Exemption Orders (Discretionary)
QTRADE CANADA INC.
2001 BCSECCOM 934
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF QTRADE CANADA INC.
Exemption Order under Sections 48 and 76
[para 1]
WHEREAS Qtrade Canada Inc. (“Qtrade”) has applied to the Executive Director for an order under sections 48 and 76 of the Securities Act , R.S.B.C. 1996, c. 418 (the "Act") that intended trades of stock options to purchase common shares of Qtrade (the "Options")to a financialinstitutionas described in the provisions of the securities legislation of any of the Provinces of Canada (other than B.C.) corresponding to sections 45(2)(2) and 74(2)(1) of the Act, as amended from time to time, or a credit union as defined in The Securities Act (Manitoba) (the “Manitoba Act”), are exempt from the requirements of sections 34(1)(a) and 61 of the Act;
[para 2]
1. Qtrade was incorporated under the Canada Business Corporations Act on May 6, 1999, and its head office is in British Columbia;
[para 3]
2. Qtrade is not a “reporting issuer” under the Act or under the securities legislation of any other jurisdiction;
[para 4]
3. Qtrade’s articles of incorporation provide that, so long as Qtrade is not a reporting corporation, no shares of Qtrade may be transferred without the approval of Qtrade’s board of directors;
[para 5]
4. Qtrade owns all of the issued and outstanding shares of Qtrade Investor Inc. (“Qtrade Investor”), an Internet-based provider of retail discount brokerage services. Qtrade also maintains a proprietary securities trading platform and website which is used by Qtrade Investor in conducting its operations;
[para 6]
5. Qtrade Investor is a member of the Investment Dealers Association of Canada and the Canadian Investor Protection Fund and is registered as an investment dealer in each of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland;
[para 7]
6. From time to time Qtrade and Qtrade Investor enter into agreements with financial institutions pursuant to which Qtrade Investor provides online discount brokerage services to the customers of such institutions;
[para 8]
7. Under certain of these agreements, Qtrade has agreed to grant Options to the financial institution based on the number of customers of the financial institution who become customers of Qtrade Investor. Certain of these agreements also provides for the grant of a fixed number of Options on execution. Each of the agreements provides that the grant and issuance of Options thereunder is subject to discretionary relief from applicable prospectus and registration requirements where necessary. The Options are non-transferable;
[para 9]
8. The agreements contemplating the issuance of Options have been entered into with financial institutions in the provinces of B.C., Alberta, Saskatchewan, Manitoba and Ontario. These consist, in the case of B.C., of “savings institutions” (as defined in the Interpretation Act (British Columbia)) or other institutional purchasers exempted under the provisions of sections 45(2)(2) and 74(2)(1) of the Act, and in the case of Alberta, Saskatchewan, Manitoba and Ontario, of either institutional purchasers exempted under the equivalent provisions of the applicable securities legislation of Alberta, Saskatchewan, Manitoba and Ontario, or a credit union as defined in The Securities Act (Manitoba) (the “Manitoba Act”);
[para 10]
9. The issuance of Options to the B.C. financial institutions is exempt from the registration and prospectus requirements of the Act pursuant to sections 45(2)(2) and 74(2)(1) because each institution is a “savings institution” within the meaning of these sections;
[para 11]
10. The issuance of Options to the Alberta, Saskatchewan, Manitoba and Ontario financial institutions (other than Manitoba credit unions) is exempt from the registration and prospectus requirements of the applicable securities legislation of those jurisdictions pursuant to the applicable provisions corresponding to sections 45(2)(2) and 74(2)(1) of the Act, namely:
(a) sections 65(1)(c) and 107(1)(a) of the Securities Act (Alberta);
(b) sections 39(1)(c) and 81(1)(a) of The Securities Act, 1988 (Saskatchewan);
(c) sections 19(1)(c) and 58(1)(a) of the Manitoba Act; and
(d) sections 35(1)(3) and 72(1)(a) of the Securities Act (Ontario);
[para 12]
11. The issuance of Options to Manitoba credit unions is exempt from the registration and prospectus requirements of the Manitoba Act under a decision of the Manitoba Securities Commission dated August 31, 2001;
[para 13]
12. The issuance of Options to the Alberta, Saskatchewan, Manitoba and Ontario financial institutions is a distribution from British Columbia and is not exempt from the registration and prospectus requirements of the Act, to the extent the relevant institution is a credit union or other provincially chartered and regulated institution in that province which does not carry on business in B.C. and is thus not authorized to carry on business under the Financial Institutions Act (B.C.) and therefore is not a “savings institution” within the meaning of the Act;
[para 14]
13. All certificates representing the underlying common shares issued pursuant to the exercise of Options will contain a legend stating that the common shares may not be transferred without the approval of Qtrade’s board of directors;
[para 15]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;
[para 16]
IT IS ORDERED:
1. under Sections 48 and 76 of the Act, that intended trades in Options of Qtrade to financial institutions as described in the provisions of the securities legislation of any of the Provinces of Canada (other than B.C.) corresponding to sections 45(2)(2) and 74(2)(1) of the Act, as amended from time to time, or credit unions as defined in the Manitoba Act, are exempt from the requirements of sections 34(1)(a) and 61 of the Act, provided that:
(a) Qtrade files a Form BCF 45-902F on or before the 10th day after the distribution of Options to financial institutions;
[para 17]
2. under s. 76 of the Act that any trade in the common shares acquired on exercise of the Options is deemed to be a distribution unless:
(a) Qtrade is a reporting issuer under the Act and has been a reporting issuer for the 12 months immediately preceding the trade;
(b) if the seller is an insider of Qtrade, other than a director or senior officer of Qtrade, the seller has filed all records required to be filed under sections 87 and 90 of the Act;
(c) if the seller is a director or senior officer of Qtrade, the seller has filed all records required to be filed under sections 87 and 90 of the Act and Qtrade has filed all records required to be filed under part 12 of the Act and the Rules;
(d) the trade is not a distribution from the holdings of a control person;
(e) no unusual effort is made to prepare the market or create a demand for the security; and
(f) no extraordinary commission or other consideration is paid in respect of the trade.
[para 18]
DATED at Vancouver, British Columbia, on September 19, 2001.
Brenda Leong, Director