Securities Law & Instruments


Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – under paragraphs 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 or if the individual is registered as a dealing, advising or associate advising representative of another registered firm – firms are not affiliated entities – first registered firm acquiring second registered firm’s client accounts – second registered firm intends to surrender registration – the firms have valid business reasons for individual to be registered with both firms – individual has sufficient time to adequately serve both firms – since one firm is winding up, 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 for a limited period of time

Applicable Legislative Provisions

Multilateral Instrument 11-102 Passport System, s. 4.7.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 15.1.

September 9, 2016

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
HOME INVESTMENT MANAGEMENT INC. (“Home”),
PANGAEA ASSET MANAGEMENT INC. (“Pangaea”) AND
RICHARD STRAND (“Strand”)

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from Home and Pangaea (collectively, the Filers) for a decision under the securities legislation of the Jurisdiction (the Legislation) for an exemption from the restrictions 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) to permit Strand to act as an advising representative, director and officer of Home while also acting as an advising representative and dealing representative of Pangaea for a limited period of time following the acquisition of substantially all of the assets of Home by Pangaea (the Exemption 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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by Home in Alberta and Saskatchewan and by Pangaea in Alberta, British Columbia, Manitoba and Saskatchewan.

Interpretation

Terms defined in MI 11-102, NI 31-103 and National Instrument 14-101 Definitions have the same meaning in this decision unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

Home

1.             Home is a company organized under the laws of Alberta, with its head office in Alberta. Home is currently registered in the categories of exempt market dealer and portfolio manager under the securities legislation of each of Alberta and Saskatchewan.

2.             The principal regulator of Home is the Alberta Securities Commission (the ASC).

3.             Home’s registration is subject to terms and conditions, including that Home and anyone acting on its behalf shall not, directly or indirectly:

(a)           accept any new clients or open any client accounts of any kind or

(b)           trade in any security, other than a full or partial liquidating transaction.

4.             Other than providing discretionary portfolio management services to two residents of Nova Scotia without having the appropriate registration or relying upon an appropriate exemption from registration, Home is not in default of any requirement of securities legislation in any jurisdiction of Canada.

Pangaea

5.             Pangaea is a company organized under the laws of Ontario, with its head office in Ontario. Pangaea is registered in the categories of investment fund manager, portfolio manager and exempt market dealer under the securities legislation of each of Alberta, British Columbia, Ontario and Saskatchewan. Additionally, Pangaea is registered in the category of exempt market dealer under the securities legislation of Manitoba.

6.             The principal regulator of Pangaea is the Ontario Securities Commission.

7.             Pangaea is not in default of any requirement of securities legislation in any jurisdiction of Canada.

The Transaction

8.             The Filers are each independently owned and are not affiliates of one another.

9.             The application for the Exemption Sought is made in relation to the transfer of substantially all of the assets of Home, including Home’s client accounts, to Pangaea (the Transaction). In connection with the Transaction, Strand will seek registration as a dealing representative and advising representative of Pangaea under the securities legislation of each of Alberta and Saskatchewan.

10.          Home will transfer all of its client accounts to Pangaea on or about September 16, 2016 (the Account Transfer Date). On or immediately after the Account Transfer Date, Home will submit an application for voluntary surrender of its registration to the ASC, its principal regulator.

Dual Registration

11.          Strand is a director and officer of Home and is registered as the ultimate designated person (UDP), the chief compliance officer (CCO) and the sole advising representative of Home.

12.          As soon as the Exemption Sought is granted, Pangaea will make a filing via the National Registration Database to add Pangaea as an additional sponsoring firm of Strand.

13.          The Exemption Sought will permit Strand:

(a)           as an officer, director and advising representative of Home, to facilitate the orderly wind-up of Home’s registerable business and operations, including the voluntary surrender of Home’s registration under applicable securities legislation; and

(b)           as an advising representative of Pangaea, to provide services in relation to former clients of Home who will become clients of Pangaea that are similar to the services he performed on behalf of Home.

14.          After the Account Transfer Date, Strand, as Home’s sole director, officer, UDP and CCO, will act in such capacity only to comply with regulatory requirements, including, as necessary, to surrender Home’s registration under securities legislation.

15.          Strand will have sufficient time and resources to adequately meet his obligations to each of the Filers.

16.          Home will ensure that Strand adheres to the terms and conditions imposed on the registration of Home.

17.          The Filers have in place policies and procedures to address any conflicts of interest that may arise as a result of the dual registration of Strand. Following the transfer of its client accounts to Pangaea, the activities of Home will be administrative in nature and will not include registerable activities of any kind, which should result in there being few, if any, conflicts of interest.

18.          Pangaea has compliance and supervisory policies and procedures in place to monitor the conduct of its representatives, including Strand, and to ensure that Pangaea can deal appropriately with any conflicts of interest that may arise.

19.          Pangaea will supervise the activities that Strand will conduct on behalf of Home in the same way that it does other outside business activities of its registered individuals, including by holding meetings regularly with him and by obtaining regular status reports from him.

20.          In the absence of the Exemption Sought, the Filers would be prohibited under paragraphs 4.1(1)(a) and 4.1(1)(b) of NI 31-103 from permitting Strand to act as an advising representative, director and officer of Home while also acting as an advising representative and dealing representative of Pangaea.

Decision

The Decision Maker 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 Maker 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 expires on the earlier of the following:

(a)           one year after the date hereof, and

(b)           the date on which the surrender of Home’s registration is accepted by the ASC.

“Marrianne Bridge”
Deputy Director,
Compliance and Registrant Regulation
Ontario Securities Commission