Securities Law & Instruments


Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Pursuant to 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 firms are affiliates – The firms require relief for a limited period of time to facilitate the spin-off of one firm's advisory business to the other firm – The individual will have sufficient time to adequately serve both firms – As one firm is winding down its adviser operations, conflicts of interest are unlikely to arise – The firms have policies in place to handle potential conflicts of interest – The firms are exempted from the prohibition for a limited period of time.

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, 15.1.

May 29, 2017

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(THE JURISDICTIONS)

AND

IN THE MATTER OF
WHITEHAVEN SECURITIES INC.
(WH SECURITIES)

AND

WHITEHAVEN ASSET MANAGEMENT INC.
(WHAM)
(COLLECTIVELY, THE FILERS)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the “Decision Maker”) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (“Legislation”) for relief from the requirement in paragraph 4.1(1)(b) 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 authorize Mr. Richard Bernard (the “Representative”) to act as registered advising representative and as derivatives advising representative of each of the Filers (the “Exemption Sought”).

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

i)              the Autorité des marchés financiers (“AMF”) is the principal regulator for this application,

ii)             for the decision of the principal regulator in respect of the Exemption Sought, the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in British Columbia and in Alberta;

iii)            the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario;

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 Passport System have the same meaning if used in this decision, unless otherwise defined.

Representations

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

WHAM

1.             WHAM is a corporation incorporated under the Canada Business Corporations Act. Its head office is located at 206-5305, Blvd. Notre-Dame, Laval, Québec, H7W 4T8, and it is intended that, once registered, its principal securities regulator will be the AMF.

2.             WHAM is a subsidiary of WhiteHaven Holding Inc.

3.             On September 21, 2016, WHAM filed an application to be registered in the category of portfolio manager in British Columbia and in Quebec and to be registered as derivatives portfolio manager in Quebec.

4.             WHAM is not in default of any requirements of securities legislation in any jurisdiction of Canada.

WH Securities

5.             WH Securities is a corporation incorporated under the Business Corporations Act (Québec). Its head office is located at 206-5305, Blvd. Notre-Dame, Laval Québec, H7W 4T8, and its principal securities regulator is the AMF.

6.             WH Securities is also a subsidiary of WhiteHaven Holding Inc. Consequently, WHAM and WH Securities are affiliated companies.

7.             Founded in 2013, WH Securities is a firm headquartered in Montreal that offers a variety of investment products and solutions including portfolio management, mutual funds, exempt market, corporate finance and insurance services.

8.             WH Securities is registered in the categories of exempt market dealer and portfolio manager in Alberta, British Columbia, and Quebec. It is also registered in the category of exempt market dealer in Ontario and in the categories of mutual fund dealer and derivatives portfolio manager in Quebec.

9.             WH Securities is not in default of any requirements of securities legislation in any jurisdiction of Canada.

The Spin-off

10.          Shortly after WHAM is adequately registered and the Exemption Sought is granted (the “Closing Date”), WH Securities is proposing to spin-off its management business to a newly formed entity (WHAM) (the “Spin-off”) in order to be able to voluntarily surrender its registration as portfolio manager in Alberta, in British Columbia and in Quebec after the Spin-off and to voluntarily surrender its registration as derivatives portfolio manager in Quebec after the Spin-off.

11.          WH Securities wishes to voluntarily surrender its registration as portfolio manager and as derivatives portfolio manager in order to become a member of the Mutual Fund Dealers Association of Canada (the “MFDA”) and the MFDA has requested that WH Securities no longer be registered as portfolio manager.

12.          As part of the Spin-off, portfolio managers registered with WH Securities and their clients will be transferred to WHAM.  Clients of WH Securities will be provided with notice of the transfer of their account that will explain that WH Securities will no longer offer services to its clients and that will provide more information on the Spin-off.

13.          If the Exemption Sought is granted, the Representative would act as advising representative, as derivatives advising representative and as CCO for both Filers until the Spin-off and the regulatory filings related thereto are completed, but would cease to require the dual registration as soon as WH Securities has voluntarily surrendered its registration as portfolio manager and as derivatives portfolio manager.

14.          As part of the Spin-off, on the Closing Date, the Representative will be the only advising representative and derivatives advising representative to be transferred from WH Securities to WHAM requiring a dual registration. His registration will be updated to reflect the transfer.

15.          After the Spin-off, the Representative will continue to act as CCO for both Filers.

16.          In addition to his current registration with WH Securities, the Filers hereby request to register the Representative as advising representative and as derivatives advising representative of WHAM in all provinces where WHAM is currently or will be registered.

17.          The Representative’s dual registration is required to facilitate the completion of the Spin-off and the regulatory filings related thereto. Once such actions are completed, and once WH Securities has voluntarily surrendered its registration as portfolio manager in British Columbia and in Quebec, he will no longer require to be dually registered.

18.          WH Securities has agreed to certain terms and conditions being placed on its registration after the Spin-off is completed which include that the Representative, as registered advising representative and as derivatives advising representative of WH Securities, will act in such capacity only to comply with regulatory requirements, including, as necessary, to complete the surrender of WH Securities’ registration as portfolio manager in British Columbia and in Quebec.

19.          The Representative has agreed to adhere to the terms and conditions imposed.

20.          The fact that the Representative will only act as advising representative for a very short period limits the chances of conflicts of interest arising in relation with the dual registration. In addition, WHAM and WH Securities will have policies and procedures in place to address any conflict of interest and will be able to appropriately deal with any such conflicts, should they arise.

21.          WHAM will supervise the activities that the Representative will conduct on behalf of WH Securities 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 order to minimize any client confusion, the Representative’s dual registration will be appropriately disclosed to his clients.

23.          The Filers do not expect that the dual registration of the Representative will create significant additional work for him and are confident that he will have sufficient time to adequately serve both firms.

24.          The Representative will act in the best interest of his clients with each Filer and will deal fairly, honestly and in good faith with these clients.

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 representations made herein  remain true; and

(b)           this exemption will terminate upon the earlier of the following:

(i)            the date on which the AMF accepts WH Securities’ surrender of registration as portfolio manager in Alberta, in British Columbia and its surrender of registration  as derivatives portfolio manager in Quebec; and

(ii)           the end of the day that is six months after the date of this decision.

“Eric Stevenson”
Superintendent, Client Services and Distribution Oversight