Exemption Orders (Discretionary)
CIBC WORLD MARKETS INC.
2001 BCSECCOM 1175
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – relief granted from the underwriting conflicts requirements to permit registrants to underwrite an offering of securities where the issuer is a connected or related issuer of the registrants, subject to certain conditions
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 AND LABRADOR, 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., RBC DOMINION SECURITIES INC., NATIONAL BANK FINANCIAL INC., AND TRILON SECURITIES CORP.
AND
GREAT LAKES HYDRO INCOME FUND
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., RBC Dominion Securities Inc., National Bank Financial Inc. and Trilon Securities Corp. (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 related issuer (or the equivalent) or 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 units (the “Units”) of Great Lakes Hydro Income Fund (the “Issuer”), pursuant to a short form prospectus (the “Prospectus”);
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Commission des valeurs mobilières du Québec is the principal regulator for this application;
AND WHEREAS the 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 Issuer currently has operations in Canada in the ownership of electricity generating facilities.
3. The units of the Issuer are listed on The Toronto Stock Exchange.
4. The head office of the lead underwriter for the Offering is in Toronto, Ontario.
5. The Issuer filed a preliminary short form prospectus dated December 5, 2001 (the “Preliminary Prospectus”) in the Jurisdictions.
6. The Filers, along with Scotia Capital Inc., TD Securities Inc., BMO Nesbitt Burns Inc., Merrill Lynch Canada Inc., HSBC Securities Canada Inc. and FirstEnergy Capital Corp. are proposing to act as underwriters in connection with the Offering.
7. The proportionate share of the Offering underwritten by each of the Underwriters is as follows:
CIBC World Markets Inc. 25.0%
RBC Dominion Securities Inc. 15.0%
Scotia Capital Inc. 12.0%
TD Securities Inc. 12.0%
BMO Nesbitt Burns Inc. 10.0%
National Bank Financial Inc. 10.0%
HSBC Securities (Canada) Inc. 5.0%
Merrill Lynch Canada Inc. 5.0%
Trilon Securities Corporation 4.0%
FirstEnergy Capital Corp. 2.0%
8. Canadian Imperial Bank of Commerce (“CIBC”) and Royal Bank of Canada (“Royal”) have extended to Great Lakes Power Trust (“GLPT”), a trust wholly owned by the Issuer, a secured credit facility in the amount of $50 million (the “CIBC/Royal Loan”). As of December 3, 2001, approximately $14.3 million was outstanding under the CIBC/Royal Loan and GLPT is in compliance with the terms of such loan.
9. National Bank of Canada (“National”), CIBC and Canadian Western Bank have extended to Powell River Energy Inc. (“PREI”), an indirect subsidiary of the Issuer, a secured credit facility in the amount of $70 million (the “National/CIBC/CW Loan”). As of December 3, 2001, approximately $70 million was outstanding under the National/CIBC/CW Loan and PREI is in compliance with the terms of such loan. (The CIBC/Royal Loan and the National/CIBC/CW Loan are hereinafter collectively referred to as the “Bank Loans” and CIBC, National and Royal are hereinafter collectively referred to as the “Banks”).
10. Each of CIBCWM, RBC and NBF (the “Connected Registrants”) is a direct subsidiary of one of the Banks.
11. Trilon Bancorp Inc. (“Trilon Bancorp”) has extended to PREI a secured credit facility in the amount of $35 million (the “Trilon PREI Loan”). As of December 3, 2001, approximately $22 million was outstanding under the Trilon PREI Loan and PREI is in compliance with the terms of such loan.
12. In connection with a proposed acquisition by the Issuer of a hydroelectric generating system and related transmission facilities in Maine, USA (the “Acquisition”), Trilon Bancorp intends to extend to GNE, LLC, a limited liability corporation which the Issuer, through GLPT, intends to acquire as part of the Acquisition, a credit facility in the approximate amount of US$80 million (the “Trilon Acquisition Loan”). (The Trilon PREI Loan and the Trilon Acquisition Loan are hereinafter collectively referred to as the “Trilon Loans”).
13. Trilon Bancorp and Trilon are both subsidiaries of Trilon Financial Corporation, and both Trilon and the Issuer are indirect subsidiaries of Brascan Corporation (‘Brascan”).
14. The Issuer may use a portion of the proceeds of the Offering to reimburse certain of the Banks and/or Trilon Bancorp.
15. The Banks, Trilon Bancorp and Brascan did not and will not participate in the decision to make the Offering or in the determination of its terms.
16. The Filers will not benefit in any manner from the Offering other than the payment of their underwriting fees in connection with the Offering.
17. By virtue of the Bank Loans, the Issuer may, in connection with the Offering, be considered a connected issuer (or the equivalent) of the Connected Registrants.
18. By virtue of the common indirect ownership of the Issuer and Trilon by Brascan, and by virtue of the Trilon Loans, the Issuer may, in connection with the Offering, be considered a related issuer (or the equivalent) and a connected issuer (or the equivalent) of Trilon.
19. The Issuer is not a related issuer (or the equivalent) of any of the Filers except Trilon.
20. The Issuer is not a related issuer (or the equivalent) or a connected issuer (or the equivalent) of any of the other members of the underwriting syndicate.
21. The unrelated and unconnected registrants will underwrite 46% of the Offering.
22. The unrelated and unconnected registrants participated in the due diligence process in connection with the Offering.
23. The nature and details of the relationship among the Issuer and the Filers, and among the Issuer, Trilon and Brascan, has been described in the Preliminary Prospectus and will be described in the Prospectus. The Prospectus will contain the information specified in Appendix “C” of draft Multilateral Instrument 33-105 Underwriting Conflicts (the “Proposed Instrument”).
24. The Issuer is not a “specified party” as defined in the Proposed Instrument.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (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 Offering provided the Issuer is not a related issuer, as defined in the Proposed Instrument, to any of the underwriters except Trilon at the time of the Offering and is not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
DATED December 14, 2001
Le Directeur de la conformité et de l’application,
McJean Lorrain