Exemption Orders (Discretionary)
BMO CAPITAL TRUST
2001 BCSECCOM 292
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a “connected issuer,” and a "related issuer" of registrants that are to act as uderwriters in a proposed distribution of common shares of the Issuer - Issuer is not a “specified party” as defined in Draft Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts - independent underwriter to underwrite 20% of the Offering - registrant underwriters exempted from independent underwriter requirements.
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 BRITISH COLUMBIA, ONTARIO, QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF
AND
IN THE MATTER OF BMO CAPITAL TRUST
AND
BMO NESBITT BURNS INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta, Ontario, Quebec and Newfoundland (the "Jurisdictions") has received an application from BMO Nesbitt Burns Inc. (the "Lead Underwriter" or the "Filer") for a decision, pursuant to the securities legislation (the "Legislation") of the Jurisdictions, that the requirement (the "Independent Underwriter Requirement") contained in the Legislation, which prohibits a registrant from acting as underwriter in connection with a distribution of securities of an issuer, made by means of prospectus, where the issuer is a "related issuer" (or the equivalent) of the registrant, or, in connection with the distribution, a "connected issuer" (or the equivalent) of the registrant, without certain required participation in the distribution by an underwriter (an "Independent Underwriter"), in respect of which the issuer is neither a related issuer (or the equivalent) of the registrant, nor, in connection with the distribution, a connected issuer (or the equivalent) of the registrant, shall not apply to the Filer in respect of the proposed offering (the “Offering”) of Trust Capital Securities-Series B ("BMO BOaTS - Series B") of BMO Capital Trust (the "Issuer") to be made pursuant to a prospectus;
AND WHEREASunder the Mutual Reliance System for Exemptive Relief Applications (the "System") the Ontario Securities Commission is the principal jurisdiction for this application;
AND WHEREASthe Lead Underwriter has represented to the Decision Makers that:
1 The Issuer is a closed-end trust formed under the laws of Ontario by The Trust Company of the Bank of Montreal (the "Trustee"), a wholly-owned subsidiary of the Bank of Montreal (the "Bank").
2 The Issuer is a reporting issuer under the Legislation of each Jurisdiction and is not in default of any requirements of the Legislation.
3 The Issuer proposes to issue and sell to the public a second series of transferable trust units called BMO BOaTS-Series B. The Trust will also issue securities called special trust securities (the "Special Trust Securities" and, collectively with the BMO BOaTS-Series B, the "Trust Securities") to the Bank or affiliates of the Bank. To that end, a preliminary prospectus qualifying the Offering (the "Preliminary Prospectus") was filed on January 24, 2001 and a final long form prospectus (the "Prospectus") will be filed in all Canadian provinces and territories.
4 The first series of transferable trust units, called BMO BOaTS-Series A, was issued by the Trust in an offering equivalent to the one contemplated under the Preliminary Prospectus above on October 11, 2000. The BMO BOaTS-Series A and BMO BOaTS-Series B are collectively referred to as the "BMO BOaTS".
5 The BMO BOaTS Series-B are non-voting except in limited circumstances and the Special Trust Securities are voting securities. The Bank will covenant for the benefit of the holders of the BMO BOaTS Series-B that, for so long as any BMO BOaTS Series-B are outstanding, the Bank will maintain ownership, directly or indirectly, of 100% of the Special Trust Securities.
6 The Issuer will use the proceeds of the issue of the Trust Securities to purchase eligible trust assets consisting primarily of undivided co-ownership interests in one or more pools of first mortgages on residential property insured by Canada Mortgage and Housing Corporation or Mortgage-Backed Securities which will generate income for distribution to holders of Trust Securities. The Offering will provide investors with the opportunity to invest, through the holding of BMO BOaTS, in the trust assets, and will provide the Bank with a cost-effective means of raising capital for Canadian bank regulatory purposes.
7 The Issuer will distribute its Net Distributable Funds (as defined in the Preliminary Prospectus) on the last day of June and December of each year commencing June 30, 2001 (each, a "Distribution Date"). On each Distribution Date, unless the Bank has failed to declare dividends on any of its preferred shares or, if no such shares are then outstanding, on its common shares, a holder of BMO BOaTS will be entitled to receive a non-cumulative fixed cash distribution (the "Indicated Distribution"). In the event the Bank fails to pay such dividends, all of the Net Distributable Funds of the Issuer will be payable to the Bank as the sole holder of the Special Trust Securities and holders of the BMO BOaTS will not receive a distribution.
8 Pursuant to the terms of the Bank Share Exchange Trust Agreements (as defined in the Preliminary Prospectus), the Bank will covenant for the benefit of holders of BMO BOaTS Series-B that if, on any Distribution Date where the Indicated Distribution is payable, the Issuer fails to pay the Indicated Distribution in full on the BMO BOaTS, the Bank will not declare dividends of any kind on certain classes of its shares including preferred shares and common shares until approximately ten calendar months following such Distribution Date unless the Issuer first pays such Indicated Distribution (or the unpaid portion thereof) to holders of BMO BoaTS.
9 In certain circumstances, the BMO BOaTS Series-B may be exchanged for preferred shares of the Bank. The Bank is the promoter of the Issuer and the Bank has signed a certificate page of the Preliminary Prospectus.
10 The Filer will underwrite a portion of the Offering that is larger than any other member of the underwriting syndicate.
11 The Filer is an indirect wholly-owned subsidiary of the Bank.
12 The Issuer is a "related issuer" (or the equivalent) to the Filer.
13 The nature and details of the relationship between the Issuer, the Filer and the Bank is described in the Preliminary Prospectus and will be described in the Prospectus. The information set out in Appendix C of the proposed Multi-Jurisdictional Instrument 33-105 will be contained in the Prospectus.
14 The Filer will receive no benefits relating to the Offering other than the payment of its fees in connection therewith.
15 Except for the Filer, the Issuer is neither a "related issuer" (or the equivalent), nor is it expected to be, in connection the Offering, a "connected issuer" (or the equivalent), of any of the other underwriters (the "Independent Underwriters").
16 The Independent Underwriters will underwrite a majority of the Offering, with one of the Independent Underwriters, CIBC World Markets Inc., underwriting at least 20% of the dollar value of the Offering. CIBC World Markets Inc. will participate in the drafting of the Prospectus, the due diligence relating to the Offering and in the pricing of the Trust Securities. CIBC World Markets Inc.'s participation in the Offering will be disclosed in the Prospectus and each of CIBC World Markets Inc., the other Independent Underwriters and the Lead Underwriter will sign a certificate in the Prospectus.
AND WHEREAS under the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
AND WHEREASeach of the Decision Makers under the Legislation 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 Lead Underwriter in connection with the Offering, provided that:
(a) CIBC World Markets Inc.participates in the Offering as stated in paragraph 16 above;
(b) the Prospectus contains the disclosure stated in paragraph 16 above; and
(c) The relationship between the Issuer and the Filer is disclosed in the Prospectus.
DATEDthis 27th day of February, 2001.
Robert W. Davis Howard I. Wetson