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 business reasons for the individuals to be registered with both firms. The Filers have agreed that up to a maximum of ten individuals will be dually registered under the exemption at any point in time. The Filers have policies in place to handle potential conflicts of interest. The Filers are exempted from the prohibition.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 4.1(b).

December 21, 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
VANTAGE ASSET MANAGEMENT INC.
 (VAMI)

AND

VPP MANAGEMENT INC.
(VPP, and together with VAMI, the Filers)

DECISION


Background

The securities regulatory authority or regulator in Ontario (Decision Maker) has received an application from the Filers for a decision under the securities legislation (the Legislation) of the Jurisdiction for relief from the restriction under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the Dual Registration Restriction), pursuant to section 15.1 of NI 31-103, to permit Darren Gottlieb and Ka Wing Francis Lau (collectively, the Existing Representatives) and future individuals, to be registered as advising representatives or associate advising representatives (the Future Representatives) of VAMI to act as registered advising representatives or associate advising representatives of VPP (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 Alberta, British Columbia, Manitoba, Nova Scotia, and Quebec (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 31-103 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1.             The head office of VAMI is in Toronto, Ontario.

2.             VAMI is registered as an exempt market dealer in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario and Québec, as a portfolio manager in Ontario and as an Investment Fund Manager in Newfoundland and Labrador, Ontario and Québec.

3.             VAMI’s sole client in respect of its portfolio manager registration is a single fund – the Vantage Protected Performance Fund (the Vantage Fund).

4.             The head office of VPP is in Toronto, Ontario and it will share premises with VAMI.

5.             VPP is a 100% wholly-owned subsidiary of VAMI.

6.             VPP is registered as an exempt market dealer, portfolio manager and investment fund manager with the Ontario Securities Commission (the Commission).

7.             VPP is the appointed portfolio manager and investment fund manager to the VPP Fund Ltd. (the VPP Fund) and has entered into an investment management agreement with the VPP Fund.

8.             The VPP Fund is an investment vehicle domicile in Grand Cayman and is only available to international (non-Canadian) permitted clients. The VPP Fund does not accept investments from Canadian residents and is not marketed into Canada. The VPP Fund currently manages capital for sophisticated investors outside of Canada and this constituency will remain VPP Fund’s target client in the future.

9.             The Cayman Islands Monetary Authority will govern the VPP Fund.

10.          Since the Filers are under common control, each such entity is an affiliate of the other and are affiliated registrants.

11.          Mr. Gottlieb is a resident of Toronto, Ontario and is a registered advising representative, officer, shareholder and director of VAMI. Mr. Gottlieb is one of the founders of VAMI and has acted as an advising representative of VAMI since 2009. In that capacity he is the lead portfolio manager of the Vantage Fund.

12.          Mr. Gottlieb has, and will continue to have, sufficient time and resources to adequately meet his obligations to each of VAMI and VPP.

13.          Mr. Gottlieb’s position with VPP is that of Lead Portfolio Manager and he will be responsible for multiple aspects of the firm’s research process, including: idea generation, industry analysis, security analysis, risk management and the fund’s daily trading. Mr. Gottlieb will be spending his time analyzing investment opportunities and identifying/addressing the fund’s risk exposures.

14.          Mr. Lau is a resident of Toronto, Ontario and is a registered advising representative of VAMI since 2014. Mr. Lau is a senior analyst performing investment analysis for the Vantage Fund.

15.          Mr. Lau has, and will continue to have, sufficient time and resources to adequately meet his obligations to each of VAMI and VPP.

16.          Mr. Lau’s position with VPP is that of portfolio manager and he will be responsible for multiple aspects of the firm’s research process, including: idea generation, industry analysis, security analysis and financial modelling.

17.          The Existing Representatives are familiar with the business model of each of VAMI and VPP.

18.          VAMI may wish to engage additional Future Representatives to work for VPP in connection with the VPP Fund and as it may be beneficial that these Future Representatives also become registered with VPP as advising representatives or associate advising representatives, Dual Registration Restriction relief is also being sought in respect of any such Future Representatives, provided they so qualify under applicable securities regulations. The Filers expect that additional Future Representatives will be so engaged as necessary depending on the status of the Existing Representatives (i.e. whether or not they continue to be engaged by VAMI and VPP) and also the growth of the Vantage Fund and VPP Fund.

19.          The Filers have different client bases.

20.          The interests of the Filers are aligned in connection with the appropriate management and administration of each of the Vantage Fund and VPP Fund, and the roles of the Existing Representatives and any Future Representatives.

21.          The role of the Existing Representatives and any Future Representatives will be to support the business activities and interests of both VAMI and VPP.

22.          The Existing Representatives and Future Representatives will be subject to supervision by, and the applicable compliance requirements of, both Filers. The Filers’ Chief Compliance Officer and management will ensure that the Existing Representatives and any Future Representatives have sufficient time and resources to adequately serve each Filer and its clients.

23.          Each of the Filers are subject to the restrictions and requirements in Part 13 of NI 31-103.

24.          VAMI is not in default of any requirement of securities legislation in Ontario.

25.          VPP is not in default of any requirement of securities legislation in Ontario.

26.          In the absence of the Exemption Sought, the Filers would be prohibited by the Dual Registration Restriction from permitting the Existing Representatives to act as advising representatives of VAMI and any other Future Representative to act as an advising representatives or associate advising representatives of both Filers, even though the Filers are affiliates and have controls and compliance procedures in place to deal with their advising activities.

27.          The dual registration of the Existing Representatives and Future Representatives will not give rise to the conflicts of interest that may be present in a similar arrangement involving unrelated, arm’s length firms. The interests of the Filers are aligned in connection with the role of the Existing Representatives and any Future Representatives at VAMI will be to support the business activities and interest of both Filers in respect of their business activities.

28.          The Filers have adequate policies and procedures in place to address any potential conflicts of interest that may arise as a result of the dual registration of the Existing Representatives and any Future Representatives and will be able to appropriately deal with any such conflicts, should they arise.

29.          The Filers have jointly agreed upon a common allocation policy, to ensure that investment opportunities suitable for both funds are allocated between them fairly.

30.          The Existing Representatives will be under the supervision of both Filers and are subject to all policies and procedures addressing conflicts of interest that may arise as a result of the dual registration. Any Future Representatives will also be under the supervision of both Filers and will be subject to all policies and procedures addressing conflicts of interest that may arise as a result of the dual registration.

31.          The Filers will provide written disclosure to the investors of the Vantage Fund and the VPP Fund of the affiliated registrant relationship between the Filers as well as the dual registration of the Existing Representatives and any Future Representatives in disclosure documents provided by each fund to their investors.

Decision

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 that the Exemption Sought is granted provided that the circumstances described above remain in place and at any point in time the Filers have no more than ten (10) representatives who are registered with both Filers.

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