Securities Law & Instruments


Headnote

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 reasons for the Representative to be registered with both firms – Both firms will be managing different activities and client bases, which will mitigate the risk of conflicts of interest arising from the dual registration – the Representative will have sufficient time to adequately serve both firms – Both firms have policies and procedures in place to address potential conflicts of interest and the dually registered representatives are aware of those procedures – 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.

August 9, 2016

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
CHEVERNY CAPITAL INC.
(Cheverny)

AND

CORDIANT CAPITAL INC.
(Cordiant) (the Filers)

DECISION

Background

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 requirement in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registration Obligations (NI 31-103) pursuant to section 15.1 of NI 31-103 to permit Benn Mikula (the Representative) to be registered as a dealing representative of Cheverny and as a dealing representative of Cordiant (the Exemption Sought).

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 Alberta and British Columbia; and

(c)           the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

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:

1              The Filers are both corporations governed by the Canada Business Corporations Act.

2              The head office of each Filer is located in Montréal, Québec.

3              Cordiant is an exempt market dealer registered with the securities regulatory authorities in Alberta, Ontario and Quebec and is registered as an Investment Fund Manager and Portfolio Manager with Ontario and Quebec. Cordiant is also registered with the U.S. Securities and Exchange Commission and Commission de surveillance du secteur financier (Luxembourg).

4              Cheverny is an exempt market dealer registered with the securities regulatory authorities in each of Alberta, British Columbia, Quebec and Ontario.

5              Cordiant is an affiliate of Cheverny since they are both wholly-owned by Dominion & Colonial Investment Partners Inc. (D&C). D&C is beneficially owned by Jean-Francois Sauve, James T. Kiernan and the Representative.

6              Neither Cheverny nor Cordiant are in default of any requirement of securities legislation in any jurisdiction of Canada.
7              The Representative is registered as a dealing representative of Cordiant in Quebec, Alberta, and Ontario and is seeking registration as a dealing representative of Cheverny in Quebec, Alberta, British Columbia and Ontario.

8              The objective of the Representative to be registered with both Filers is to ensure that, in his role as senior executive of both firms, he will be able to provide strategic guidance and leadership at each firm as well as be able to participate in client meetings.

9              At Cordiant, the Representative is responsible for defining strategy, managing the company and developing relations with large institutional investors in the context of seeking capital to manage in one of Cordiant's emerging market private debt funds.

10           At Cheverny, the Representative will interact with the senior leadership of large corporations and private equity groups in relation to strategy, mergers and acquisitions (M&A) issues and capital structure optimisation.

11           The dual registration of the Representative at each of Cordiant and Cheverny would create operational efficiencies and optimization of resources for the two affiliated entities.

12           There will be minimal potential for conflicts of interest or client confusion because there is very little or no overlap between the activities of each Filer. Cordiant is an investment manager overseeing funds that invest in emerging and frontier market debt in Africa, Latin America, and Asia. Cheverny focuses on M&A and corporate strategy for businesses in Canada and Europe. Moreover the client base of each Filer is different.

13           The Representative will not engage in any discretionary trading or otherwise have any discretionary authority in his capacity as a dealing representative of Cordiant.

14           The Representative will have sufficient time and resources to adequately serve each Filer and its clients. The Representative will spend the majority of his time fulfilling his duties in his capacity as a dealing representative of Cheverny. The representative will devote approximately 25 hours at Cordiant and 40 hours at Cheverny.

15           The Representative will be subject to supervision by and to the applicable compliance requirements of, both Filers. The existing compliance and supervisory structures will apply depending on which regulatory entity on whose behalf the Representative is acting.

16           The Representative will act in the best interests of both his Cheverny clients and his Cordiant clients and deal fairly, honestly and in good faith.

17           In case Cheverny would be called upon to act in a transaction that might be of interest to Cordiant, all the parties (the client, the Filers and any other interested party) would be informed of any potential conflict.

18           Both Cheverny and Cordiant are subject to the conflict of interest requirements set out in NI 31-103 and such requirements will be complied with at all times.

19           Each of the Filers has policies and procedures to address conflicts of interest and all the directors and officers of each Filer are aware of those policies and procedures.

20           The roles of the Representative at the Filers will be disclosed to clients by the Representative both verbally and via the websites of the Filers. Relevant written materials will disclose that the Filers are affiliates.

21           In the absence of the Exemption Sought, the Representative would be prohibited under paragraph 4.1(1)(b) of NI 31-103 from acting as a dealing representative of Cheverny, while also acting as a dealing representative of Cordiant, even though the Filers are affiliates.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

“Maryse Pineault”
Senior Director, Distribution Practices
Autorite Des Marches Financiers