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 – The registered firms have valid business reasons for the individuals to be registered with both firms; the situation will last only until the registration of the acquired firm is surrendered and, if applicable, its membership with an SRO is terminated; the individuals will have sufficient time to adequately serve both firms; the situation will last only until the earlier of one year from the date of the relief and the date that the registration of the acquired firm is surrendered or terminated; the firms have policies and procedures in place to manage potential conflicts of interest; the firms are able to deal with any potential conflicts, including by supervising how the individual will deal with these conflicts.

 

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 27, 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

LAURUS INVESTMENT COUNSEL INC. (Laurus),

BLUEWATER INVESTMENT MANAGEMENT INC. (Bluewater) AND

DENNIS STARRITT (Starritt)

 

DECISION

 

Background

 

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from Laurus and Bluewater (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 Starritt to act as an advising representative and officer of Laurus while also acting as a director, officer and advising representative of Bluewater for a limited period of time following the acquisition of substantially all the assets, including the bulk transfer of client accounts, of Bluewater by Laurus (the Exemption Sought).

 

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

 

(a)           the Ontario Securities Commission (OSC) 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 Laurus 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:

 

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

 

2.             The principal regulator of Laurus is the OSC.

 

3.             Laurus is not in default of any requirement of securities legislation in any jurisdiction of Canada.

 

4.             Bluewater is a company organized under the laws of Ontario, with its head office in Toronto, Ontario. Bluewater is registered in the category of portfolio manager under the securities legislation of Ontario.

 

5.             The principal regulator of Bluewater is the OSC.

 

6.             Bluewater is not in default of any requirement of securities legislation in any jurisdiction of Canada.

 

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

 

The Transaction

 

8.             The application for the Exemption Sought is made in relation to the transfer of substantially all of the assets of Bluewater, including Bluewater’s client accounts and certain other assets to Laurus (the Transaction). In connection with the Transaction, Starritt will seek registration as an advising representative of Laurus under the securities legislation of Ontario, Alberta, British Columbia, Manitoba and Saskatchewan.

 

9.             Pursuant to section 11.9 of NI 31-103 the Filers notified the OSC of the Transaction by letter dated August 22, 2016.

 

10.          Bluewater will transfer all of its client accounts and sub-advisory agreements to Laurus on or about September 30, 2016 (the Transaction Date).

 

Dual Registration

 

11.          Starritt is currently the director and officer of Bluewater and is registered as the ultimate designated person (UDP), the chief compliance officer (CCO), and sole advising representative of Bluewater.

 

12.          On or after the Transaction Date, Starritt will:

 

(a)           terminate his registration as an advising representative of Bluewater, and

 

(b)           subsequently seek registration as an advising representative of Laurus, be appointed as an officer of Laurus, and will continue as director and officer of Bluewater until the surrender of Bluewater’s registration under applicable securities legislation is complete and accepted by the OSC (the Dual Registration).

 

13.          Upon registration as an advising representative of Laurus, Starritt will no longer be involved in trading activities on behalf of Bluewater.

 

14.          Upon completion of the Transaction, Bluewater agreed to the following term and condition being placed upon its registration:

 

(a)           Bluewater and its registered individuals will not trade in securities within the meaning of applicable securities laws and will not open any new client accounts; and

 

(b)           Starritt, as a director, non-trading officer, UDP and CCO of Bluewater, will act in such capacity only to comply with regulatory requirements, including, as necessary, to complete the surrender of Bluewater’s registration which surrender application has been submitted to the OSC.

 

15.          The Dual Registration will permit Starritt:

 

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

 

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

 

16.          Effective as of the Transaction Date, Bluewater will cease its registrable activities and will not open any new client accounts. Following the Transaction Date, Bluewater will notify the OSC of the completion of the Transaction, and will continue with the steps required to complete the surrender of its registration under applicable securities legislation. Bluewater expects to complete the wind-up of its registrable business and operations by January 2017.

 

17.          Subject to the issuance of the Exemption Sought, Laurus will, on the Transaction Date, submit an application via the National Registration Database to register Starritt as an advising representative of Laurus.

 

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

 

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. The limited activities of Bluewater and Starritt following the Transaction Date 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.

 

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

 

21.          Laurus will supervise the activities that Starritt will conduct on behalf of Bluewater 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.

 

22.          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 Starritt to act as an advising representative and officer of Laurus while also acting as an officer, director and advising representative of Bluewater.

 

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:

 

(a)           the Exemption Sought is effective on the date the Transaction is completed;

 

(b)           the Exemption Sought shall expire on the earlier of the following:

 

(i)            one year after the date hereof; and

 

(ii)           the date on which the surrender of Bluewater’s registration is accepted by the OSC.

 

“Marrianne Bridge”

Deputy Director,

Compliance and Registrant Regulation

Ontario Securities Commission