Application to the Ontario Securities Commission for a ruling pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) for a ruling that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The Applicant will provide advice to an affiliated insurance company in Ontario for so long as such affiliate remains an affiliate of the Applicant.
Applicable Legislative Provisions
Securities Act, R.S.O., c. S.5, as am., ss. 25(3), 74(1).
January 13, 2017
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
FORESTERS INVESTMENT MANAGEMENT COMPANY, INC.
(SECTION 74 OF THE ACT)
UPON the application (the Application) by Foresters Investment Management Company, Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for a ruling pursuant to subsection 74(1) of the Act that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a corporation organized under the laws of the State of New York. The Applicant is registered as an investment adviser with the United States Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940. The Applicant does not have an office or employees in Canada.
2. The Applicant currently provides investment advice to funds in the United States which are registered as investment companies under the Investment Company Act of 1940, including both mutual funds and funds which serve as the underlying investment options for variable annuity contracts and life insurance policies offered by participating insurance companies, including Foresters Life Insurance and Annuity Company. The Applicant also manages its own investment portfolio, the profit sharing plan of Foresters Financial Services, Inc. and the general account of Foresters Life Insurance and Annuity Company, both of which are affiliates of the Applicant formed and operating in the United States.
3. The Applicant is an indirect wholly-owned subsidiary of The Independent Order of Foresters (IOF), a fraternal benefit society organized under the federal laws of Canada. IOF is an international financial services provider and on an enterprise basis has more than three million customers and members in Canada, the United States, and the United Kingdom. IOF, directly or through its subsidiaries, provides life insurance, savings, retirement and investment solutions. IOF, as a fraternal benefit society, is subject to Part XII of the Insurance Companies Act and as per its letters patent is authorized to sell life and disability insurance. IOF is also a licensed insurer in all provinces and territories of Canada in which it offers life insurance. The head office of IOF is located in Toronto, Ontario.
4. The Applicant is in compliance in all material respects with U.S. securities law. Neither the Applicant nor IOF is in default of any requirements of securities legislation in Ontario.
5. Employees of IOF currently provide investment advice and portfolio management services with respect to certain portions of IOF’s assets and there is no requirement for such individuals to be registered as advisers under the Act where these individuals provide investment advice to their corporate employers with respect to the portfolio assets of such corporate employers.
6. IOF, however, intends to move to a different model in the future whereby the Applicant would provide investment advice and portfolio management services to IOF in respect of certain of its assets. It is also intended that Foresters Asset Management Inc., an indirect wholly-owned subsidiary of IOF and a registered portfolio manager in Ontario, will be providing investment advice and portfolio management services with respect to certain portions of IOF’s assets.
7. The Applicant is not registered as an adviser in Canada and cannot rely on the international adviser exemption set out in National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) because the Applicant may provide advice on securities of Canadian issuers that is not incidental to the advice it will provide on a “foreign security” (as defined in section 8.26(2) of NI 31-103).
8. IOF is a “permitted client” as defined in NI 31-103.
9. The assets held by IOF and managed by the Applicant would be owned by IOF. There are no external stakeholders (such as, for example, holders of variable annuity contracts or segregated funds/separate accounts for policyholders) that have a direct interest in the investment performance of such portfolios.
10. Accordingly, there are no stakeholders in Ontario or elsewhere other than IOF that will be directly affected by the results of the investment advice and portfolio management services to be provided by the Applicant.
AND WHEREAS section 74 of the Act provides that a ruling may be made by the Commission that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, where the Commission is satisfied that to do so would not be prejudicial to the public interest;
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS RULED, pursuant to section 74 of the Act, that the Applicant is exempt from the adviser registration requirements of subsection 25(3) of the Act in respect of advice it provides to affiliates in Ontario, provided that:
(a) the Applicant provides investment advice and portfolio management services in Ontario only to its affiliates that (i) are licensed or otherwise duly permitted or authorized to carry on the business of an insurance company in Canada or a branch of a foreign insurance company in Canada, or (ii) are holding companies that have as their principal business activity to hold securities of one or more affiliates that are each licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; and
(b) with respect to any particular affiliate described in paragraph (a), the investment advice and portfolio management services are provided only as long as that affiliate remains (i) an “affiliate” of the Applicant, as defined in the Act, and (ii) a “permitted client” as defined in NI 31-103.
January 13, 2017
Ontario Securities Commission
Ontario Securities Commission