Freedom International Brokerage Company and RBC Dominion Securities Inc.

Headnote

Under paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual acts as an officer, partner or director of another registered firm that is not an affiliate of the first-mentioned firm. The Filers have sought relief from that prohibition. The firm employing an individual as a registered representative is an owner of the second registered firm and entitled to appoint a director to its board. The individual representative will have sufficient time to adequately serve both firms. The potential for conflicts of interest is significantly reduced compared to other similar arrangements because the second firm operates as an inter-dealer bond broker and does not compete with the shareholder firm. The filers have policies in place to handle potential conflicts of interest. Relief from the prohibition has been granted.

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.

May 31, 2022

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Principal Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF FREEDOM INTERNATIONAL BROKERAGE COMPANY (FREEDOM), AND RBC DOMINION SECURITIES INC. (DS)

DECISION

Background

The regulator in the Principal Jurisdiction (the Decision Maker) has received a joint application from Freedom and DS (each a Filer) for a decision under the securities legislation of the Principal Jurisdiction (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 DS to permit Mr. Daniel Ram to act as a dealing representative of DS while also acting as a director of Freedom (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 joint application; and

(b) DS has 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 the provinces and territories of Canada (collectively, the Jurisdictions) other than the Principal Jurisdiction.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by each of the Filers insofar as such facts relate to that Filer:

Freedom

1. Freedom is an unlimited liability company incorporated under the laws of Nova Scotia.

2. The principal regulator of Freedom is the OSC because Freedom's principal office is located in Toronto, Ontario.

3. Freedom is registered as an exempt market dealer in Ontario and Québec, and has been approved as an inter-dealer bond broker by the Investment Industry Regulatory Organization of Canada (IIROC).

4. As an inter-dealer bond broker, Freedom provides an integrated voice and electronic brokerage service to its clients in accordance with the requirements of Series 7300 of the IIROC Rules (Series 7300).

5. Pursuant to Series 7300, all of Freedom's clients are typically Canadian investment dealers, Canadian chartered banks and/or an affiliated entity.

6. As an inter-dealer bond broker, Freedom acts as an agent for its customers in allowing a customer to buy and/or sell domestic and international corporate and government bonds, derivatives and other related securities (collectively, Debt Securities) to another customer of Freedom.

7. Freedom never acts as principal in effecting a trade with a client (i.e., Freedom only matches an order by a buyer with a seller and vice versa).

8. Freedom is owned (i) indirectly by a wholly-owned subsidiary of BGC Partners Inc. (BGC), a leading global brokerage company servicing the financial and real estate markets with its head office in London, England, and (ii) directly by, or indirectly by a wholly-owned subsidiary of BMO Nesbitt Burns Inc., CIBC World Markets Inc., DS, Merrill Lynch Canada Inc., Scotia Capital Inc. and TD Securities Inc. (collectively, the Shareholders).

9. The board of directors of Freedom (the Board) consists of five representatives from BGC and one representative from each of the other Shareholders for a total of 11 directors. The members of the Board do not receive any compensation for acting as a director of Freedom.

10. BGC and the other Shareholders have entered into a unanimous shareholders agreement which effectively limits the ability of the directors of Freedom to oversee the operations of Freedom and imposes restraints on what Freedom can do without shareholder approval.

11. Freedom and DS are not affiliates.

DS

12. DS is registered as an investment dealer in each of the provinces and territories of Canada, as a futures commission merchant in Ontario, as a derivatives dealer in Québec, is a member of IIROC, and is indirectly owned by the Royal Bank of Canada.

13. The principal regulator of DS is the OSC because DS's principal office is located in Toronto, Ontario.

14. Mr. Ram is registered as a dealing representative (investment dealer) of DS in each of the provinces of Canada. DS wants to appoint Mr. Ram as its representative on the Board.

15. Mr. Ram is currently a Managing Director at DS and is responsible for buying and selling Debt Securities for institutional investors, (ii) analyzing current market conditions, and (iii) implementing decisions to yield positive returns / profits for such institutional clients.

16. DS uses the services of Freedom to effect trades of Debt Securities on its own behalf and on behalf of its clients from time to time.

Dual Registration

17. Mr. Ram has extensive knowledge about fixed income securities and the marketplace in which Freedom operates, and as such, subject to regulatory approval, Freedom would like to appoint Mr. Ram to act as a member of the Board as it will assist Freedom to remain competitive and to be responsive to its clients' interests.

18. DS has determined that Mr. Ram is the appropriate person to sit on the Board and that it does not have another individual that is not registered in the Jurisdictions who has the necessary expertise.

19. Mr. Ram will be supervised by DS.

20. The day-to-day operations of Freedom are carried out by the executive management and employees of Freedom. Mr. Ram will not have any role in the day-to-day operations of Freedom.

21. Neither DS or Mr. Ram will have access to Freedom's systems, which access would enable either DS or Mr. Ram to influence the actions of a client of Freedom to the benefit of DS or Mr. Ram in relation to a trade.

22. At no time will the interests of DS be favoured over the other clients of Freedom as a result of Mr. Ram being a member of Freedom's Board.

23. It is anticipated that Mr. Ram will spend between four to six hours per quarter on his duties as a director of Freedom.

24. The directors of Freedom are subject to a detailed policy governing conflicts of interest (the Freedom Policy). The Freedom Policy specifically addresses the situation where a representative, that is a director appointed by a Shareholder, has a conflict of interest or duty arising from the concurrent fiduciary duties owed to Freedom and the respective Shareholder.

25. The Freedom Policy proceeds from the principle that as a director of Freedom and as a member of the Board, Mr. Ram owes an unqualified fiduciary duty to Freedom. The Freedom Policy enforces that principle by providing that where a director or the Board identifies a conflict of interest, the Board will adopt a protocol for managing the conflict which must include provisions relating to:

(a) whether the conflicted director must withdraw from the Board meeting for the duration of any discussion on a relevant matter, and whether the Board may waive such a requirement;

(b) whether, in light of applicable law or other relevant circumstances, the conflicted director may vote in connection with any Board decision on that matter; and

(c) whether, subject to such restrictions as the Board may impose, the conflicted director may receive Board papers or other information which relates in any way to the subject-matter that gives rise to the conflict (the Information). Where the Board decides that Mr. Ram may not receive the Information, and the Board further decides that the conflict of duty is of such nature or sensitivity that it is not appropriate for Mr. Ram to be made aware of the nature of the Information, Mr. Ram will not be notified of the nature of the Information.

26. To further protect Freedom, the Freedom Policy contains guidelines relating to:

(a) the circumstances in which the Information may be passed on by Mr. Ram to DS, who nominated Mr. Ram;

(b) the right of Freedom to place an embargo on the Information which must not be passed on because of its sensitivity; and

(c) acceptance by DS of the obligation of confidentiality in relation to any Information received.

27. DS has appropriate compliance and supervisory policies and procedures to deal with any conflicts of interest that may arise as a result of Mr. Ram being a director of Freedom.

28. The potential for conflicts of interest or client confusion due to Mr. Ram acting as a director of Freedom and a dealing representative of DS is mitigated by the following:

(a) DS does not compete with Freedom;

(b) members of the Board serve without remuneration;

(c) Mr. Ram will not be involved in the day-to-day operations of Freedom's operations;

(d) neither DS or Mr. Ram will have access to Freedom's systems, which access would enable DS or Mr. Ram to influence the actions of a client of Freedom to the benefit of DS or Mr. Ram in relation to a trade; and

(e) at no time will Freedom favour the interests of DS as a result of Mr. Ram being a member of the Board.

29. Neither Filer is in default of securities, commodities or derivatives legislation in any Jurisdiction.

30. In the absence of the Exemption Sought, DS would be prohibited under section 4.1(1)(a) of NI 31-103 from allowing Mr. Ram to act as a dealing representative of DS while also acting as a director of Freedom.

Decision

The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted, provided that the circumstances described above remain in place.