AXA Investment Managers, Inc.
Application to the Ontario Securities Commission for an order pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The Applicant will provide advice to its Canadian affiliates in Ontario only for so long as such affiliate remains an affiliate of the Applicant.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(3) and 74(1).
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (the Act)
IN THE MATTER OF AXA INVESTMENT MANAGERS, INC.
UPON the application (the Application) of AXA Investment Managers, Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 74(1) of the Act that the Applicant be exempted from the adviser registration requirement in subsection 25(3) of the Act;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission as follows:
1. The Applicant is a Delaware corporation registered with the U.S. Securities and Exchange Commission (SEC) as an investment advisor, with its principal office located in Greenwich, Connecticut. The Applicant does not have an office or employees in Canada.
2. The Applicant is a wholly owned, indirect subsidiary of AXA SA, a Société Anonyme organized under the laws of France. The ownership to the ultimate parent holding company, AXA SA, is as follows:
(a) AXA SA directly and indirectly owns substantially all of AXA Investment Managers SA's equity ownership interests;
(b) AXA Investment Managers SA directly owns 100% of AXA IM U.S. Group Holding Inc.; and
(c) AXA IM US Group Holding Inc. directly owns 100% of the Applicant.
AXA SA and its direct and indirect subsidiaries are collectively referred to as the "AXA Group." The AXA Group is a diversified, global financial services company.
3. The Applicant is an affiliated company of:
(a) Catlin Syndicates Limited, formerly Catlin Westgen Limited (Catlin Member), a Member of the Lloyd's Market (as defined below) that carries on business as a foreign insurance company federally-regulated in Canada in accordance with the Insurance Companies Act (Canada) (ICA) through, among others, Lloyd's Syndicate 2003;
(b) XL Bermuda Ltd., an insurance company established under the laws of Bermuda that carries on business as a Class E and Class 4 insurer regulated in Bermuda by the Bermuda Monetary Authority, that has assets pledged in a collateral account with a Canadian trust company established for the benefit of the Canadian insurance business of an affiliate that carries on business as a foreign insurance company federally-regulated in Canada in accordance with the ICA and the Office of the Superintendent of Financial Institutions (OSFI) guidelines;
(c) XL Reinsurance America, Inc., a reinsurance company established under the laws of New York, that carries on business as a foreign insurance company federally-regulated in Canada in accordance with the ICA and that has been granted an order to insure in-Canada risks; and
(d) XL Specialty Insurance Company, an insurance company established under the laws of Delaware, that carries on business as a foreign insurance company federally-regulated in Canada in accordance with the ICA and that has been granted an order to insure in-Canada risks,
(each a Canadian Affiliate, and collectively, the Canadian Affiliates).
4. The head offices of the Canadian Affiliates are located in: (a) Catlin Member: 20 Gracechurch Street, London EC3V 0BG, (b) XL Bermuda Ltd.: O'Hara House, One Bermudiana Road, Hamilton HM08, Bermuda, (c) XL Reinsurance America, Inc.: 70 Seaview Avenue, Stamford, CT 06902-6040, USA, and (d) XL Specialty Insurance Company: 70 Seaview Avenue, Stamford, CT 06902-6040, USA, respectively. Each Canadian Affiliate is an indirect wholly-owned subsidiary of AXA SA, the parent company of the AXA Group. The principal activity of AXA SA is the holding of investments in the AXA Group entities.
5. Lloyd's is a self-regulating organization operating under the provisions of the Lloyd's Act 1982 (U.K.) that operates a brokered market (the Lloyd's Market), which focuses on, among other things, high risk, specialist insurance for businesses, comprised of a number of underwriting syndicates (Syndicates).
6. The capital supporting risks underwritten by Syndicates at the Lloyd's Market is provided by underwriting members (Members).
7. Under the ICA, Lloyd's Members, collectively, are authorized to insure risks as a "foreign company". In addition to being governed by the ICA, Members, collectively, are licensed as insurers under applicable insurance legislation in all provinces and territories of Canada to transact most classes of insurance, and the relevant Canadian business of Members is subject to and governed in accordance with the applicable requirements of such legislation in the same manner as any other licensed insurer.
8. Catlin Member is a Member of Lloyd's and carries on the business of insurance in Canada through, among others, Lloyd's Syndicate 2003.
9. The Applicant proposes to provide investment management and investment advisory services to the Canadian Affiliates and any other affiliates in Ontario that may be formed or acquired in the future that: (i) are licensed or otherwise duly permitted or authorized to carry on the business of an insurance company in Canada or a branch of a foreign insurance company in Canada; (ii) are holding companies that, as their principal business activity, hold securities of one or more affiliates that are each licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; or (iii) are grantor or pledgor of a collateral account established for the benefit of the Canadian insurance business of an affiliate, described in paragraphs (i) and (ii), in accordance with the ICA and OSFI guidelines. It is expected that the Applicant will provide investment management and investment advisory services on the assets of the Canadian Affiliates that are approximately US$2.299 billion in the aggregate as at the date of this order.
10. The Canadian Affiliates hold portfolio assets directly and are also the beneficiaries of portfolio assets held in certain collateral accounts (the Collateral Accounts) established either: (i) as Canadian-domiciled trusts settled by the Canadian Affiliates, as grantors, for the contingent benefit of themselves (Vested Asset Trusts); or (ii) by the Canadian Affiliates, as pledgors, for the benefit of an affiliate that is licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada, as secured parties, under reinsurance security agreements pursuant to which the pledgor has agreed to collateralize certain risks of the secured party for purposes of reinsurance (the Reinsurance Security Agreements). Any other affiliates in Ontario that may be formed or acquired in the future will also hold portfolio assets directly or in Collateral Accounts. Under the ICA and guidelines of OSFI, assets in the Collateral Accounts must be maintained in Canada in order for the beneficiary or secured party, as applicable, to receive credit for such assets under the ICA for insurance regulatory solvency purposes. The trustee of each of the Vested Asset Trusts is either CIBC Mellon Trust Company or RBC Investor Services Trust Company and the custodian under each of the Reinsurance Security Agreements is CIBC Mellon Trust Company (each a Trustee and Custodian), each a Canadian financial institution as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions (NI 45-106). The portfolio assets held directly by the Canadian Affiliates and any other affiliates in Ontario that may be formed or acquired in the future, and the Collateral Accounts are referred to, collectively, as the Accounts.
11. With respect to the Vested Asset Trusts, the Trustee and Custodian acts as agent of the AXA Group and invests the vested assets on the written direction of the persons authorized by the grantor of the Vested Asset Trust.
12. With respect to the Reinsurance Security Agreements, until an entitlement order is delivered by the secured party, pledged collateral is held by the Trustee and Custodian for safekeeping and the pledgor is entitled to direct the Trustee and Custodian as to the manner of investment of the collateral and with respect to the manner of exercising the voting rights attached to the securities and other financial assets that are part of the collateral. Upon the receipt of an entitlement order by the Trustee and Custodian from the secured party, the investment and voting powers promptly cease, and the Trustee and Custodian must transfer the collateral to or according to the direction of the secured party.
13. Each Canadian Affiliate, each Trustee and Custodian, the grantor under each Vested Asset Trust, and the pledgor under each Reinsurance Security Agreement is a "permitted client", as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103).
14. The Applicant offers discretionary portfolio management services under various investment strategies, and manages and/or sub-advises separate accounts for international and domestic institutional clients.
15. The Applicant is required to be registered as an investment adviser with the SEC pursuant to the Investment Advisers Act of 1940 as it provides investment management and investment advisory services to others for compensation both from a U.S. office location and to U.S. clients at levels that mandate such registration.
16. The Applicant has operated in Canada under the international adviser registration exemption in section 8.26 of NI 31-103 (the International Advisor Registration Exemption) and provides investment management and investment advisory services to affiliates within the AXA Group with respect to non-Canadian securities.
17. The Applicant proposes to provide investment management and investment advisory services to the Canadian Affiliates with respect to the Accounts of each Canadian Affiliate maintained in connection with its Canadian business that includes Canadian securities (being part of the investment objectives of the Accounts). However, the Applicant cannot rely on the International Adviser Registration Exemption if it advises the Accounts of the Canadian Affiliates since such advice will be with respect to Canadian securities and will not be incidental to the advice it is providing on a "foreign security" (as defined in Section 8.26(2) of NI 31-103).
18. There is no requirement for employees of a corporation to be registered as advisers under the Act if such employees provide investment advice to their employer on portfolio assets held by such employer. The Canadian Affiliates do not currently employ, nor do they intend to employ, individuals who provide investment advice with respect to the Accounts, but rather the Canadian Affiliates intend to outsource the adviser function to the Applicant, an affiliate of each of the Canadian Affiliates. Outsourcing the investment function is permitted under the ICA and other applicable federal insurance company legislation.
19. The Canadian portfolio assets held in the Accounts and managed or to be managed by the Applicant are owned by each of the respective Canadian Affiliates or held for the benefit of the respective Canadian Affiliates. There are no external stakeholders (such as, for example, holders of variable annuity contracts or segregated funds/ separate accounts for policyholders) that have any direct interest in the performance of such portfolios. Accordingly, there is no stakeholder in Ontario or elsewhere, other than members of the AXA Group, that would be directly affected by the investment advice provided by the Applicant.
20. Subsection 74(1) of the Act provides that an order may be made by the Commission 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.
21. The Applicant is in compliance in all material respects with securities laws of the United States of America. The Applicant is not in default of any requirements of securities legislation of any jurisdiction in Canada.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to subsection 74(1) of the Act, that the Applicant is exempt from the adviser registration requirement of subsection 25(3) of the Act in respect of it acting as an adviser to its affiliates in Ontario, provided that:
1. the Applicant provides investment management and investment advisory services in Ontario only to its affiliates that:
(a) are licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada or a branch of a foreign insurance company in Canada; or
(b) are holding companies that have as their principal business activity to hold securities of one or more affiliates that are each licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada; or
(c) are the grantor or pledgor of a collateral account established for the benefit of the Canadian insurance business of an affiliate, described in paragraphs (a) and (b), in accordance with the ICA and OSFI guidelines;
2. with respect to any particular affiliate, the investment management and investment advisory services provided in Ontario are provided only as long as that affiliate remains: (i) an "affiliate" of the Applicant as defined in the Act, and (ii) a "permitted client" as defined in NI 31-103; and
3. in the case of investment management and investment advisory services provided to the grantor of a collateral account, described in paragraph 1(c), that is a trust, the trust remains a "permitted client" as defined in NI 31-103.
DATED at Toronto, Ontario, this 14th day of July, 2022.