CI Private Counsel LP et al.
Application for relief for individual already registered from registration in Ontario and/or Québec -- relief granted in relation to the operation of a charitable program -- relief granted subject to certain conditions set out in the decision.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 1(1), 25 and 74.
Instrument, Rule or Policy cited
Multilateral Instrument 11-102 Passport System, s. 4.7.
November 29, 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 CI PRIVATE COUNSEL LP CIBC ASSET MANAGEMENT INC. CIBC INVESTOR SERVICES INC. CIBC WORLD MARKETS INC. ASSANTE FINANCIAL MANAGEMENT LTD. ASSANTE CAPITAL MANAGEMENT LTD. (the Filers)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that certain of the Filers' registered individuals, who are specified on a list maintained by the Filers and available upon request to the principal regulator, be exempt from the requirement to be registered in Ontario, Québec or both in connection with the trading of securities for, or the provision of advice about securities to, Benefaction Foundation (Benefaction), a not-for-profit charitable corporation registered as a foundation under the Income Tax Act (Canada) that is resident in and operating out of Ontario and Québec (the Exemption Sought) and operates a charitable giving program offered by Filers to the Filers' clients.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (the Commission) 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 Québec.
Representations of the Filers
1. CI Private Counsel LP is a limited partnership subsisting under the laws of the Province of Manitoba. CI Private Counsel LP is registered as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer in each jurisdiction of Canada. The principal business of CI Private Counsel LP is discretionary portfolio management and wealth management advisory services, and on occasion the firm may trade in securities under an exemption from the prospectus exemption. Subject to paragraph 7 below, CI Private Counsel LP is not in default of securities legislation in any jurisdiction of Canada.
2. CIBC Asset Management Inc. is a corporation established under the laws of Canada and is a wholly-owned subsidiary of The Canadian Imperial Bank of Commerce. CIBC Asset Management Inc. is registered as a portfolio manager in all of the Canadian jurisdictions, an investment fund manager in Ontario, Québec and Newfoundland and Labrador, a derivatives portfolio manager in Québec, and a commodity trading manager in Ontario. CIBC Asset Management Inc.'s registration as a portfolio manager also covers services provided to individuals and families by CIBC Private Investment Counsel (a division of CIBC Asset Management Inc.) or under the CIBC Private Wealth Management banner. Subject to paragraph 7 below, CIBC Asset Management Inc. is not in default of securities legislation in any jurisdiction of Canada.
3. CIBC Investor Services Inc. is a corporation incorporated pursuant to the laws of Canada and is a wholly-owned subsidiary of The Canadian Imperial Bank of Commerce. CIBC Investor Services Inc. is a member of IIROC and is registered in as an investment dealer in each jurisdiction of Canada and as a derivatives dealer in Québec. CIBC Investor Services Inc. provides investment accounts with on-line access combined with the availability of obtaining advice from a CIBC advisor. Subject to paragraph 7 below, CIBC Investor Services Inc. is not in default of securities legislation in any jurisdiction of Canada.
4. CIBC World Markets Inc. is a corporation incorporated pursuant to the laws of Ontario and it is the investment banking and full-service retail brokerage subsidiary of The Canadian Imperial Bank of Commerce. CIBC World Markets Inc. is a member of IIROC and is registered in each jurisdiction of Canada as an investment dealer, in Ontario and Manitoba as a futures commission merchant, and in Québec as a derivatives dealer. Subject to paragraph 7 below, CIBC World Markets Inc. is not in default of securities legislation in any jurisdiction of Canada.
5. Assante Financial Management Ltd. is a corporation incorporated pursuant to the laws of Ontario that operates primarily as a mutual fund dealer. Assante Financial Management Ltd. is a subsidiary of Assante Wealth Management (Canada) Ltd., which itself is a subsidiary of CII Investments Inc. Assante Financial Management Ltd. is an MFDA member and is registered as a mutual fund dealer and exempt market dealer in each jurisdiction of Canada. Assante Financial Management Ltd. offers its clients mutual funds, guaranteed investment certificates ("GICs") and government bonds. Subject to paragraph 7 below, Assante Financial Management Ltd. is not in default of securities legislation in any jurisdiction of Canada.
6. Assante Capital Management Ltd. is a corporation incorporated pursuant to the laws of Canada. Assante Capital Management Ltd. is a subsidiary of Assante Wealth Management (Canada) Ltd., which itself is a subsidiary of CII Investments Inc. Assante Capital Management Ltd. is a member of IIROC and is registered in each jurisdiction of Canada as an investment dealer. Assante Capital Management Ltd. offers its clients public-equity securities, bonds, mutual funds, GICs and other securities that are available on a prospectus-exempt, private placement basis. Subject to paragraph 7 below, Assante Capital Management Ltd. is not in default of securities legislation in any jurisdiction of Canada.
7. Through inadvertence, a small number of Representatives (as such term is defined at paragraph 9 below) who have been providing services to Benefaction from time-to-time have not been registered in Ontario and/or Québec.
Benefaction Foundation Program
8. The Filers have partnered with Benefaction, a registered charitable public foundation specializing in "donor-advised funds". Benefaction was registered as a charitable public foundation by the Canada Revenue Agency on May 22, 2008 and exists under the Canada Not-for-profit Corporations Act. Benefaction's mission is to encourage philanthropy by helping Canadians maximize charitable giving while minimizing tax burdens. It is governed by a Board of Directors currently comprised of 4 members, and it currently has three executives, a Chief Executive Officer, Chief Investment Officer and Vice-President, Growth Initiatives. Currently, charitable assets held by Benefaction total approximately $200 million.
9. Clients of the Filers are informed by their dealing representative or advising representative (the Representative) about the program which allows them to establish donor-advised funds (the Program). Information about the Program is also provided to clients in writing at the time they are informed about the Program and is always available online via Benefaction's website.
10. From time-to-time, a client of the Filers (the Donor) may choose to pursue specific philanthropic and tax objectives through a donor-advised fund offered by Benefaction.
11. The Donor is provided with an agreement between the Donor and Benefaction (theDonor Agreement) which the Donor must sign.
12. The Representative for the Donor opens a new account for Benefaction (the Account). Benefaction is now the client of the Representative and the Filer who sponsors the Representative.
13. The Donor makes a charitable donation to Benefaction, primarily in the form of cash or publicly listed securities. The Donor signs a Letter of Authorization for the Representative to transfer the Donor's donated property into the Account. This donation is irrevocable. A welcome kit is sent to the Donor after the Account is opened and funded.
14. The Donor receives a donation receipt from Benefaction for the donation made which the Donor can use to apply for a tax credit at tax filing time.
15. The Donor continues to work with the Representative who manages the Account for Benefaction.
16. The Donor Agreement entitles the Donor to make annual grant recommendations to Benefaction on the disbursement of grants from the Account to the Donor's chosen charities.
17. Donors may also make subsequent donations to Benefaction under the Program from time-to-time.
18. Benefaction provides a quarterly report to Donors which: (i) provides account opening and closing balances for the relevant period, and (ii) outlines fund details, including a financial summary over the period and since inception, a list of donation and grant activity over the period, a summary of the fund's grants by charitable sector, and the annual disbursement quota.
Filers' Relationship with Benefaction
19. Benefaction retains the Filers to provide investment management and advisory services to Benefaction with respect to the Accounts, and the Filers retain Benefaction to facilitate and administer the Program for the Donors.
20. Benefaction is responsible for carrying out all management and administrative processes required to operate the Program including accepting donations, opening and maintaining Accounts, directing the investing of the proceeds of each donation in accepted investments including completing and executing any account opening and/or other documents as may be required to open, trade and/or advise in respect to an Account, redeeming investments to pay fees associated with the Program and grant payments, and responding to specific Account questions as well as those related to Benefaction's role and responsibilities.
21. The Filers agree to manage each account opened by Benefaction in accordance with the provisions of the corresponding Donor Agreement.
22. Once the donation is made, Benefaction instructs the Representative to sell the donated assets. The proceeds of the donations are invested in a balanced portfolio or other investments approved by Benefaction, such as a mutual fund or exchange-traded fund. Discretionary accounts are sometimes opened for larger donor advised funds in instances where the Filer is approved in the category of portfolio manager, or by an appropriately licensed sub-adviser with which the Dealer has entered into a written sub-adviser agreement.
23. In regard to the investment of the assets in the Account, the investments must be made in compliance with the "prudent investment principles" set out in the Income Tax Act (Canada).
24. Benefaction does not permit a Donor to make decisions on the investment of the assets held in the Account. Unless the Account is a managed account as further detailed below, Benefaction has final authority over all investment decisions in each of the Accounts. After receiving a recommendation from the Representative, Benefaction will make a final decision on the investment for that Account and will send trading instructions to the Representative servicing that Account.
25. Where an Account is a managed account, investment decisions will be made by the Representative responsible for the Account, in accordance with Benefaction's Investment Policy and the investment objectives of the Account pursuant to the portfolio mandate(s) selected by Benefaction.
26. The Filers charge Benefaction the standard fees and charges applicable to such services as it would any other client.
27. In order to facilitate the relationship between the Donors and Benefaction, the Representative responsible for managing the Accounts will be the registered individual of the Filer that has the pre-existing relationship with the Donor. However, Benefaction has the ability to select another Representative to manage the Account.
28. Benefaction has senior representatives located in both Ontario and Quebec. The firm's Chief Executive Officer and founder resides in Quebec. The firm's Chief Investment Officer resides in Ontario. Each of the Chief Executive Officer or the Chief Investment Officer can authorize investment decisions and trades for Benefaction Accounts.
29. Each of the Filers' Representatives will be registered in the Donor's jurisdiction of residence. However, certain Representative may not be registered in Ontario, in Québec, or both if the Representative does not have any clients resident in Ontario or in Québec.
30. Absent the Exemption Sought, any Representative would be required to be appropriately registered in Ontario or in Québec in order to conduct registrable activities on behalf of an Account.
31. The Filers submit that the Exemption Sought would not be prejudicial to the public interest because:
a. the arrangement between the Donor, Benefaction, and the Filers is to allow for the engagement of the Donor in a fund established by the Donor for their charitable giving while Benefaction manages and administers the requirements for the Donor's charitable fund under the Income Tax Act (Canada);
b. Benefaction is required to manage the Account assets in compliance with prudent investment principles under the Income Tax Act (Canada);
c. each of the Filers will be registered in both Ontario and Québec; and
d. the Exemption Sought is limited to certain Representatives who are not registered in Ontario, in Québec or both to trade in securities for, or provide advice about securities to, Benefaction, but the Representative relying on the relief granted will be registered in one or more provinces and territories of Canada, including in the appropriate category in the jurisdiction where the Donor is resident.
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) Benefaction is a charitable public foundation under the Income Tax Act (Canada) that operates a charitable giving program focused on "donor advised funds";
(b) Benefaction is a "permitted client" as defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;
(c) each Filer offers the Program to its clients;
(d) each Filer is registered in both Ontario and Québec;
(e) each Representative is trading for or advising Benefaction in relation to an Account that was established under the Program from the donation of a Donor, and the Donor makes annual grant recommendations to Benefaction on the disbursement of grants from the Account to the Donor's chosen charities;
(f) each Representative that trades for or advises Benefaction is registered in one or more provinces or territories in Canada, including in the appropriate category in the jurisdiction to trade for or advise the Donor;
(g) each Filer will maintain and keep up-to-date a list of Representatives that are not registered in Ontario and/or Québec and for whom Benefaction is a client;
(h) each Filer will provide the list of Representatives referred to in condition (g) to the principal regulator within 10 days of any such request;
(i) each Representative that is not registered in Ontario does not solicit, trade for or advise any client that is resident in Ontario (other than Benefaction);
(j) each Representative that is not registered in Québec does not solicit, trade for or advise any client that is resident in Québec (other than Benefaction);
(k) each Filer will disclose all fees, expenses and commissions related to the Program in writing to every Donor by the applicable Filer or the applicable Representative prior to the Donor making a donation to Benefaction; and
(l) Benefaction provides a quarterly report to its Donors which: (i) provides account opening and closing balances for the relevant period, and (ii) outlines fund details, including a financial summary over the period and since inception, a list of donation and grant activity over the period, a summary of the fund's grants by charitable sector, and the annual disbursement quota.
Ontario Securities Commission
Ontario Securities Commission
OSC File #: 2020/0279