Exemption Orders (Discretionary)
CIBC WORLD MARKETS INC.
2001 BCSECCOM 556
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a connected issuer, but not a related issuer, in respect of registrants that are underwriters in proposed distribution of units 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 ALBERTA, BRITISH COLUMBIA, NEWFOUNDLAND, ONTARIO AND QUÉBEC
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF CIBC WORLD MARKETS INC.
AND
IN THE MATTER OF RBC DOMINION SECURITIES INC.
AND
IN THE MATTER OF ALGORITHMICS INCORPORATED
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the “Decision Maker”) in each of Alberta, British Columbia, Newfoundland, Ontario and Québec (the “Jurisdictions”) has received an application from CIBC World Markets Inc. and RBC Dominion Securities Inc. (the “Filers”), for a decision under 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 a 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 connection with a proposed initial public (and secondary) offering (the “IPO”) of common shares (“Common Shares”) of Algorithmics Incorporated (“Algorithmics”) by means of a long form prospectus (the “Prospectus”);
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Filers have represented to the Decision Makers that:
1. Algorithmics is a private company incorporated under the laws of the Province of Ontario, and is not presently a reporting issuer in any province or territory of Canada or any other jurisdiction.
2. Algorithmics and certain selling securityholders are proposing to offer common shares of Algorithmics in Canada by way of a long form prospectus in accordance with applicable securities laws, and in the United States, under available exemptions from the prospectus requirements of that jurisdiction.
3. It is anticipated that the common shares will be offered by an underwriting syndicate comprised of the Filers and other dealers including J.P. Morgan Securities Canada Inc. (“JPM”) and TD Securities Inc. (“TDSI”) (collectively, the “Underwriters”).
4. The Underwriters and Algorithmics will enter into an underwriting agreement in connection with the IPO to conduct the IPO on a firm commitment basis.
5. Forty percent (40%) of the IPO will be underwritten by CIBC World Markets Inc., thirty percent (30%) by RBC Dominion Securities Inc., twenty percent (20%) by JPM, and ten percent (10%) by TDSI.
6. In September 2000, CIBC Capital Partners, a division of the Canadian Imperial Bank of Commerce (“CIBC”) and Royal Bank of Canada (“RBC”) completed a transaction with Algorithmics whereby theses two entities each acquired US$15,000,000 in principal amount of a debt security known as “Series 1 Convertible Notes”, convertible into Series B Shares of Algorithmics which are, in turn, convertible into common shares of Algorithmics, and in some cases, convertible directly into common shares. In addition, RBC has provided a credit facility to Algorithmics and each of CIBC, RBC or their respective affiliates (which include the Filers) are customers of Algorithmics.
7. Each Filer is a wholly-owned subsidiary of either CIBC or RBC. The head office of each Filer is located in Ontario.
8. Each Filer is a registrant in good standing under the securities legislation of each province and territory of Canada.
9. By virtue of their relationships with CIBC and RBC, and by virtue of the convertible debt of Algorithmics held by CIBC and RBC, Algorithmics may be considered a “connected issuer”, or equivalent, of the Filers under the Legislation and proposed Multi-Jurisdictional Instrument 33-105 (“MI 33-105”), but not a “related issuer” or equivalent.
10. Algorithmics is not a “related issuer”, or equivalent, or a “connected issuer”, or equivalent, to any of the other Underwriters for the purposes of the Legislation or MI 33-105.
11. None of the selling securityholders is a “related issuer” or “connected issuer” to any of the Underwriters for purposes of the Legislation or MI 33-105.
12. The Underwriters will receive no benefit pursuant to the IPO, other than payment of their fees in connection therewith.
13. The determination to proceed with the IPO, including the determination of the terms of the IPO, will be made through negotiation between Algorithmics and the Underwriters, and neither CIBC nor RBC has had, or will have, any involvement in such decision or determination.
14. Algorithmics is in good financial condition, is not a “specified party” as defined in MI 33-105, and is not under any financial pressure to undertake the IPO.
15. All the Underwriters have signed or will sign the underwriter’s certificate in the preliminary prospectus and will sign the underwriter’s certificate in the final prospectus.
16. The preliminary prospectus and the prospectus will, to the extent applicable, contain the disclosure set forth in Appendix “C” to MI 33-105 and will describe the relationships between Algorithmics and the Filers.
AND WHEREAS under the System, this 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 under the Legislation is that, the Independent Underwriter Requirement shall not apply to the Filers in connection with the IPO provided Algorithmics is not a related issuer, as defined in MI 33-105, to the Filers at the time of the IPO and is not a specified party as defined in the MI-33-105 at the time of the IPO.
DATED April 3, 2001.
J. A. Geller R. Stephen Paddon