Exemption Orders (Discretionary)
TRADEFREEDOM SECURITIES INC.
2001 BCSECCOM 960
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief for registrants from the suitability requirements of the Securities Rules and the requirements of the Investment Dealers Association, to enable the registrant discount dealer to provide trade execution services to clients, subject to the terms and conditions set out in the decision document.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 27 and 48
Securities Rules, B.C. Reg 194/97, s. 48(1)(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF TRADEFREEDOM SECURITIES INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia and Ontario (collectively, the “Jurisdictions”) has received an application from TradeFreedom Securities Inc. (the “Filer”) for:
1. a decision under the securities legislation of the Jurisdictions (the “Legislation”) that the requirements of the Legislation requiring the Filer and its registered salespersons, partners, officers and directors (the “Registered Representatives”) to make inquiries of each client of the Filer as are appropriate, in view of the nature of the client’s investments and of the type of transaction being effected for the client’s account, to determine (a) the general investment needs and objectives of the client and (b) the suitability of a proposed purchase or sale of a security for the client (such requirements, the “Suitability Requirements”) do not apply to the Filer and its Registered Representatives; and
2. a decision under the Legislation that the requirements of the Investment Dealers Association of Canada (the “IDA”), in particular IDA Regulation 1300.1(b), 1800.5(b) and 1900.4, requiring the Filer and its Registered Representatives to make inquiries of each client of the Filer as are appropriate, in view of the nature of the client’s investments and of the type of transaction being effected for the client’s account, to determine (a) the general investment needs and objectives of the client and (b) the suitability of a proposed purchase or sale of a security for the client (such requirements, the “IDA Suitability Requirements”) do not apply to the Filer and its Registered Representatives;
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 Filer has represented to the Decision Makers that:
1. the Filer is a corporation incorporated under the Canada Business Corporations Act;
2. the head office of the Filer is located in Quebec and the Filer has Registered Representatives registered in each of the Jurisdictions;
3. the Filer is registered as an investment dealer under the Legislation of each of the Jurisdictions and is a member of the IDA;
4. the Filer has not opened an account for a client located in either of the Jurisdictions prior to the granting of this Decision;
5. the Filer and its Registered Representatives will not provide advice or recommendations regarding the purchase or sale of any security or as to suitability and the Filer has adopted policies and procedures to ensure the Filer and its Registered Representatives do not provide advice or recommendations regarding the purchase or sale of any security or as to suitability;
6. when the Filer provides trade execution services to clients in either of the Jurisdictions, it would, in the absence of this Decision, be required to comply with the Suitability Requirements and IDA Suitability Requirements;
7. clients who request the Filer or its Registered Representatives to provide advice or recommendations or advice as to suitability will be referred to another registered dealer or adviser who provides those services;
8. the Filer will not compensate its Registered Representatives on the basis of transactional values;
9. each prospective client of the Filer will be advised, and required to provide the Filer with a written acknowledgement (the “Prospective Client Acknowledgement”), that:
(a) no advice or recommendations will be provided by the Filer or its Registered Representatives regarding the purchase or sale of any security, and
(b) the Filer and its Registered Representatives will not determine the general investment needs and objectives of the client or the suitability of a proposed purchase or sale of a security for the client,
prior to the Filer opening an account for such prospective client;
10. the Prospective Client Acknowledgement will provide the prospective client with sufficient detail and will explain to each prospective client the significance of not receiving either investment advice or a recommendation from the Filer, including the significance of the Filer not determining the general investment needs and objectives of the client, or the suitability of a proposed purchase or sale of a security for the client;
11. the Filer has adopted policies and procedures to ensure:
(a) that evidence of all Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA; and
(b) all client accounts of the Filer are appropriately designated as being a client account to which a Prospective Client Acknowledgement has been received;
AND WHEREAS under 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 under the Legislation is that the Suitability Requirements contained in the Legislation shall not apply to the Filer and its Registered Representatives so long as:
1. the Filer and its Registered Representatives do not provide any advice or recommendations regarding the purchase or sale of any security;
2. clients who request the Filer or its Registered Representatives to provide advice or recommendations or advice as to suitability are referred to another registered dealer or adviser who provides those services;
3. the Filer is a distinct legal entity and operates using its own letterhead, accounts, Registered
Representatives and account documentation;
4. the Filer does not compensate its Registered Representatives on the basis of transactional values;
5. each prospective client of the Filer is advised of the Decision of the Decision Makers and required to provide a Prospective Client Acknowledgement prior to the Filer opening an account for such prospective client;
6. evidence of all Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA; and
7. when the IDA rule addressing the IDA Suitability Requirements comes into effect, the Decision with respect to the Suitability Requirements will terminate six months following the date such rule comes into force, unless the Decision Maker determines otherwise.
DATED this 2nd day of October, 2001.
Randee B. Pavalow
THE DECISION of the Decisions Makers is that the IDA Suitability Requirements do not apply to the Filer and its Registered Representatives so long as:
1. the Filer and its Registered Representatives do not provide any advice or recommendations regarding the purchase or sale of any security;
2. clients who request the Filer or its Registered Representatives to provide advice or recommendations or advice as to suitability are referred to another registered dealer or adviser who provides those services;
3. the Filer is a distinct legal entity and operates using its own letterhead, accounts, Registered Representatives and account documentation;
4. the Filer does not compensate its Registered Representatives on the basis of transactional values;
5. each prospective client of the Filer is advised of the Decision of the Decision Makers and required to provide a Prospective Client Acknowledgement prior to the Filer opening an account for such prospective client;
6. evidence of all Prospective Client Acknowledgements is established and retained pursuant to the record keeping requirements of the Legislation and the IDA; and
7. when the IDA rule addressing the IDA Suitability Requirements comes into effect, the Decision with respect to the IDA Suitability Requirements will terminate six months following the date such rule comes into force, unless the Decision Maker determines otherwise.
DATED at Toronto, Ontario this 2nd day of October, 2001.
Paul M. Moore K.D. Adams