Jen, Carson - Opportunity to be Heard

Director's Decision
[Update: This individual was registered as an Associate Advising Representative on August 12, 2005.]



R.S.O. 1990, C.S.5, AS AMENDED






May 30, 2003
Winfield Liu
Senior Legal Counsel
Market Regulation
Allison McBain
Registration Officer
Gordon Pansegrau
Counsel for the Applicant


The decision of the Director is to deny Mr. Jen's application for registration as an associate investment counsel and portfolio manager. The reasons for the decision are set out below.


Mr. Jen is seeking registration as an associate investment counsel and portfolio manager. As part of the registration application he requested, by letter dated September 24, 2002, an exemption under section 4.1 of Ontario Securities Commission Rule 31-502 -- Proficiency Requirements for Registrants (the "Rule"), from the proficiency requirements contained in section 3.3 of the Rule. The applicant provided additional submissions in support of the application under letters dated November 11 and December 13, 2002. Staff informed Mr. Jen by letter dated January 23, 2003, that they recommended to the Director that the application for registration not be granted on the basis that the applicant was not suitable for registration. Pursuant to subsection 26(3) of the Securities Act, the Director shall not refuse to grant registration without giving the applicant an opportunity to be heard. Mr. Jen has chosen to be heard by making written submissions dated February 14, 2003.

The Rule sets out the proficiency requirements for persons seeking registration as a dealer or adviser. Subsection 3.3(1) deals with requirements for associate officers of investment counsel or portfolio managers.

3.3(1) An individual may be granted registration as an associate representative, associate partner or associate officer of an investment counsel or portfolio manager if the individual has

(a) completed

(i) the Canadian Investment Manager Program and the first year of the Chartered Financial Analyst Examination Program; or

(ii) the Chartered Financial Analyst Examination Program; and

(b) been employed for

(i) two years performing research involving the financial analysis of investments, or

(ii) two years as a registered salesperson of a broker, investment dealer or securities dealer.

Section 1.2 of Companion Policy 31-502CP states that:

1.2 The Director will consider granting an exemption to any of sections 2.1 to 2.5 and 3.1 to 3.3 of the Rule to any person or company if the Director is satisfied that the person or company has qualifications or experience that are equivalent to, or more appropriate in the circumstances, than the qualifications or experience required under the section.

Mr. Jen completed the Canadian Securities Course in 1989 and Part 1 of the Chartered Financial Analyst Examination Program ("CFA") in July 2002. Prior to that he obtained a Bachelor of Engineering which he completed in 1974 and a Masters of Business Administration in 1978. In 1985 he obtained his CMA designation from the Society of Management Accountants of Alberta.

Summary of the Applicant's Submission

The applicant began his employment with Elliott & Page Limited in February 2002 and has become involved in the management of the Equity Index Funds. During his involvement with these funds he gained experience with many aspects of the management of index funds such as portfolio construction, index fund tracking error, the Barra Risk Modelling System, hedging and synthetic stock replication. His work has also included some duties related to fixed income securities, money market and actively-managed equity portfolios. It is submitted that the experience that Mr. Jen has acquired is sufficient to warrant the granting of any exemption from the proficiency requirements.

Summary of Staff's Submission

Staff noted that Mr. Jen had completed a Masters of Business Administration degree in 1978 but felt that while some of the courses in that program were relevant, in many cases they were not. Furthermore, the MBA degree was completed many years ago. Mr. Jen had also obtained his CMA designation but, once again, that was completed a number of years ago in 1985. Staff's view of his work experience was that the emphasis on management of index funds, although providing experience with passively-managed funds, did not provide sufficient experience with actively-managed funds.

Director's Findings

The proficiency requirements for an associate officer of an investment counsel or portfolio manager as set out in subsection 3.3(1) of the Rule contemplate two components. The first is formal course work consisting of the completion of the CFA or a combination of the first year of the CFA and the Canadian Investment Management Program. In addition, there is a requirement for two years of employment performing financial analysis of investments or as a registered salesperson. Completion of the specified programs set out in section 3.3 is an important component of the proficiency requirements.

Mr. Jen has approximately three years of employment relating to management of equity funds. In particular, his time seems to have been spent largely with passively-managed index funds although there was some minor involvement with other types of funds including actively-managed funds. Nonetheless, I find that the practical experience that he has would likely meet the proficiency requirement of two years of employment performing research involving financial analysis of investments.

The requirements of paragraph 3.3(1)(a), however, have not been completed. It has been submitted that the applicant's work experience is sufficient to justify an exemption from completing the requirements of that subsection.

Section 1.2 of the Companion Policy gives some guidance in considering a request for an exemption. The Director may grant an exemption if the Director is satisfied that the qualifications or experience of the applicant are equivalent to or, are more appropriate in the circumstances, than the qualifications or experience required under the relevant section of the Rule. As noted, the Rule contemplates that the requirement for work experience is in addition to the completion of course work. In order for work experience to be a sufficient basis for an exemption from completing the specified programs the experience must exceed the basic requirement of two years employment to the extent that the experience could be considered the equivalent of the CFA or CIM programs. In the present case, I do not find the applicant's work experience to be so extensive, either in terms of the variety or nature of the responsibilities undertaken during the employment or the duration of time, as to warrant the granting of an exemption from the requirement to complete the required course work. Accordingly, I find that the applicant is not suitable for registration since all relevant proficiency requirements have not been met.

May 30, 2003.

"Winfield Liu"