Securities Law & Instruments


Headnote

Under paragraph 4.1(1)(a) 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. The Filer has sought relief from that prohibition. The individual will have sufficient time to adequately serve both firms. The firm also has policies in place to handle potential conflicts of interest. Relief from the prohibition has been granted.

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, 13.4, 15.1.

December 29, 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
ELM PARK CAPITAL MANAGEMENT, LLC
(Elm Park)

AND

IN THE MATTER OF
RP INVESTMENT ADVISORS LP
(RPIA LP) AND
CHARLES MARTIN WINOGRAD

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Elm Park (the Filer or Elm Park) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the restriction under paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), pursuant to section 15.1 of NI 31-103, to permit Charles Martin Winograd (Mr. Winograd) to act as a dealing repre-sentative and an advising representative of Elm Park and also hold a partnership interest in RPIA LP through Winograd Capital Inc. (Winograd Capital), a company in which Mr. Winograd is the sole officer, director, and shareholder (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,

(b)           the Filer has 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 Filer in Alberta, British Columbia, Manitoba, Nova Scotia, and Quebec (together with Ontario, the Jurisdictions).

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

The decision is based on the following facts represented by the Filer and RPIA LP:

1.             Elm Park is a limited liability company organized under the laws of the State of Delaware, United States of America (United States). The head office of Elm Park is located in Dallas, Texas in the United States.

2.             Elm Park is registered as an investment adviser with the United States Securities and Exchange Commission.

3.             Elm Park is registered as an exempt market dealer in Alberta, British Columbia, Ontario, Manitoba, Nova Scotia, and Quebec. Elm Park is also registered as an investment fund manager and portfolio manager in Ontario and as an investment fund manager in Quebec.

4.             Elm Park is a private investment firm that focuses on investing in lower middle market debt securities, and manages two investment funds which invest in private credit opportunities.

5.             RPIA LP is a limited partnership formed under the laws of Ontario with its head office located in Toronto, Ontario. The general partner of RPIA LP is RP Investment Advisors GP Inc. (the General Partner).

6.             On or about December 29, 2016, as a result of a reorganization, all “registrable” activities of RP Investment Advisors (RPIA) and its registered and approved individuals, will be transferred to RPIA LP.

7.             Elm Park was previously granted relief from section 4.1 of NI 31-103 to allow Mr. Winograd to act as a dealing representative and an advising representative of Elm Park and also hold a partnership interest in RP Investment Advisors, a general partnership formed under the laws of Ontario (“RPIA”) subject to certain terms and conditions in In the Matter of Elm Park Capital Management, LLC and Charles Martin Winograd (March 26, 2014).

8.             RPIA LP has applied for registration as an investment fund manager, portfolio manager, exempt market dealer and commodity trading manager in Ontario, as an investment fund manager, portfolio manager and exempt market dealer in Quebec, as an investment fund manager and exempt market dealer in Newfoundland and Labrador and as an exempt market dealer in British Columbia, Alberta, Saskatchewan, Mani-toba and Nova Scotia.

9.             RPIA LP will be an alternative fixed income asset manager that specializes in active investment grade credit funds and interest rate management. RPIA LP will manage four pooled funds offered to investors pursuant to exemptions from the prospectus requirements under Canadian securities legislation and one mutual fund offered under a simplified prospectus.

10.          RPIA LP and Elm Park are not affiliates.

11.          Mr. Winograd is a resident of Ontario and is a senior managing partner of Elm Park. He owns a 50% voting interest in Elm Park through a holding company.

12.          Mr. Winograd is registered as a dealing representative of Elm Park in Alberta, British Columbia, Ontario, Manitoba, Nova Scotia, and Quebec. Mr. Winograd is registered as an advising representative of Elm Park in Ontario.

13.          RPIA LP is not in default of any requirement of securities legislation in any of the Jurisdictions.

14.          Winograd Capital (a firm whose sole officer, director and shareholder is Mr. Winograd, an Elm Park dealing representative and advising representative) holds a 4.5% limited partnership interest in RPIA LP and 4.5% of the outstanding securities of the General Partner. Although Winograd Capital is the limited partner of RPIA LP, Mr. Winograd could be considered to be acting as a partner of RPIA LP as he is the sole officer, director, and shareholder of Winograd Capital. Accordingly, Mr. Winograd would be in contravention of paragraph 4.1(1)(a) of NI 31-103.

15.          The limited partnership interest does not allow Winograd Capital or Mr. Winograd to be involved in the business, operations or affairs of RPIA LP like an officer, director or an active partner. Winograd Capital has no voting rights on the day-to-day business, operations or affairs of RPIA LP. Winograd Capital will only be entitled to vote on extraordinary matters involving RPIA LP, such as a sale of all or substantially all of the business or its assets.

16.          Mr. Winograd will not personally act as an officer, partner, or director of RPIA LP. He will not be registered as a dealing representative or an advising representative with RPIA LP. Mr. Winograd will have no individual decision-making authority and will not be given individual authority to bind RPIA LP.

17.          Mr. Winograd has acted as a management advisor to RPIA since October 2009. In that capacity, he serves in a limited advisory and consultative role and will continue to do so for RPIA LP. He reviews and discusses firm strategy, financial plans and results, and policies including risk policies. Mr. Winograd is not involved in any investment decisions or other day to day decisions made for RPIA and will not be for RPIA LP. He does not advise on specific investments.

18.          Mr. Winograd estimates that he spends around one to two hours per week on RPIA duties. He has always had, and will continue to have, sufficient time and resources to adequately meet his obligations to each firm (specifically, Elm Park and RPIA LP).

19.          The potential for conflicts of interest between the RPIA LP and Elm Park will be mitigated by the fact that the investment funds they manage will invest in different types of securities. Elm Park’s investments are solely focused on private market investments that are not publicly issued securities traded on any exchange, unlike investments that will be made by RPIA LP.

20.          Although it is not expected that there will be any conflicts of interest between RPIA LP and Elm Park, as they each will have different products, both have policies and procedures in place to address conflicts of interest that may arise as a result of Mr. Winograd acting as a dealing and advising representative of Elm Park and holding a limited partnership interest in RPIA LP through Winograd Capital.

21.          It is understood that Elm Park has compliance and supervisory policies and procedures in place to monitor the conduct and outside business activities of its registered representatives (including Mr. Winograd) and to ensure that Elm Park can deal appropriately with any conflict of interest that may arise.

22.          Each of the Filer and RPIA LP will be subject to the restrictions and requirements in Part 13 of NI 31-103 regarding conflict of interest matters.

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 Exemption Sought shall cease to be effective when:

(i)            Winograd Capital is no longer a partner of RPIA LP; or

(ii)           Mr. Winograd is no longer registered in any of the Jurisdictions as a dealing representative or an advising represen-tative of Elm Park.

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