Exemption Orders (Discretionary)

BANK ONE, NA


2001 BCSECCOM 27


Headnote:

Mutual Reliance Review System for Exemptive Relief Applications – Relief under registration and prospectus requirements in order that a direct branch of a United States bank to be established in Canada and registered under the Bank Act as an "authorized foreign bank" or "Schedule III bank" may have the same exemptions under the Securities Act as savings institutions or "Schedule I and II" banks.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 34, 44(2)(a), 45(2)(2), 45(2)(5), 45(2)(20), 45(2)(27), 46(a)(iv), 46(d), 48, 61, 74(2)(1), 74(2)(4), 76

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND, NEWFOUNDLAND, YUKON TERRITORY, NORTHWEST TERRITORIES, AND NUNAVUT TERRITORY

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF BANK ONE, NA

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Nunavut, Yukon and Northwest Territories (the “Jurisdictions”) has received an application (the “Application”) from Bank One, NA (“Bank One”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that Bank One is exempt from various registration, prospectus and filing requirements of the Legislation in connection with the banking business to be carried on by Bank One in the Jurisdictions;

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS it has been represented by Bank One to the Decision Makers that:

1. Bank One is established under the laws of the United States and is the principal bank subsidiary of Bank One Corporation in the United States. Bank One has maintained an active presence in Canada since 1981. Bank One Canada is a foreign bank subsidiary of Bank One currently listed on Schedule II of the Bank Act (Canada) (the “Bank Act”).

2. Bank One Canada provides a wide range of corporate banking services to Canadian companies and subsidiaries of U.S. companies carrying on business in Canada, including cash management, foreign exchange, credit and related banking services. Local treasury operations of Bank One Canada provide funding and liquidity for the various activities of Bank One Canada. Bank One Canada is an active participant in the overnight interbank market, accepts term deposits from major Canadian and multinational corporations and derives a portion of its funding from brokered deposits. These deposits are evidenced by certificates of deposit registered in the holder’s name, bearer deposit notes or printed confirmations addressed to the depositor.

3. Bank One will only accept deposits from the following:

(a) Her Majesty in right of Canada or in right of a province or territory, an agent of Her Majesty in either of those rights and includes a municipal or public body empowered to perform a function of government in Canada, or an entity controlled by Her Majesty in either of those rights;

(b) the government of a foreign country or any political subdivision thereof, an agency of the government of a foreign country or any political subdivision thereof, or an entity that is controlled by the government of a foreign country or any political subdivision thereof;

(c) an international agency of which Canada is a member, including an international agency that is a member of the World Bank Group, the Inter American Development Bank, the Asian Development Bank, the Caribbean Development Bank and the European Bank for Reconstruction and Development and any other international regional bank;

(d) a financial institution (i.e.: (a) a bank or an authorized foreign bank under the Bank Act; (b) a body corporate to which the Trust and Loan Companies Act (Canada) applies; (c) an association to which the Cooperative Credit Association Act (Canada) applies; (d) an insurance company or a fraternal benefit society to which the Insurance Companies Act (Canada) applies; (e) a trust, loan or insurance corporation incorporated by or under an Act of the legislature of a province or territory in Canada; (f) a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province or territory in Canada; (g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province or territory in Canada and that is primarily engaged in dealing in securities, including portfolio management and investment counseling, and is registered to act in such capacity under the applicable Legislation; and (h) a foreign institution that is (i) engaged in the banking, trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is otherwise engaged primarily in the business of providing financial services, and (ii) is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province or territory in Canada);

(e) a pension fund sponsored by an employer for the benefit of its employees or employees of an affiliate that is registered and has total plan assets under administration of greater than $100 million;

(f) a mutual fund corporation that is regulated under an Act of the legislature of a province or territory in Canada or under the laws of any other jurisdiction and has total assets under administration of greater than $10 million;

(g) an entity (other than an individual) that has, for the fiscal year immediately preceding the initial deposit, gross revenues on its own books and records of greater than $5 million; or

(h) any other person if the deposit is, in the aggregate, greater than $150,000;

collectively referred to for purposes of this Decision as “Authorized Purchasers”.

4. In June of 1999 amendments to the Bank Act were proclaimed that permit foreign commercial banks, to establish direct branches in Canada. These amendments have created a new Schedule III listing foreign banks permitted to carry on banking activities through branches in Canada.

5. Bank One is seeking an order under the Bank Act permitting it to establish a full service branch under the Bank Act and designating it on Schedule III. Bank One will take over the current corporate banking services and treasury functions currently conducted by Bank One Canada.

6. The Legislation applicable in each Jurisdiction refers to either “Schedule I and Schedule II banks”, “banks”, “savings institutions” or “financial institutions” in connections with certain exemptions however no reference is made in any of the Legislation to entities listed on Schedule III to the Bank Act.

7. In order to ensure that Bank One, as an entity listed on Schedule III, is able to provide banking services to businesses in the Jurisdictions it requires the exemptions under the Legislation which are similar to the exemptions applicable to banking institutions incorporated under the Bank Act to the extent that the current exemptions applicable to Schedule I and II listed banks are relevant to the business being undertaken by Bank One in the Jurisdictions.

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that in connection with the banking business to be carried on by Bank One in the Jurisdictions:

1. Bank One is exempt from the requirement under the Legislation, where applicable, to be registered as an underwriter with respect to the same types of securities that an entity listed on Schedule I or II to the Bank Act may act as an underwriter in respect of without being required to be registered under the Legislation as an underwriter.

2. Bank One is exempt from the requirement under the Legislation to be registered as an adviser where the performance of the service as an adviser is solely incidental to its primary banking business.

3. A trade of a security to Bank One where Bank One purchases the security as principal shall be exempt from the registration and prospectus requirements of the Legislation of the Jurisdiction in which the trade takes place (the “Applicable Legislation”) provided that:

(i) the forms that would have been filed and the fees that would have been paid under the Applicable Legislation if the trade had been made, on an exempt basis, to an entity listed on Schedule I or II to the Bank Act purchasing as principal (referred to in this Decision as a “Schedule I or II Bank Exempt Trade”) are filed and paid in respect of the trade to Bank One, and

(ii) the first trade in a security acquired by Bank One pursuant to this Decision is deemed a distribution (or primary distribution to the public) under the Applicable Legislation unless:

(a) the issuer of the security is a reporting issuer, or the equivalent, under the Applicable Legislation and, if Bank One is in a special relationship (where such term is defined in the Applicable Legislation) with such issuer, Bank One has reasonable grounds to believe that such issuer is not in default of any requirements of the Applicable Legislation;

(b) (i) the securities are listed and posted for trading on a stock exchange, that is recognized by the Decision Maker of the applicable Jurisdiction for purposes of the resale of a security acquired in a Schedule I or II Bank Exempt Trade, and comply with the requirements set out in paragraph (a) or (b) of Appendix A to this Decision and have been held at least six months from the date of the initial exempt trade to Bank One or the date the issuer became a reporting issuer, or the equivalent, under the Applicable Legislation, whichever is the later, or

(ii) the securities are bonds, debentures or other evidences of indebtedness issued or guaranteed by an issuer or are preferred shares of an issuer and comply with the requirements set out in paragraph (a) or (c), of Appendix A to this Decision, and have been held at least six months from the date of the initial exempt trade to Bank One or the date the issuer became a reporting issuer, or the equivalent, under the Applicable Legislation, whichever is the later, or

(iii) the securities are listed and posted for trading on a stock exchange, that is recognized by the Decision Maker of the applicable Jurisdiction for purposes of the resale of a security acquired in a Schedule I or II Bank Exempt Trade, or are bonds, debentures or other evidences of indebtedness issued or guaranteed by the reporting issuer, or the equivalent, under the Applicable Jurisdiction whose securities are so listed, and have been held at least one year from the date of the initial exempt trade to Bank One or the date the issuer became a reporting issuer, or the equivalent, under the Applicable Legislation, whichever is later, or

(iv) the securities have been held at least eighteen months from the date of the initial exempt trade to Bank One or the date the issuer became a reporting issuer, or the equivalent, under the Applicable Legislation, whichever is later; and

(c) Bank One files a report within 10 days of the trade prepared and executed in accordance with the requirements of the Applicable Legislation that would apply to a Schedule I or II Bank Exempt Trade,

provided that no unusual effort is made to prepare the market or to create a demand for such securities and no extraordinary commission or consideration is paid in respect of such trade and provided Bank One does not hold sufficient number of securities to materially affect the control of the issuer of such securities but any holding by Bank One of more than 20 per cent of the outstanding voting securities of the issuer of such securities shall, in the absence of evidence to the contrary, be deemed to affect materially the control of such issuer.

4. Provided Bank One only trades the types of securities referred to in this paragraph 4 with Authorized Purchasers, trades of bonds, debentures or other evidences of indebtedness of or guaranteed by Bank One shall be exempt from the registration and prospectus requirements of the Legislation.

5. Evidences of deposit issued by Bank One to Authorized Purchasers shall be exempt from the registration and prospectus requirements of the Legislation.

THE FURTHER DECISION of the Decision Maker in Ontario is that in connection with the banking business to be carried on by Bank One in Ontario:

A. Subsection 25(1)(a) of the Securities Act (Ontario) R.S.O. 1990 c. S.5 (as amended) (the “Act”) does not apply to a trade by Bank One:

(i) of a type described in subsection 35(1) of the Act or section 151 of the Regulations made under the Act; or

(ii) in securities described in subsection 35(2) of the Act.

B. Except as provided for in paragraph 3 of this Decision, section 28 of Schedule I to the Regulations made under the Act shall not apply to trades made by Bank One in reliance on this Decision.

DATED at Toronto this 5th day of December, 2000.


Howard I. Wetston Stephen N. Adams
©2024 British Columbia Securities Commission