Securities Law & Instruments


Headnote

Application for an order pursuant to section 80 of the Commodity Futures Act (Ontario) (the CFA) that the Filer and its representatives be exempt from the adviser registration requirement in paragraph 22(1)(b) of the CFA in connection with advising employee plans established for the benefit of employees of the Canadian affiliate of the Filer, subject to terms and conditions and sunset clause.

Applicable Legislative Provisions

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss. 22(1)(b), 80.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 25(3).

Rules Cited

OSC Rule 35-502 Non-Resident Advisers, s. 7.6.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 8.26.

Application Decisions

In the Matter of DuPont Capital Management Corporation (2013), 36 OSCB 3477

IN THE MATTER OF
THE COMMODITY FUTURES ACT,
R.S.O. 1990, CHAPTER C.20, AS AMENDED
(the CFA)

AND

IN THE MATTER OF
DUPONT CAPITAL MANAGEMENT CORPORATION
(the Filer)

ORDER
(Section 80 of the CFA)

UPON the application (the Application) of the Filer to the Ontario Securities Commission (the Commission) for an order pursuant to section 80 of the CFA that the Filer and any individuals engaging in, or holding themselves out as engaging in, the business of advising the DuPont Canada Pension Plan (as defined below) on behalf of the Filer (the Representatives) in respect of Foreign Contracts (as defined below) be exempt, for a specified period of time, from the adviser registration requirement in paragraph 22(1)(b) of the CFA, subject to certain terms and conditions;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND WHEREAS in this Order:

Advisory Services means the investment advisory services provided by the Filer to the DuPont Employee Plans;

CEA means the United States Commodity Exchange Act, as amended from time to time;

Contract has the meaning ascribed to that term in subsection 1(1) of the CFA;

DuPont Canada means E.I. du Pont Canada Company;

DuPont Canada Pension Plan means the Canadian pension plan established for the benefit of the employees of DuPont Canada;

DuPont Employee Plans means the pension plans, retirement plans and similar plans established for the benefit of the employees of the Filer and its affiliates globally;

Foreign Contract means a Contract that is primarily traded on one or more organized exchanges that are located outside of Canada and primarily cleared through one or more clearing corporations that are located outside of Canada;

Futures Advisory Services means investment advisory services provided by the Filer to the DuPont Employee Plans in respect of Foreign Contracts;

OSA means the Securities Act, R.S.O. 1990, c. S.5, as amended;

OSC Rule 35-502 means OSC Rule 35-502 Non-Resident Advisers; and

Trust Agreement means the pension trust agreement between DuPont Canada and Royal Trust Corporation of Canada, as trustee, dated May 1, 2004.

AND UPON the Filer having represented to the Commission that:

1.             The Filer is a corporation incorporated under the laws of Delaware, with its head office in Wilmington, Delaware. The Filer is a wholly-owned subsidiary of E.I. DuPont de Nemours and Company, which is a subsidiary of DowDuPont Inc.

2.             The Filer provides investment advisory services to certain of the DuPont Employee Plans, including the DuPont Canada Pension Plan.

3.             The Filer is registered as an investment adviser with the United States Securities and Exchange Commission. The Filer is not registered in any capacity under the CFA or the OSA. However, the Filer currently has the ability to use the international adviser exemption set out in section 8.26 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations in Alberta, British Columbia, Manitoba, Ontario and Québec.

4.             DuPont Canada is incorporated under the laws of the Canada Business Corporations Act, and carries on manufacturing and other business activities in Canada. DuPont Canada is also a wholly-owned subsidiary of DowDuPont Inc.

5.             DuPont Canada established the DuPont Canada Pension Plan under the laws of Ontario for the benefit of its employees in Canada pursuant to the Trust Agreement. DuPont Canada is the administrator and sponsor of the DuPont Canada Pension Plan.

6.             DuPont Canada is authorized under the Trust Agreement to appoint one or more investment managers to direct the investment of the DuPont Canada Pension Plan. Accordingly, DuPont Canada has appointed the Filer to provide investment advisory services to the DuPont Canada Pension Plan.

7.             The Filer employs the Representatives to provide, among other things, Advisory Services to the DuPont Employee Plans.

8.             The Filer provides Advisory Services primarily from its head office in Wilmington, Delaware. The Advisory Services primarily pertain to advising in respect of investments in securities; however, the Advisory Services may also include Futures Advisory Services from time to time.

9.             The Filer does not provide any Advisory Services from Canada. Neither the Filer nor its Representatives is ordinarily resident or maintains an office in Canada.

10.          The Filer is not required to register, and is not registered, as an adviser under the CEA in order for the Filer to provide Futures Advisory Services to the DuPont Employee Plans. Similarly, none of the Representatives are registered, or are required to register, in any capacity under the CEA in order for the Representatives to provide Futures Advisory Services to the DuPont Employee Plans. The requirement to be registered, or be exempt from registration, as a commodity trading adviser under the CEA is triggered by advising others for compensation. The National Futures Association has published current guidance which indicates that provision of the Advisory Services by the Filer or the Representatives to the DuPont Employee Plans is not considered to be “advising others” for the purposes of the CEA. On this basis, the Filer has concluded that neither the Filer nor the Representatives are required to register under the CEA.

11.          Pursuant to an investment management agreement, the Filer has provided Advisory Services to the DuPont Canada Pension Plan since February 7, 2008. The Filer had previously provided Futures Advisory Services to the DuPont Canada Pension Plan in reliance on an exemptive relief order granted by the Commission on March 26, 2013 (the Prior Order) which expired on March 26, 2018. The Filer has not provided any Futures Advisory Services to the DuPont Canada Pension Plan since the Prior Order expired.

12.          The Filer is authorized to provide Advisory Services in respect of securities to the DuPont Canada Pension Plan pursuant to section 7.6 of OSC Rule 35-502, which prescribes an exemption from the requirement to register as an adviser under the OSA for a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as an adviser for a pension fund sponsored by an affiliate, for the benefit of the employees of the affiliate.

13.          Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a partner or an officer of a registered adviser and is acting on behalf of a registered adviser. Under the CFA, “adviser” means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to trading in Contracts.

14.          There is presently no exemption from the adviser requirement under the CFA for a person or company, not ordinarily resident in Ontario, in connection with that person or company acting as an adviser in Contracts for a pension fund sponsored by an affiliate for the benefit of the employees of the affiliate, similar to section 7.6 of OSC Rule 35-502 in respect of advising in securities. Consequently, the Filer is not currently authorized to offer Futures Advisory Services to the DuPont Canada Pension Plan.

15.          The Filer is not in default of any requirements of securities legislation or commodity futures legislation in Ontario.

16.          The Filer seeks to provide comprehensive investment management services to the DuPont Employee Plans. The Filer is able to provide Advisory Services in respect of securities to the DuPont Canada Pension Plan in reliance on the exemption set out in section 7.6 of OSC Rule 35-502. However, the Filer is precluded from offering Futures Advisory Services to the DuPont Canada Pension Plan due to lack of a statutory exemption from registration as an adviser under the CFA. If the requested relief is granted, the DuPont Canada Pension Plan will benefit from having access to the full scope of Advisory Services available from the Filer.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;

IT IS ORDERED pursuant to section 80 of the CFA that the Filer and its Representatives are exempt from the adviser registration requirement in paragraph 22(1)(b) of the CFA in respect of the Futures Advisory Services they provide to the DuPont Canada Pension Plan provided that:

1.             the DuPont Canada Pension Plan is sponsored or administered by an affiliate of the Filer;

2.             the Filer’s head office or principal place of business is in a jurisdiction outside of Canada; and

3.             neither the Filer nor its Representatives becomes subject to registration requirements under the CEA in order for the Filer to provide Futures Advisory Services to the DuPont Canada Pension Plan, provided that the Filer may continue to rely on the exemptive relief provided in this Order for a period of 90 days following such time as the Filer becomes subject to a registration requirement under the CEA.

IT IS FURTHER ORDERED that this Order will terminate on the earliest of:

1.             such transition period as provided by operation of law after the effective date of the repeal of the CFA;

2.             six months, or such other transition period as provided by operation of law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) or Ontario securities law (as defined in the OSA) that affects the ability of the Filer to act as an adviser to the DuPont Canada Pension Plan in respect of Foreign Contracts; and

3.             five years after the date of this Order.

Dated at Toronto, Ontario, this 13th of July, 2018

“Mark J. Sandler”
Commissioner
Ontario Securities Commission

“Cecilia Williams”
Commissioner
Ontario Securities Commission