MR Group Investment US, Inc. et al. – ss. 74, 144

Headnote

Rulings under subsection 74(1) of the Securities Act (Ontario) (the Act) exempting three affiliated companies from the adviser registration requirement in subsection 25(3) where the companies act as an adviser to other affiliated companies, subject to certain terms and conditions -- Decision providing for rulings also includes Orders under subsection 144(1) that revoke the following two prior rulings of the Commission that had provided exemptions from the adviser registration requirement for two of the three applicant companies: (i) the Ruling of the Commission dated December 14, 2012, In the Matter of MEAG New York Corporation, (2012), 35 OSCB 11510; and (ii) the Ruling of the Commission dated March 28, 2018, In the Matter of MEAG MUNICH ERGO Asset Management GmbH Corporation, (2018), 41 OSCB 2817.

Applicable Legislative Provisions

Securities Act, R.S.O., c. S.5, as am., ss. 25(3), 74(1).

Decisions Cited

Ruling of the Commission dated December 14, 2012, In the Matter of MEAG New York Corporation, (2012), 35 OSCB 11510.

Ruling of the Commission dated March 28, 2018, In the Matter of MEAG MUNICH ERGO Asset Management GmbH Corporation, (2018), 41 OSCB 2817.

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (THE ACT) AND IN THE MATTER OF MR GROUP INVESTMENT US, INC., MEAG NEW YORK CORPORATION AND MEAG MUNICH ERGO ASSET MANAGEMENT GMBH

RULING and ORDER (Section 74 and Section 144 of the Act)

UPON the application (the Application) of MR Group Investment US, Inc. (MR Group Investment), MEAG New York Corporation (MEAG New York), and MEAG MUNICH ERGO Asset Management GmbH (MEAG Munich) (collectively, the Applicants) to the Ontario Securities Commission (the Commission) for:

(i) a ruling, pursuant to subsection 74(1) of the Act, that each Applicant not be subject to the registration requirement contained in subsection 25(3) of the Act (the Adviser Registration Requirement), where it acts an adviser to an Affiliated Company (as defined below) or, in the case of MEAG New York and MEAG Munich, where it acts as a sub-adviser to MR Group Investment, in the circumstances set out below;

(ii) an order, pursuant to subsection 144(1) of the Act, revoking the ruling of the Commission dated December 14, 2012, In the Matter of MEAG New York Corporation, (2012) 35 OSCB 11510 (the Prior MEAG New York Ruling); and

(iii) an order, pursuant to subsection 144(1) of the Act, revoking the ruling of the Commission dated March 28, 2018, In the Matter of MEAG MUNICH ERGO Asset Management GmbH Corporation, (2018), 41 OSCB 2817 (the Prior MEAG Munich Ruling) (the MEAG New York Ruling and the MEAG Munich Ruling are collectively referred to herein as the Prior MEAG Rulings);

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Applicants having represented to the Commission as follows:

MR Group Investment

1. MR Group Investment is a corporation existing under the laws of Delaware that has its headquarters in the state of New Jersey, in the United States of America (the U.S.A.). It does not have any office or employees located in Canada.

2. MR Group Investment is, in all material respects, in compliance with the securities laws of the U.S.A.

3. MR Group Investment is not in default of any requirements of securities legislation in any jurisdiction of Canada.

4. MR Group Investment is a member of the Munich Re Group (defined below) and is assuming a central role in the investment advisory function of the Munich Re Group pursuant to the Reorganization (defined below).

5. MR Group Investment is not registered in any category of registration under the securities legislation of any jurisdiction of Canada.

The Munich Re Group

6. Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (Munich Re), is a global re-insurance company headquartered in Germany. Each of the Applicants is part of the corporate group of companies affiliated with Munich Re and collectively known as the 'Munich Re Group'. Munich Re, Munich Reinsurance Company of Canada, Temple Insurance Company, The Boiler Inspection and Insurance Company of Canada, and Munich Reinsurance America, Inc. (collectively, the Insurance Companies) are insurance companies that carry on business in Canada as Canadian federally-licensed insurance companies with their Canadian head offices located in Ontario. Munich Holdings Ltd., a company established under the laws of Canada with its Canadian head office located in Ontario, is the holding company of Munich Reinsurance Company of Canada and Temple Insurance Company. Munich Holdings Ltd. and the Insurance Companies are collectively referred to herein as the Affiliated Companies. Each of the Affiliated Companies is a direct or indirect wholly owned subsidiary of Munich Re.

7. With respect to the above Affiliated Companies:

(a) Munich Re operates as an insurance company in Canada on a branch basis;

(b) Munich Reinsurance Company of Canada underwrites the following classes of business: property, accident and sickness, aircraft, automobile, boiler and machinery, credit, fidelity, hail, liability, surety and marine;

(c) Temple Insurance Company underwrites large industrial and commercial risk management accounts;

(d) The Boiler Inspection and Insurance Company of Canada offers equipment breakdown insurance and other specialty insurance and reinsurance coverages worldwide;

(e) Munich Reinsurance America, Inc. is a major provider of property and casualty reinsurance in the U.S.A., operating also through its branch in Canada; and

(f) Munich Holdings Ltd. is a holding company and does not conduct insurance operations in Canada.

8. Each of the Affiliated Companies is deemed to be an "affiliate" of each of the Applicants for the purposes of the Act, pursuant to subsection 1(2) of the Act. Each of the Affiliated Companies is also a "permitted client" as that term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103).

MEAG New York

9. MEAG New York is a corporation existing under the laws of the State of Delaware, U.S.A, that has its headquarters located in the state of New York, U.S.A. It does not have any office or employees located in Canada.

10. MEAG New York is, in all material respects, in compliance with the securities laws of the U.S.A.

11. MEAG New York is not in default of any requirements of securities legislation in any jurisdiction of Canada.

12. MEAG New York provides investment management services exclusively to entities affiliated with Munich Re, including the Affiliated Companies.

13. MEAG New York is not registered in any category of registration under the securities legislation of any jurisdiction of Canada.

14. Pursuant to the Prior MEAG New York Ruling, MEAG New York obtained an exemption from the Adviser Registration Requirement permitting it to act as an adviser to Affiliated Companies, subject to certain terms and conditions.

MEAG Munich

15. MEAG Munich is a corporation existing under the laws of the Federal Republic of Germany (Germany), based in the City of Munich, Germany. It does not have any office or employees located in Canada.

16. MEAG Munich is exempt from the obligation to obtain the authorization of BaFin (the German Federal Financial Supervisory Authority) to provide financial services pursuant to the German Banking Act (Kreditwesengesetz) on the basis that it provides such services exclusively to affiliated entities.

17. MEAG Munich is, in all material respects, in compliance with the securities laws of Germany.

18. MEAG Munich is not in default of any requirements of securities legislation in any jurisdiction of Canada.

19. MEAG Munich provides investment management services exclusively to entities affiliated with Munich Re, including the Affiliated Companies.

20. MEAG Munich is not registered in any category of registration under the securities legislation of any jurisdiction of Canada.

21. Pursuant to the Prior MEAG Munich Ruling, MEAG Munich obtained an exemption from the Adviser Registration Requirement permitting it to act as an adviser to Affiliated Companies, subject to certain terms and conditions.

Adviser Activities

22. Currently, MEAG New York has a sub-adviser agreement with MEAG Munich. The sub-adviser agreement sub-delegates to MEAG Munich advisory responsibilities of MEAG New York to Affiliated Companies for certain portfolio management and asset investment services in respect of tradeable fixed income and money market investments, as well as cash/currencies and derivatives services. MEAG New York has responsibility for all such advice rendered by MEAG Munich, which MEAG Munich is fully qualified to render.

23. Each of the Applicants operates under an exemption from registration under the securities legislation of the jurisdiction in which its head office is located, which in turn permits each to carry on activities in that jurisdiction that registration as an adviser under the Act would permit it to carry on in Ontario.

24. None of the Applicants can rely on the exemption from the Adviser Registration Requirement set out in section 8.26 [international adviser] of NI 31-103 (the International Adviser Exemption) for advice it provides, or after the Reorganization will provide, to an Affiliated Company, because the advice includes, or will include, advice in respect of a security that is not a "foreign security" as defined in subsection 8.26(2), and such advice is not, or will not, be incidental to advice provided on a foreign security.

Reorganization

25. The Munich Re Group is planning a reorganization (the Reorganization) that will have the effect of centralizing various aspects of group operations, including investment advisory services. The impetus for the Reorganization as it relates to investment advisory services is to coordinate investment directions and respond to insurance risk allocation needs on a group-wide basis in real time.

26. Pursuant to the Reorganization, it is proposed that MR Group Investment will become the central investment advisory services hub in the Canadian and United States markets for the Munich Re Group, with MEAG Munich and MEAG New York becoming sub-advisers to MR Group Investment, with MR Group Investment to provide a group overlay to the global investment management performed by MEAG Munich and MEAG New York for Munich Re Group affiliates around the world, including the Affiliated Companies.

27. The roles of MEAG New York and MEAG Munich are proposed to be modified as a result of the Reorganization: MEAG New York will transfer all direct contractual advisory relationships with the Affiliated Companies over to MR Group Investment, which will in turn enter into sub-advisory arrangements with MEAG New York and MEAG Munich, ensuring continuity with the investment advisory teams at MEAG New York and MEAG Munich, as MEAG New York and MEAG Munich will continue to handle the bulk of the investment advisory services for the Affiliated Companies, as before the Reorganization, but will do so on a sub-advisory basis through, and coordinated by, MR Group Investment.

28. Following the Reorganization, the portfolio assets of the Affiliated Companies will continue to be beneficially owned by each of the respective Affiliated Companies. There will also continue to be no external stakeholders (including, for example, holders of variable annuity contracts or segregated/separate accounts for policyholders) that have any direct or indirect interest in the performance of such portfolios. There will continue to be no stakeholders in Ontario or elsewhere, other than the Affiliated Companies and Munich Re (as the direct or indirect owner of the Affiliated Companies), that will be directly affected by the results of the investment advice and portfolio management services to be provided by any of the Applicants to an Affiliated Company, in accordance with the exemptions from the Adviser Registration Requirement set out in this Ruling.

29. Employees of a corporation do not trigger the Adviser Registration Requirement if the employee provides investment advice to their corporate employer with respect to the portfolio assets of their corporate employer. The Affiliated Companies do not currently employ individuals to provide investment advice with respect to their respective portfolio assets. Even though the Affiliated Companies have outsourced such services to MEAG New York, MEAG Munich and, upon completion of the Reorganization, to MR Group Investment, the individuals who provide, or will provide, such services will continue to be employees of affiliates of the Affiliated Companies (i.e., as employees of MR Group Investment, MEAG New York or MEAG Munich). Accordingly, the outsourced adviser function stays within the Munich Re Group and, in any event, is, and will after the Reorganization continue to be, performed by employees of affiliates of the Affiliated Companies, substantially reflecting the circumstances that prevent the employees of a corporation from triggering the Adviser Registration Requirement, with this outsourcing of the investment advisory function permitted under applicable federal or provincial insurance company legislation.

Revocation of Prior MEAG Rulings

30. To reflect the Reorganization, MEAG New York and MEAG Munich have requested: (i) a restatement in this Ruling of substantially similar exemptive relief to that previously made available to them under, respectively, the MEAG New York Ruling and the MEAG Munich Ruling; and (ii) a revocation of the corresponding Prior MEAG Ruling as a part of this restatement.

AND WHEREAS section 74 of the Act provides that the Commission may, upon the application of an interested person or company make a ruling that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, where the Commission is satisfied that to do so would not be prejudicial to the public interest;

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to section 74 of the Act, that each of the Applicants is not subject to the Adviser Registration Requirement in respect of that Applicant acting as an adviser to an Affiliated Company, or, in the case of MEAG New York and MEAG Munich, where such Applicant acts as sub-adviser to MR Group Investment, provided that:

(a) the Affiliated Company is:

(i) licensed or otherwise duly permitted or authorized to carry on the business of an insurance company in Canada or the business of a branch of a foreign insurance company in Canada; or

(ii) a holding company that has as its principal business activity holding securities of one or more affiliates that are in each case licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada;

(b) in the case of MEAG New York and MEAG Munich, where such Applicant acts as a sub-adviser to MR Group Investment, the sub-advised advice is only provided to an Affiliated Company referred to in paragraph (a)(i) or (a)(ii), above;

(c) with respect to any advice to an Affiliated Company referred to in paragraph (a) or paragraph (b), above, the advice or sub-advised advice is provided only so long as:

(i) the Affiliated Company remains deemed to be an "affiliate" of the Applicant pursuant to subsection 1(2) of the Act;

(ii) the Affiliated Company remains a "permitted client" as defined in section1.1 of NI 31-103; and

(iii) the beneficial ownership of the portfolio assets of the Affiliated Company and the affected stakeholders continues to be as set out in paragraph 28, above;

(d) with respect to any sub-advised advice referred to in paragraph (b), above, the sub-advised advice is provided only so long as MR Group Investment remains deemed to be an "affiliate" of the Applicant pursuant to subsection 1(2) of the Act;

(e) the Applicant notifies the Commission of any regulatory action initiated after the date of this Ruling in respect of the Applicant or, to the best of that Applicant's knowledge and after reasonable inquiry, in respect of any "predecessor" or "specified affiliate" of the Applicant (as those terms are defined in Form 33-109F6 to National Instrument 33-109 Registration Information), by completing and filing with the Commission Appendix "A" hereto within 10 days of the commencement of such regulatory action, or in the case of a predecessor or specified affiliate of the Applicant, within 10 days of such knowledge;

(f) the Applicant, in the course of its dealings with any Affiliated Company referred to in paragraph (a) or (b), above, acts fairly, honestly and in good faith;

(g) the Applicant complies with, and remains in compliance with, any applicable adviser licensing or registration requirements under applicable securities legislation in the jurisdiction in which its head office is located; and

(h) this Ruling will terminate on the date that is the earlier of:

(i) the date that is five years after the date of this Ruling; and

(ii) the date of the coming into force of a change in securities legislation in Ontario that exempts any of the Applicants from the Adviser Registration Requirement in connection with any advising activity the Applicant provides to an Affiliated Company, on terms and conditions other than those set out in this Ruling;

AND WHEREAS section 74 of the Act provides that the Commission may, upon the application of a person or company affected by the decision, make an order revoking or varying a decision of the Commission, if, in the Commission's opinion, the order would not be prejudicial to the public interest;

AND UPON the Commission being of the opinion that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 144 of the Act, that each of the Prior MEAG Rulings is hereby revoked.

DATED at Toronto, Ontario, this 20th day of November, 2020.

APPENDIX "A"

NOTICE OF REGULATORY ACTION

1. Settlement agreements

Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?

Yes ____ No _____

If yes, provide the following information for each settlement agreement:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Regulator/organization

Date of settlement (yyyy/mm/dd)

Details of settlement

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

2. Disciplinary history

Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:

	Yes	No
(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?	_____	_____
(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?	_____	_____
(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?	_____	_____
(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?	_____	_____
(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?	_____	_____
(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?	_____	_____
(g) Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?	_____	_____

If yes, provide the following information for each action:

Name of Entity
Type of Action
Regulator/organization
Date of action (yyyy/mm/dd)	Reason for action
Jurisdiction

3. Ongoing investigations

Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?

Yes _____ No _____

If yes, provide the following information for each investigation:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Reason or purpose of investigation

Regulator/organization

Date investigation commenced (yyyy/mm/dd)

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

Authorized signing officer or partner

- - - - - - - - - - - - - - - - - - - -

Name of firm

Name of firm's authorized signing officer or partner

Title of firm's authorized signing officer or partner

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

Witness

The witness must be a lawyer, notary public or commissioner of oaths.

- - - - - - - - - - - - - - - - - - - -

Name of witness

Title of witness

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

This form is to be submitted through the Ontario Securities Commission's Electronic Filing Portal:

https://www.osc.gov.on.ca/filings

{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.