Global Reach Financial Solutions Inc.

Headnote

Application for a decision to vary a previous decision exempting a money services business (MSB) from the dealer registration and prospectus requirements in connection with certain distributions of and trades in over-the-counter (OTC) derivatives that are made by the filer with a "permitted counterparty" or an "eligible commercial hedger" -- "permitted counterparty" defined to mean "permitted client" as defined in Section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations -- "eligible commercial hedger" defined to mean a non-individual commercial hedger as defined in proposed derivatives business conduct and registration rules but with reduced financial threshold -- relief granted to remove financial threshold from "eligible commercial hedger" definition -- relief granted as an interim response to current regulatory uncertainty associated with the regulation of OTC derivatives, pending the development by the Canadian Securities Administrators (the CSA) of a uniform framework for the regulation of OTC derivatives in all provinces and territories of Canada -- decision includes terms and conditions of relief that are based on the regulatory framework for derivatives firms set out in the proposed derivatives business conduct and registration rules being developed by the CSA.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 53(1), 74 and 144.

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 1.1 ("permitted client").

Proposed National Instrument 93-101 Derivatives: Business Conduct and Proposed National Instrument 93-102 Derivatives: Registration ("commercial hedger" and "eligible commercial hedger").

OSC Rule 13-502 Fees.

July 26, 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 GLOBAL REACH FINANCIAL SOLUTIONS INC. (the Filer)

DECISION

Background

The Filer has made an application (the Application) to the Principal Regulator (as defined below) in the Jurisdiction for a decision under the securities legislation of the Jurisdiction (the Legislation) to vary the previous decision of the Principal Regulator made under the Legislation entitled Re Global Reach Financial Solutions Inc. dated November 16, 2020 (the Previous Decision){1} in accordance with the Requested Amendment Relief (as described below).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator); and

(b) the Filer has provided notice that, consistent with the relief granted in the Previous Decision, section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Newfoundland and Labrador, Northwest Territories, Nunavut, Prince Edward Island and Yukon (the Applicable Jurisdictions).

Interpretation

Defined terms contained in National Instrument 14-101 Definitions or the Previous Decision have the same meaning in this decision unless they are otherwise defined in this decision (the Decision).

Representations

This Decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is incorporated under the Canada Business Corporations Act (Canada). The Filer's principal office is located in Vancouver, British Columbia.

2. The Filer is a subsidiary of Global Reach Group Holdings (Jersey) Ltd., which, with its affiliates, is part of the Global Reach corporate group (the Global Reach Group), a provider of foreign exchange (FX) risk management and payment services, headquartered in the United Kingdom (the UK), with operations in six countries, including offices in the Netherlands, Spain, South Africa and Cyprus.

3. The Global Reach Group has three trading subsidiaries in the UK, all of which hold the relevant licences from the UK Financial Conduct Authority (the UK FCA):

(a) Global Reach Markets Limited -- an authorized investment firm which provides advice / deals as matched principal broker in OTC FX derivatives;

(b) Global Reach Partners -- an authorized payment institution which provides foreign exchange and payment services to corporate clients (where the FX falls outside of the investment rules -- spot and deliverable forwards where the underlying requirement is for the payment of goods or services); and

(c) Foreign Currency Exchange Limited -- an authorized e-money institution providing payment wallets and foreign exchange services (where outside of investment regulation).

4. Each of these entities is required to adhere to both prudential and conduct requirements ensuring their financial soundness, the protection of client money and the fair treatment of clients.

5. The Filer provides FX and payment services for commercial and other non-retail customers in Canada, other than in Quebec, for the hedging of risk or payment facilitation and not for speculative or investment purposes.

6. The Filer is classified as a Money Services Business under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (PCMLTFA) and associated regulations. The Filer is registered as a Money Services Business (MSB) or equivalent in all provinces in which it carries on business. As an MSB, the Filer fully complies with anti-money laundering and anti-terrorist financing laws and regulations in Canada and, in particular, the Guidelines produced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

7. The Filer is not registered under the securities, commodity futures or derivatives legislation of any of the provinces or territories of Canada in any capacity.

The Previous Decision

8. On November 16, 2020, the Filer was granted certain relief from certain requirements of the Legislation that would otherwise be applicable to the Filer in connection with the operation of the Filer's foreign exchange risk management and payment services business (the Filer's FX Business), subject to terms and conditions, all as described in the Previous Decision.

9. Specifically, on November 16, 2020, the Principal Regulator in the Previous Decision exempted the Filer and its respective officers, directors and representatives from

(a) the dealer registration requirement (the Dealer Registration Relief), and

(b) the prospectus requirement (the Prospectus Relief),

in the Legislation in respect of distributions of or other trades in OTC Derivatives (as defined below) in connection with the Filer's FX Business made by

(c) the Filer to or with a "Permitted Counterparty" or an "Eligible Commercial Hedger" (as such terms are defined in the Previous Decision), and

(d) by a Permitted Counterparty or an Eligible Commercial Hedger to or with the Filer

as the case may be, subject to a sunset clause and the terms and conditions set out in the Previous Decision (the Previous Decision Relief).

10. In the Previous Decision, the Filer provided notice that, in the case of the Dealer Registration Relief and, in the jurisdictions where required, the Prospectus Relief, section 4.7(1) of MI 11-102 is intended to be relied upon in the Applicable Jurisdictions.

11. Elsewhere in Canada and outside of the Applicable Jurisdictions, the Filer relies on exemptions for trading in OTC Derivatives with "Qualified Persons" in Canada set out in the following instruments (the CSA Local Blanket Orders):

Alberta	ASC Blanket Order 91-507 Over-the-Counter Trades in Derivatives
British Columbia	BC Instrument 91-501 Over-the-Counter Derivatives
Manitoba	Blanket Order 91-501 Over-the-Counter Trades in Derivatives
New Brunswick	Local Rule 91-501 Derivatives
Nova Scotia	Blanket Order 91-501 Over the Counter Trades in Derivatives
Saskatchewan	General Order 91-908 Over-the-Counter Derivatives

12. The Filer does not currently offer FX or payment services to customers in Quebec.

The Requested Amendment Relief

13. The Previous Decision included the following defined term:

"Eligible Commercial Hedger" means a person or company, other than an individual, that

(a) is a commercial hedger in relation to the OTC Derivative that it transacts with the Filer;

(b) has represented to the Filer in writing that it has the requisite knowledge and experience to evaluate the information provided to the person or company about OTC Derivatives by the Filer, the suitability of the OTC Derivatives for the person or company, and the characteristics of the OTC Derivatives to be transacted on the person or company's behalf, and

(c) has, or directly or indirectly owns or is owned by or is under common ownership with an entity, or group of entities, that has, net assets of at least $500,000 as shown on its most recently prepared financial statements;

14. The Filer is seeking to amend the Previous Decision by deleting the definition of "Eligible Commercial Hedger" in the Previous Decision and replacing it with the following new definition of "Eligible Commercial Hedger" (the Requested Amendment Relief):

"Eligible Commercial Hedger" means a person or company, other than an individual, that

(a) is a commercial hedger in relation to the OTC Derivative that it transacts with the Filer; and

(b) has represented to the Filer in writing that it has the requisite knowledge and experience to evaluate the information provided to the person or company about OTC Derivatives by the Filer, the suitability of the OTC Derivatives for the person or company, and the characteristics of the OTC Derivatives to be transacted on the person or company's behalf;

15. The Filer is seeking the Requested Amendment Relief for the following reasons:

(a) Having operated within the regulatory framework set out in the Previous Decision for six months, the Filer believes that the net asset requirement in clause (c) of the definition of "Eligible Commercial Hedger" in the Previous Decision (the net asset requirement) has impacted the ability of the Filer to service its customers and given rise to unlevel-playing-field concerns vis-à-vis other unregistered market participants that operate a similar foreign exchange risk management and payment services business in Canada.

(b) The Filer believes these customer service and unlevel-playing-field concerns have been exacerbated by the current Covid-19 pandemic. Small businesses have become particularly vulnerable as a result of Covid and there are many examples where exposure to fluctuations in FX can have a material impact on their ability to continue to operate. These small clients are poorly served by the more established larger institutions leaving many such clients exposed.

(c) The comparable definitions of "hedger" in the definition of "Qualified Party" in the CSA Local Blanket Orders and in subsection 1(1) of the Commodity Futures Act (Ontario) do not include a net asset requirement and the Filer wishes to operate the Filer's FX Business on a more harmonized basis across Canada,

16. The Filer has further made an application to the Director in the Jurisdiction for a decision, pursuant to section 6.1 of Ontario Securities Commission Rule 13-502 Fees (the Fees Rule), that the Filer be exempt from the requirement to pay an activity fee for making the Application (the Requested Fee Relief).

17. If the Filer were a registered firm under the Securities Act (Ontario) (the OSA), the Filer's officers, directors and "permitted individuals" (as that term is defined in National Instrument 33-109 Registration Information (NI 33-109) as at July 1, 2021 would be as follows:

• Millie Richardson, Chief Compliance and Risk Officer, Director

• Brett Flowers, Chief Financial Officer, Director

• Paul Lennox, President, Director -- former President of EncoreFX (officer)

• Quinn Kerkham, Commercial Director, Canada -- former VP Branch Manager of EncoreFX

18. This decision is based on the same representations made by the Filer in the Previous Decision and which remain true and complete except as necessarily amended above.

Decision (the Requested Amendment Relief)

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 is that the Requested Amendment Relief is granted.

Decision (the Requested Fee Relief)

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

It is the decision of the Director that the Requested Fee Relief is granted.

{1} https://www.osc.ca/en/securities-law/orders-rulings-decisions/global-reach-financial-solutions-inc