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) – relief from certain filing requirements of NI 33-109 in connection with a bulk transfer of business locations and registered and non-registered individuals pursuant to an asset acquisition in accordance with section 3.4 of Companion Policy 33-109CP to NI 33-109.
September 29, 2016
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
GMP SECURITIES L.P.
FIRSTENERGY CAPITAL CORP.
The principal regulator in the Jurisdiction has received an application form the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from sections 2.2, 2.3, 2.5, 3.2, and 4.2 pursuant to section 7.1 of National Instrument 33-109 Registration Information (NI 33-109) to allow the bulk transfer (the Bulk Transfer) of all the registered representatives and permitted individuals (Registered Individuals) and all the locations of FirstEnergy Capital to Securities LP resulting from the proposed transaction hereinafter described on or about September 30, 2016, in accordance with section 3.4 of the Companion Policy to NI 33-109 (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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filers in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (together with Ontario, the Jurisdictions).
Defined terms contained in National Instrument 14-101 – Definitions 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. Securities LP is a limited partnership formed under the laws of the Province of Manitoba. Griffiths McBurney L.P. (GMLP) holds all of the 11,000,001 limited partnership units in Securities LP and Griffiths McBurney Canada Corp. (GMCC) holds all of the 866,657,673 preferred units and the sole general partner interest in Securities LP.
2. Securities LP is a self-clearing investment dealer and acts as a Type 2 carrying broker for Richardson GMP Limited (RGMP) pursuant to a Uniform Type 2 Introducing/Carrying Broker Agreement dated November 12, 2009 (the Securities LP Self-Clearing Platform).
3. Securities LP is a member of Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). It is also a member of the Toronto, Montreal and TSX Venture stock exchanges. It is registered as an investment dealer with the Ontario Securities Commission (the OSC), the Alberta Securities Commission (the ASC), the Autorité des marches financiers (the AMF), the British Columbia Securities Commission (the BCSC), the New Brunswick Financial and Consumer Services Commission (the NBFCSC), the Nova Scotia Securities Commission (the NSSC), the Manitoba Securities Commission (the MSC), Prince Edward Island Office of the Superintendent of Securities Office (the PEIRS), the Saskatchewan Financial and Consumer Affairs Authority – Securities Division (the SFCAA) and the Securities Commission of Newfoundland and Labrador (the NLSC) and as a derivatives dealer with the AMF.
4. As of the date hereof, Securities LP has approximately 64 Representatives registered in one or more of the Jurisdictions and 3 business locations in one or more of the Jurisdictions.
5. Securities LP is not in default of securities legislation in any of the Jurisdictions.
6. FirstEnergy Capital is a corporation incorporated pursuant to the laws of the Province of Alberta. The authorized share capital of FirstEnergy Capital consists of 117,425,103 non-voting preferred shares and 100 special common shares. All of the issued and outstanding preferred shares of FirstEnergy Capital are owned by FirstEnergy Capital Holdings Corp. (FirstEnergy Holdings).
7. FirstEnergy Capital is an energy focused boutique which offers a range of services including equity underwriting, merger and valuation advisory services, identifying potential candidates in acquisition or divestiture transactions, trading securities and providing research to corporate, institutional and retail clients as they relate to the energy sector.
8. FirstEnergy Capital is a member of IIROC and CIPF. It is registered as an investment dealer with the ASC, the BCSC, the MSC, the NBFCSC, the NSSC, the OSC, the AMF and the SFCAA.
9. FirstEnergy Capital acts as a Type 4 introducing broker to Fidelity Clearing Canada ULC pursuant to a Uniform Type 4 Introducer/Carrier Broker Agreement dated May 30, 2012 (the FirstEnergy/Fidelity Clearing Platform).
10. As of the date hereof, FirstEnergy Capital has approximately 33 Representatives registered in one or more of the Jurisdictions and one business location which has its head office in Calgary.
11. FirstEnergy Capital is not in default of securities legislation in any of the Jurisdictions.
The Proposed Transaction
12. Pursuant to a Securities Purchase Agreement dated August 4, 2016 among FirstEnergy Holdings, a series of individual vendors (the Vendors) and GMP Capital Inc. (GMP), the Vendors have agreed to sell, and GMP has agreed to purchase, all of the issued and outstanding shares of FirstEnergy Holdings (the Proposed Transfer of Shares).
13. Immediately following the acquisition of FirstEnergy Holdings’ shares and as part of a larger corporate reorganization, FirstEnergy Capital will transfer all of its assets to Securities LP in consideration for: (i) the assumption of some or all of FirstEnergy Capital’s liabilities in respect of the transferred assets; and (ii) a limited partnership interest of Securities LP (the Proposed Transfer of Assets, together with the Proposed Transfer of Shares, the Proposed Transaction).
14. Appropriate notifications to, and requests for requisite consents, approvals and exemptions from the securities regulatory authorities, IIROC and the relevant stock exchanges has been made in regard to the Proposed Transaction.
15. Each Registered Individual of FirstEnergy Capital (other than any Registered Individual who will be terminated prior to the closing of the Proposed Transaction) will be transferred to Securities LP pursuant to the Proposed Transaction (under the same registration/approval categories in which she/he is registered/approved on the NRD).
16. FirstEnergy Holdings, the Vendors and GMP wish to complete the Proposed Transaction, including the bulk transfer of business locations and Registered Individuals, forthwith after receiving all applicable regulatory approvals, consents and exemptions required for the Proposed Transaction.
17. The Filers do not anticipate that there will be any disruption in the ability of the Filers to trade or advise on behalf of their respective clients either immediately before or immediately after the Bulk Transfer.
18. Following the closing of the Proposed Transaction, Securities LP will carry on the business of FirstEnergy Capital in substantially the same manner as FirstEnergy Capital prior to the Bulk Transfer with the exception that, for trading, custody, clearing and settlement purposes, the FirstEnergy/Fidelity Clearing Platform will be transitioned to the Securities LP Self-Clearing Platform. However, a transition period from the closing of the Proposed Transaction to the date such transition or integration is completed (hereinafter referred to as the “Transition Period”) will be required to effect the migration of the relevant client accounts and the relevant trading, custody, clearing, settlement, finance and credit processes to Securities LP.
19. Clients of FirstEnergy Capital whose accounts will be transferred to Securities LP will be provided with all requisite notices contemplated by National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, IIROC Rules 35 and 3500 and the Uniform Type 4 Introducer/Carrier Broker Agreement dated May 30, 2012 between FirstEnergy Capital, as introducing broker, and Fidelity Clearing Canada ULC, as carrying broker.
20. Allowing the Bulk Transfer to occur on the closing of the Proposed Transaction will benefit (and have no detrimental impact on) the clients of FirstEnergy Capital by ensuring that there is no interruption in registration and service to clients.
21. The Exemption Sought complies with the requirements of , and the reasons for, a bulk transfer as set out in Section 3.4 of the Companion Policy to NI 33-109 and Appendix C thereto.
22. Pursuant to section 14.11 of National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations, a notice has been sent to the clients of FirstEnergy Capital advising them of their right to close their account.
23. It would not be prejudicial to the public interest to grant the Exemption Sought.
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 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.
Deputy Director, Compliance and Registrant Regulation
Ontario Securities Commission