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Securities Law

NIN 93/24 - Exemption for Filing Notice of Networking Arrangements Governed by the Principles of Regulation [NIN - Rescinded]

Published Date: 1993-12-24
Effective Date: 1993-12-22

There are several provisions in the Securities Regulation and in other documents published by the British Columbia Securities Commission that deal with relationships between a registrant that is related to a financial institution and the financial institution. Section 167.10(2) of the Securities Regulation requires a registrant that intends to enter into a networking arrangement, as defined in section 167.10(1) of the Regulation, to give the Superintendent of Brokers written notice of its intention (a "Networking Notice").

Three sets of Principles of Regulation published by the Canadian Securities Administrators provide guidelines respecting these relationships: "Distribution of Mutual Funds By Financial Institutions" dated November 9, 1988 (the "First Principles"), "Full Service and Discount Brokerage Activities of Securities Dealers In Branches of Related Institutions" dated November 25, 1988 (the "Second Principles") and "Activities of Registrants Related To Financial Institutions" undated but effective July 1, 1990 (the "Third Principles") (collectively, the "Principles of Regulation"). The Third Principles also establishes a national clearing system for review of notices of networking arrangements that are filed in various jurisdictions, including those required to be filed under section 167.10(2) of the Regulation.

In order to increase the efficiency of the regulatory process, the Superintendent is today issuing a blanket order, BOR#93/4 (the "Blanket Order"). The Blanket Order exempts a registrant that complies with the Principles of Regulation from filing a Networking Notice.

The Ontario Securities Commission (the "OSC") has published a notice and ruling in the OSC Bulletin of December 17, 1993 providing similar relief. The OSC notice also exempts registrants involved in networking arrangements from the requirement to file, or continue to file, promotional material for review and non-objection by the OSC -- including marketing information, documents, brochures and publications. The Blanket Order does not provide equivalent relief in British Columbia because the Superintendent has rarely imposed a requirement, as a condition of non-objection to a networking arrangement, that a registrant file promotional material.

The OSC notice also discusses a chequing feature or privilege attached to a money market or treasury bill mutual fund that permits a unitholder to write cheques against the unitholder's mutual fund holdings. The OSC notice concludes that no notice of a networking arrangement need be filed, provided that full disclosure of the chequing feature, its related fees and charges and the relationship, if any, between the mutual fund's manager and the financial institution has been made in the fund's simplified prospectus and annual information form. The Commission has arrived at a similar conclusion, based on the fact that a mutual fund manager is not a registrant and, hence, not caught by the definition of networking arrangement set out in section 167.10(1) of the Regulation.

The Superintendent reminds registrants that section 125.1 of the Securities Act authorizes the Superintendent to require a registrant to provide any information or produce any records the Superintendent requires, including information relating to networking arrangements that comply with the guidelines set out in the Principles of Regulation.

DATED at Vancouver, British Columbia, on December 22, 1993

Dean E. Holley
Superintendent of Brokers