109 to allow the bulk transfer (the Bulk Transfer) of the securities registration of certain dealing representatives (the Representatives) and their respective locations at DSL in Montreal, Ottawa, Toronto, Calgary, Vancouver and Victoria to ECI, on or about April 22, 2016 (the Closing Date), in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Exemption Sought).
The securities regulatory authority in Québec (the Derivatives Decision Maker) has received an application from the Filers for a decision under the derivatives legislation of Québec for relief from section 11.1 of the Derivatives Regulation (Québec) pursuant to section 86 of the Derivatives Act (Québec) to allow the Bulk Transfer of any Representatives registered under Québec derivatives legislation and their respective locations at DSL in Montreal, Ottawa, Toronto, Calgary, Vancouver and Victoria to DSL, on the Closing Date, in accordance with section 3.4 of the Companion Policy to NI 33-109 (the Derivatives Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a hybrid application):
(i) the Ontario Securities Commission is the principal regulator for this application;
(ii) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each jurisdiction of Canada outside of Ontario (together with Ontario, the Jurisdictions);
(iii) the decision with respect to the Exemption Sought is the decision of the principal regulator; and
(iv) the decision with respect to the Derivatives Exemption Sought evidences the decision of the Derivatives Decision Maker.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
ECI
1. ECI is a corporation incorporated under the Canada Business Corporations Act and has its head office at 150 York Street, Suite 1100, Toronto, Ontario, M5H 3S5.
2. ECI is registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan in the category of investment dealer. ECI is also registered in the category of derivatives dealer in Québec.
3. ECI is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and is approved by IIROC to carry out business in the categories of securities, options and managed accounts.
4. ECI is not in default of the securities legislation in any of the Jurisdictions.
DSL
5. DSL is a corporation incorporated under the Business Corporations Act (Ontario) and has its head office at 1 Adelaide Street East, Suite 2100, Toronto, Ontario M5C 2V9.
6. DSL is registered as an investment dealer in all of the Jurisdictions and is also registered as a derivatives dealer in Québec.
7. DSL is a member of IIROC and is approved by IIROC to carry out business in the categories of securities, options and managed accounts.
8. DSL is not in default of the securities legislation in any of the Jurisdictions.
Acquisition
9. EuroPacific Canada Holdings Inc. (EPC), ECI, which is a wholly-owned subsidiary of EPC, DSL and 9590820 Canada Inc. (Holdco), which will be a wholly-owned subsidiary of DSL on the Closing Date, entered into an asset and share purchase agreement dated as of January 21, 2016 (the Asset and Share Purchase Agreement) whereby DSL, which will have assigned the employment agreements of approximately 118 dealing representatives of DSL and their related support teams (together, the Transferred Employees) to Holdco on the Closing Date, will sell the shares of Holdco to ECI on the Closing Date and will transfer the client accounts of the Transferred Employees to ECI on the Closing Date. A majority of the Transferred Employees were previously transferred to DSL in connection with its asset and share purchase agreement with Richardson GMP Limited dated as of January 13, 2014.
10. In addition, ECI will be acquiring offices or office space (including the relevant lease of space and certain equipment and furniture located in such space) at which the Transferred Employees work in Toronto, Montreal, Ottawa, Calgary, Vancouver and Victoria. At the time of the Bulk Transfer, all of the employees working in such offices will be Transferred Employees.
11. Immediately following the completion of the bulk transfer of the Transferred Employees' client accounts: (i) all of the offices where the Transferred Employees are located will cease to be offices of DSL and will become offices of ECI; (ii) ECI will take over all of the rent obligations relating to these new ECI offices from DSL, as it pertains to the lease agreements for these offices; and (iii) these offices will have ECI signage and no DSL signage. For clarity, the Transferred Employees are currently the only DSL employees located in these offices. That is, at the time that these offices become offices of ECI, all of the employees working in such offices will be Transferred Employees.
12. On the Closing Date, subject to IIROC's approval (the IIROC Approval), the employment agreements of the Transferred Employees will be assigned to Holdco, without the need for a formal agency agreement between DSL or ECI and Holdco. As part of the transaction with DSL, ECI will acquire all of the issued and outstanding shares of Holdco on the Closing Date, which will then amalgamate with ECI on the next day after the Closing Date.
13. Effective on the Closing Date, all of the registrable activities of the Transferred Employees will be transferred from DSL to ECI. Subject to obtaining the Exemption Sought, the Derivatives Exemption Sought, the IIROC Approval, and the above-mentioned amalgamation of ECI and Holdco, no disruption in the services provided by the Transferred Employees to their clients is anticipated as a result of ECI acquiring the employment agreements and client accounts of the Transferred Employees.
14. Other than the addition of a new Chief Operating Officer and a new Chief Financial Officer for ECI, the senior management and operations of DSL and ECI will not change as a result of the transfer of the Transferred Employees.
15. Pursuant to section 14.11 of National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations, a notice has been mailed to the clients of the Transferred Employees advising them of their right to close their account prior to the Closing Date.
16. A press release was issued on January 21, 2016 announcing that EPC, ECI and DSL had entered into the Asset and Share Purchase Agreement. An additional press release will be issued immediately after the Closing Date confirming the acquisition of the Transferred Employees by ECI.
Submissions in support of exemptions
17. Neither the Exemption Sought nor the Derivatives Exemption Sought will have any negative consequences on the ability of ECI or DSL to comply with any applicable regulatory requirements or the ability to satisfy any obligations in respect of the clients of the Transferred Employees.
18. Given the number of Transferred Employees that will be transferred from DSL to ECI on the Closing Date, it would be unduly time consuming and difficult to transfer each of the Transferring Employees to ECI through the National Registration Database (NRD) in accordance with the requirements of NI 33-109 if the Exemption Sought and Derivatives Exemption Sought are not granted.
19. Both Applicants are: (i) registered in some of the same categories of registration in many of the same Jurisdictions; (ii) members of IIROC; and (iii) approved to carry out securities, options and managed accounts with IIROC, affording the opportunity to seamlessly transfer the Transferred Employees and the affected business locations on the closing of the transaction by way of Bulk Transfer and thereby ensure that there is no interruption in registration.
20. At the time of the Bulk Transfer, all of the Transferred Employees will be the only employees of DSL at the branch or sub-branch at which they work. Accordingly, the transfer of registrations of the Transferred Employees in those locations to ECI on the Closing Date by means of the Bulk Transfer can be implemented in a relatively simple manner without any significant disruption to the registrable activities of the Transferred Employees, ECI or DSL, and will be easier to administer than having to transfer the registration of each of the Transferred Employees on an individual basis.
21. Allowing the Bulk Transfer of the Transferred Employees to occur on the closing of the transaction will benefit (and have no detrimental impact on) the clients of the Transferred Employees by facilitating seamless service on the part of the Transferred Employees.
22. The Exemption Sought and Derivatives Exemption Sought comply with the requirements of and the reasons for, a bulk transfer as set out in Section 4.3 of the Companion Policy to NI 33-109 and Appendix C thereto.
23. It would not be prejudicial to the public interest to grant the Exemption Sought and the Derivatives Exemption Sought.
Decision
Each of the principal regulator and the Derivatives Decision Maker is satisfied that the decision meets the test set out in the Legislation and the Derivatives Act (Québec) for the principal regulator and the Derivatives Decision Maker, respectively, to make the decision.
The decision of the principal regulator under the Legislation is the Exemption Sought is granted, provided that the Filers make acceptable arrangements with CGI Information Systems and Management Consultants Inc. for the payment of the costs associated with the Bulk Transfer, and make such arrangements in advance of the Bulk Transfer.
The decision of the Derivatives Decision Maker under the Derivatives Act (Québec) is that the Derivatives Exemption Sought is granted, provided that the Filers make acceptable arrangements with CGI Information Systems and Management Consultants Inc. for the payment of the costs associated with the Bulk Transfer, and make such arrangements in advance of the Bulk Transfer.
"Marrianne Bridge"
Deputy Director, Compliance and Registrant Regulation
Ontario Securities Commission