Brant Securities Limited and Worldsource Securities Inc.
Exemption from paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to permit an individual to act as a dealing, advising or associate advising representative of a registered firm while the individual acts as an officer, partner or director of another registered firm that is not an affiliate. One registered firm is acquiring the client accounts of another registered firm prior to the latter's winding up and subsequent resignation as dealer member of IIROC and surrender of registration. The filers have valid business reasons for the individuals to be registered with both firms; the individuals will have sufficient time to adequately serve both firms; conflicts of interest are unlikely to arise as one of the firms is winding up; and there are policies and procedures in place to handle any potential conflicts of interest. The firms are exempted from the prohibition in paragraph 4.1(1)(a) for a limited time period.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 13.4 and 15.1.
November 8, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF BRANT SECURITIES LIMITED (BRANT), AND WORLDSOURCE SECURITIES INC. (WORLDSOURCE)
The principal regulator in the Jurisdiction has received an application from Brant and Worldsource (each a Filer) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation), pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), providing for an exemption from the requirement contained in paragraph 4.1(1)(a) of NI 31-103 to allow Worldsource to permit Keith McMeekin, Hugh Jackson and Clark Alexander Squires (the Individual Registrants) to act as dealing representatives of Worldsource while also acting as directors and officers of Brant (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Saskatchewan, Quebec, and Yukon (with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meanings if used in these decisions, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. Brant is a corporation amalgamated under the Business Corporations Act (Ontario) on April 1, 2016.
2. Brant is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Ontario, New Brunswick, Nova Scotia and Prince Edward Island. Brant is a member of Investment Industry Regulatory Organization of Canada (IIROC).
3. The principal regulator of Brant is the OSC because Brant's head office is located in Toronto, Ontario.
4. All of the shares of Brant are directly owned by 1482397 Ontario Inc. The only asset of 1482397 Ontario Inc. is its holding of Brant. 1482397 Ontario Inc. is closely held, having fifteen shareholders, including the Individual Registrants.
5. Brant employs 17 registered representatives. Of those registered representatives (i) Keith McMeekin also serves as the President, Chief Executive Officer, Chief Financial Officer and Ultimate Designated Person of Brant, (ii) Herve Guibert also serves as the Chief Compliance Officer of Brant and (iii) Hugh Jackson and Clark Alexander Squires also serve as Managing Partners of Brant.
6. The Individual Registrants make up the board of directors of Brant.
7. Brant has notified the OSC of its intention to surrender its registration in all Jurisdictions after the completion of the Transaction.
8. Brant has consented to terms and conditions being placed on its registration immediately upon completion of the Transaction providing that it shall not:
(a) Accept any new clients or open any new client accounts; or
(b) Trade in any security.
9. Worldsource is a corporation incorporated pursuant to the Canada Business Corporations Act on September 21, 1988.
10. Worldsource is registered as (i) an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island and Yukon, (ii) an investment fund manager under the securities legislation of British Columbia, Alberta, Saskatchewan, Ontario and New Brunswick and (iii) a derivatives dealer under the securities legislation of Quebec. Worldsource is a member of IIROC.
11. The principal regulator of Worldsource is the OSC because Worldsource's head office is located in Markham, Ontario.
12. Worldsource offers a comprehensive and robust dealer platform for independent investment advisors, affording them enhanced operational processes and state of the art technologies as well as access to products and research designed to support their business and enhance their client relationships. Through its carrying broker, Worldsource provides its advisors with trade execution, clearing and custody functions.
13. Brant and Worldsource are not affiliates and are not related.
14. This application arises in connection with an acquisition transaction (the Transaction) which necessitates notice to the OSC and the Jurisdictions pursuant to the provisions of section 11.9 of NI 31-103. Such notice (the 11.9 Notice) was filed with the OSC on behalf of the Filers on October 1, 2021.
15. Brant and Worldsource have entered into a purchase agreement pursuant to which Worldsource will acquire Brant's client accounts and client list and all client account related books of business and records. In addition, Worldsource will make an offer to almost all current registered representatives of Brant to join Worldsource as registered representatives of Worldsource on an agency basis.
16. The Filers have applied to IIROC (the IIROC Application) for certain consents and approvals required to complete the Transaction. A copy of the IIROC Application has been filed with the OSC as part of the 11.9 Notice.
17. As set out in the IIROC Application, the Filers have plans underway to effect, and IIROC has provided its approval for, a bulk transfer of Brant client accounts to Worldsource following the close of business on November 12, 2021 (the Transaction Closing Date).
Brant's Resignation as a Dealer Member and Surrender of Registration
18. Brant has given notice of intent to resign as a Dealer Member of IIROC, which IIROC has acknowledged.
19. Under applicable IIROC Rules [Dealer Member Rule 8], Brant's resignation as a Dealer Member will be effective only once Brant files with the IIROC Secretary, which will be no later than 60 days from the Transaction Closing Date, a report of its auditor indicating that Brant has liquid assets sufficient to meet all its liabilities other than subordinated loans, if any.
20. From and after the Transaction Closing Date, Brant will continue to be a Dealer Member of IIROC and a registrant with the OSC. However, Brant will have no clients and no client accounts. Its business and undertaking will consist of and attending to the satisfaction of any liabilities and winding up its affairs.
21. During the period from and after the Transaction Closing Date to the resignation of Brant as Dealer Member of IIROC and its subsequent dissolution (the Post Closing Period), Brant will continue to be a Dealer Member of IIROC and will continue to be subject to applicable IIROC rules, including certain reporting requirements. The Individual Registrants must remain as directors, officers and approved persons of Brant in order to discharge such responsibilities.
20. As a business corporation, Brant acts through its directors and officers. The board of directors of Brant, consisting of the Individual Registrants, is required to oversee and carry out the winding up of Brant.
21. During the Post-Closing Period, the Individual Registrants will continue to service their clients in their capacities as registered representatives of Worldsource. The Individual Registrants will not be shareholders, directors or officers of Worldsource and hence will not be permitted individuals of Worldsource. Since there will be no client accounts at Brant, the Individual Registrants will not act as dealers or sales representatives of Brant.
22. The Individual Registrants will have sufficient time to adequately serve their clients as well as discharge their remaining responsibilities to Brant during the Post Closing Period.
23. During the Post Closing Period, the Individual Registrants will have executed an agency agreement with Worldsource and will be subject to the compliance and supervisory policies and procedures of Worldsource. Worldsource has appropriate compliance and supervisory policies and procedures to deal with any conflicts of interest that may arise as a result of the Individual Registrants being registered with both organizations during the Post Closing Period. However, no such conflicts are expected to arise, since in the Post Closing Period, Brant and Worldsource will not be competitors, as all client accounts belonging to the Individual Registrants will have been moved to Worldsource.
24. Neither Filer is in default of securities, commodities or derivatives legislation in any Jurisdiction.
25. In the absence of the Exemption Sought, the Filers would be prohibited under paragraph 4.1(1)(a) of NI 31-103 from permitting the Individual Registrants to act as dealing representatives of Worldsource while also acting as directors and officers of Brant.
26. The Filers submit that the Exemption Sought is not inconsistent with the public interest, and should be granted for the following reasons:
(a) Brant provided notice of the Transaction, its intended surrender of registration and resignation as a Dealer Member of IIROC to each of its clients. Brant's clients were also advised of their right to transfer their account to another registered firm prior to the Transaction Closing Date and the details of their continued relationship with their respective investment advisor on the Worldsource dealer platform.
(b) There are valid business reasons for the Individual Registrants to be registered with both firms, namely, to facilitate and carry out the winding up of Brant, which is to the benefit of both firms and the clients and representatives of Brant.
(c) The dual registrations of the Individual Registrants will be in place for a temporary period. The Exemption Sought, if granted, will expire on the date on which Brant's registration as an investment dealer is revoked.
(d) The dual registration is not likely to give rise to any material conflicts of interest. Any conflicts which do arise will be dealt with through Worldsource's policies and procedures and supervisory mechanisms which will apply to the Individual Registrants.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
(a) Brant's registration remains subject to terms and conditions substantively similar to those described in representation 8 above;
(b) Brant continues to take reasonable steps to wind up its affairs and voluntarily surrender its registration; and
(c) the Exemption Sought expires on the date on which Brant's registration is revoked.
Deputy Director, Compliance and Registrant Regulation
Ontario Securities Commission
OSC File #: 2021/0588