Exemption Orders (Discretionary)
SCOTIA CAPITAL INC.
2001 BCSECCOM 321
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - issuer is a connected, but not a related issuer, in respect of registrants that are underwriters in a proposed distribution of debentures by the issuer - underwriters exempt from the independent underwriter requirement in the legislation provided that issuer not in financial difficulty
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, s. 48
Securities Rules, B.C. Reg. 194/97, s. 78(2)(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO, BRITISH COLUMBIA, ALBERTA, QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
SCOTIA CAPITAL INC., BMO NESBITT BURNS INC.,
TD SECURITIES INC., NATIONAL BANK FINANCIAL INC.
AND
PEMBINA PIPELINE INCOME FUND
MRRS DECISION DOCUMENT
WHEREASthe securities regulatory authority or regulator (the "Decision Maker") in each of Ontario, British Columbia, Alberta, Quebec and Newfoundland (the "Jurisdictions") has received an application from Scotia Capital Inc. (“Scotia Capital”), BMO Nesbitt Burns Inc., TD Securities Inc. and National Bank Financial Inc. (collectively, the "Filers") for a decision, pursuant to the securities legislation of the Jurisdictions (the "Legislation"), that the requirement (the "Independent Underwriter Requirement") contained in the Legislation which restricts a registrant from acting as an underwriter in connection with a distribution of securities of an issuer made by means of prospectus, where the issuer is a connected issuer (or the equivalent) of the registrant unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by an independent underwriter, shall not apply to the Filers in respect of a proposed distribution (the "Offering") of Convertible Unsecured Subordinated Debentures (the "Debentures") of Pembina Pipeline Income Fund (the "Issuer"), pursuant to a short form prospectus (the "Prospectus");
AND WHEREASpursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREASthe Filers have represented to the Decision Makers that:
1. The Issuer is a reporting issuer under the Legislation of each Jurisdiction and is not in default of any requirements of the Legislation.
2. The business of the Issuer is restricted to investing in investments permitted solely under Section 132(6) of the Income Tax Act (Canada). At present the Issuer’s investments consist solely of securities of Pembina Pipeline Corporation (“Pembina”) and one voting, non-participating share in a subsidiary of Pembina. Pembina is an Alberta corporation which owns oil and natural gas liquids pipeline systems. The Issuer holds, directly or indirectly, all of the issued and outstanding common shares of Pembina and its 13.50% unsecured subordinated notes due October 25, 2027.
3. The trust units of the Issuer are listed on The Toronto Stock Exchange.
4. The principal office of the lead underwriter, Scotia Capital Inc., for the Offering is in Ontario.
5. The Issuer filed a preliminary short form prospectus dated March 5, 2001 (the "Preliminary Prospectus") in the Jurisdictions.
6. The Filers, along with RBC Dominion Securities Inc., CIBC World Markets Inc. and Merrill Lynch Canada Inc., are proposing to act as underwriters in connection with the Offering. Each of the Filers is registered as a dealer in the categories of “broker” and “investment dealer” under the Legislation.
7. Pembina maintains a $235 million extendible revolving credit facility, an $86 million one-year non-revolving term credit facility due July 31, 2001 and a $30 million operating facility (collectively, the “Credit Facilities”). The Credit Facilities are maintained with a syndicate of Canadian banks, including, but not limited to, The Bank of Nova Scotia, Bank of Montreal, The Toronto-Dominion Bank, and National Bank of Canada (collectively, the “Lenders”). As at January 31, 2001, Pembina was indebted to the Lenders in the amount of approximately $331 million. The majority of such indebtedness was incurred to fund the purchase, on July 31, 2000, of Federated Pipe Lines Ltd. (“Federated”). Pembina is in compliance with the terms of the Credit Facilities.
8. The net proceeds from the sale of the Debentures will be used by the Issuer to purchase securities of Pembina, which will in turn use the funds to repay a portion of the indebtedness incurred under the Credit Facilities for the purchase of Federated.
9. The Filers are wholly-owned subsidiaries of the Lenders.
10. The nature of the relationship among the Issuer and the Filers has been described in the Preliminary Prospectus and will be described in the Prospectus.
11. The Lenders did not and will not participate in the decision to make the Offering or in the determination of its terms.
12. The Filers will not benefit in any manner from the Offering other than the payment of their underwriting fees in connection with the Offering.
13. By virtue of the Credit Facilities, the Issuer may, in connection with the Offering, be considered a connected issuer (or the equivalent) of each of the Filers.
14. The Issuer is not a related issuer (or the equivalent) of the Filers or of any of the other members of the underwriting syndicate.
15. The nature and details of the relationship between the Issuer and the Filers will be described in the Prospectus. The Prospectus will contain the information specified in Appendix "C" of draft Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (the "Proposed Instrument").
16. The Issuer is in good financial condition, is not in financial difficulty, and is not under any immediate financial pressure to proceed with the Offering and has not been requested or required by the Lenders to repay the amounts owing under the Credit Facilities. The Issuer is not a "specified party" as defined in the Proposed Instrument.
AND WHEREASpursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (the "Decision");
AND WHEREASeach 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 DECISIONof the Decision Makers, under the Legislation, is that the Independent Underwriter Requirement shall not apply to the Filers in connection with the Offering provided the Issuer is not a related issuer, as defined in the Proposed Instrument, to the Filers at the time of the Offering and is not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
DATEDthis 14th day of March, 2001.
J.A. Geller Stephen N. Adams