Richardson Wealth (USA) Limited

Order

Headnote

Application for an order pursuant to section 74 of the Securities Act (Ontario) that a registered U.S. investment adviser, affiliated with an Ontario registered investment dealer, be exempted, subject to certain conditions, from requirements of subsection 25(3) of the Act in respect of advice provided by its representatives in respect of the U.S. tax-advantaged retirement savings, education or disability savings plans of clients formerly resident in the U.S.

Applicable Legislative Provisions

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

IN THE MATTER OF THE SECURITIES ACT, RSO 1990, C S.5, AS AMENDED (THE ACT) AND IN THE MATTER OF RICHARDSON WEALTH LIMITED AND RICHARDSON WEALTH (USA) LIMITED

ORDER (SUBSECTION 74(1) AND SUBSECTION 144(1) OF THE ACT)

WHEREAS the Ontario Securities Commission (the "Commission") has received a renewal application from Richardson Wealth Limited ("RWL Canada"), previously known as Richardson GMP Limited, and Richardson Wealth (USA) Limited ("RWL USA"), previously known as Richardson GMP (USA) Limited (RWL USA, together with RWL Canada, the "Filers") for an order pursuant to subsection 74(1) of the Act for the Requested Exemptive Relief, as defined below.

AND WHEREAS the Filers seek an order, pursuant to subsection 74(1) of the Act, exempting RWL USA, and those of its individual representatives who are also registered under the Act as dealing representatives and approved by the Investment Industry Regulatory Organization of Canada ("IIROC") in the category of portfolio management of RWL Canada (the "Dual Representatives"), from the adviser registration requirement in subsection 25(3) of the Act in respect of advice provided by the Dual Representatives, acting on behalf of RWL USA, to an individual (the "Ex-U.S. Client") if the advice is in respect of the Ex-U.S. Client's tax-advantaged retirement savings, education savings, or disability savings plan (the "U.S. Plan"), and (i) the U.S. Plan is located in the United States of America (the "U.S."), (ii) the Ex-U.S. Client is a holder of or contributor to the U.S. Plan, and (iii) the Ex-U.S. Client was previously resident in the U.S. and is now resident in Ontario (the "Requested Exemptive Relief").

AND WHEREAS the Filers seek an order, pursuant to subsection 144(1) of the Act, revoking the Ontario Order (defined below).

AND WHEREAS terms defined in National Instrument 14 101 -- Definitions have the same meaning if used in this Application, unless otherwise defined.

AND WHEREAS the Filers having represented to the Commission that:

1. On December 2, 2016, the Commission issued an order (the "Ontario Order") that granted to the Filers relief that is similar to the Requested Exemptive Relief for a period of five years.

2. The Filers have complied with, and are currently in compliance with, all of the terms and conditions of the Ontario Order.

3. RWL Canada is a wholly owned subsidiary of RF Capital Group Inc. ("RF Capital") incorporated under the federal laws of Canada. RF Capital is a public company and has its shares traded on the Toronto Stock Exchange. In addition to RWL Canada, RF Capital wholly owns RF Securities Clearing LP and CQI Capital Management L.P. Its head office is located in Toronto, Ontario.

4. RWL Canada carries on business in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and the Yukon (collectively, the "Jurisdictions"), with offices located in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Prince Edward Island, Saskatchewan and Québec.

5. RWL Canada provides wealth management services to residents of Canada, including financial planning, wills and estates planning, tax planning, insurance planning, and brokerage services.

6. RWL Canada is registered as an investment dealer in each of the Jurisdictions, and as a derivatives dealer in Québec. RWL Canada is also a dealer member of IIROC.

7. RWL Canada is not in default of securities, commodity futures, or derivatives legislation in any Jurisdiction.

8. RWL Canada does not trade, or provide advice with respect to the trading, in securities to, with, or on behalf of clients that are resident in the U.S. ("U.S. Clients"), other than in respect of Canadian-domiciled retirement savings plans, registered retirement savings plans, registered retirement income funds, education savings, or disability savings plans (collectively, "Canadian RSPs") held by U.S. Clients who were formerly resident in Canada and who have moved to the U.S. with Canadian RSPs. RWL Canada conducts this activity pursuant to an exemption from registration in the U.S.

9. RWL Canada does not carry on the business of a registered broker-dealer or registered investment adviser in the U.S. and therefore is not, and is not required to be, registered under U.S. securities law.

10. RWL USA is a wholly-owned subsidiary of RWL Canada incorporated under the federal laws of Canada. Its head office is located in Toronto, Ontario.

11. RWL USA has no physical presence in the U.S., but carries on business out of the same offices as RWL Canada in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Prince Edward Island, Saskatchewan and Québec.

12. The only physical presence or office that RWL USA has, or will have, in any Jurisdiction, are the premises that it shares with RWL Canada.

13. RWL USA provides wealth management services to U.S. Clients in reliance upon OSC Rule 32-505 -- Conditional Exemption from Registration for United States Broker-Dealers and Advisors Servicing U.S. Clients from Ontario, including financial planning, wills and estates planning, tax planning, insurance planning, and brokerage services.

14. RWL USA is registered with the U.S. Securities and Exchange Commission (the "SEC") as an investment adviser under the Investment Advisers Act of 1940 (United States) (the "1940 Act").

15. RWL USA, and the Dual Representatives acting on its behalf, are in compliance with any applicable adviser licensing or registration requirements under applicable U.S. securities law.

16. RWL USA is not in default of securities, commodity futures, or derivatives legislation in any Jurisdiction or U.S. securities law.

17. RWL USA is not registered under the securities, commodity futures, or derivatives legislation of any Jurisdiction.

18. RWL USA has engaged Pershing Advisor Solutions LLC ("Pershing Advisor Solutions"), a Delaware limited liability company, to provide for its clients' prime brokerage services directly or through its affiliate, Pershing LLC ("Pershing"), a Delaware limited liability company.

19. Pershing Advisor Solutions is registered with the SEC as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). Pershing is registered with the SEC as a broker-dealer and is a member of FINRA and the New York Stock Exchange.

20. Each Dual Representative acts on behalf of both Filers from the Filers' joint office in the Jurisdiction in which the Dual Representative is resident.

21. Each Dual Representative is registered as a dealing representative of RWL Canada, and approved by IIROC for portfolio management, in one or more of the Jurisdictions.

22. None of the Dual Representatives are in default of securities, commodity futures, or derivatives legislation in any Jurisdiction or U.S. securities law.

23. Each Dual Representative, when acting on behalf of RWL Canada, only trades to, with, or on behalf of, or advises clients of RWL Canada resident in the Jurisdiction(s) where he or she is registered as a dealing representative and U.S. Clients formerly resident in Canada in respect of their Canadian RSPs.

24. RWL USA, and each Dual Representative when acting on behalf of RWL USA, advise Ex-U.S. Clients and U.S. Clients.

25. RWL USA, and each Dual Representative when acting on behalf of RWL USA, advise Ex-U.S. Clients pursuant to the Ontario Order, and desire to continue to advise Ex-U.S. Clients pursuant to the Requested Exemptive Relief with respect to the trading of securities in their U.S. Plans despite the residency of such Ex-U.S. Clients in Ontario.

26. The advice that RWL USA provides pursuant to the Ontario Order, and will provide to Ex-U.S. Clients pursuant to the Requested Exemptive Relief, will be ancillary to RWL USA's principal business of advising U.S. Clients. RWL USA expects that the amount of revenue derived from Ex-U.S. Clients will not exceed 10% of its total revenue.

27. The Dual Representatives have the requisite proficiency, education, and experience to provide advice to Ex-U.S. Clients with respect to the trading of securities in their U.S. Plans.

28. Neither RWL USA, nor the Dual Representatives on its behalf, will advertise for, or solicit, new clients in Ontario.

29. It is currently intended that Pershing Advisor Solutions and Pershing will continue to provide trading, custody, clearing, and settlement services for all Ex-U.S. Clients of RWL USA in respect of their U.S. Plans pursuant to the exemption from the dealer registration requirement in section 25(1) of the Act (the "dealer registration requirement") that is provided in section 8.18 of National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations.

30. In any case, the execution of each trade identified or recommended by RWL USA (and each Dual Representative acting on its behalf) for an Ex-U.S. Client resident in Ontario will be conducted by a person that is: (i) registered as a dealer under the Act in a category that would permit the person to execute the trade; or (ii) exempt from the dealer registration requirement for the purposes of the trade.

31. When providing advice to Ex-U.S. Clients with respect to the trading of securities in their U.S. Plans pursuant to the Requested Exemptive Relief, RWL USA, and the Dual Representatives acting on its behalf, will comply with U.S. securities law.

32. All Ex-U.S. Clients of RWL USA will have entered into, or will enter into, customer agreements and associated account opening documentation with RWL USA. All communications with Ex-U.S. Clients pursuant to the Requested Exemptive Relief will be through RWL USA, and the Dual Representatives acting on its behalf, and will be under RWL USA branding.

33. To avoid client confusion, all Ex-U.S. Clients of RWL USA will have received, or will receive, disclosure that explains the relationship between RWL USA and RWL Canada.

34. As a market participant, each of the Filers will keep, pursuant to subsection 19(1) of the Act: (i) such books, records, and other documents as are necessary for the proper recording of its business transactions and financial affairs, and the transactions that it executes on behalf of others; and (ii) such books, records, and documents as may otherwise be required under the Act.

35. RWL USA confirms that there are not currently any regulatory actions of the type contemplated by the Notice of Regulatory Action attached as Appendix A hereto in respect of RWL USA, or any predecessors or specified affiliates of RWL USA.

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 subjection 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 it would not be prejudicial to the public interest for the Commission to grant the Requested Exemptive Relief on the basis of the terms and conditions proposed;

IT IS ORDERED that, pursuant to subsection 74(1) of the Act, the Requested Exemptive Relief is granted, provided that:

(a) the advice is for an individual who is ordinarily resident in Canada but previously resident in the U.S. if such advice is in respect of the individual's U.S. Plan, and

(i) the U.S. Plan is located in the U.S.,

(ii) the individual is a holder of or contributor to the U.S. Plan, and

(iii) the individual was previously resident in the U.S.;

(b) the only physical presence or offices that RWL USA has in any jurisdiction of Canada are the premises that it shares with RWL Canada;

(c) RWL USA does not advertise for or solicit new clients in Ontario;

(d) RWL USA remains registered as an investment adviser under the 1940 Act;

(e) RWL Canada remains registered under the Act as an investment dealer and is a dealer member of IIROC;

(f) RWL USA and each of the Dual Representatives are in compliance with and remain in compliance with any applicable adviser licensing or registration requirements under applicable securities legislation of the U.S.;

(g) each Dual Representative providing advice on behalf of RWL USA is registered under the Act as a dealing representative in a category that would permit it to advise Ex-U.S. Clients with respect to the trading of securities in their U.S. Plans in compliance with the Act, if the U.S. Plans were instead tax-advantaged retirement savings plan located in Canada;

(h) RWL USA will have entered into customer agreements and associated account opening documentation with all Ex-U.S. Clients and all communications with Ex-U.S. Clients will be through RWL USA, and the Dual Representatives acting on its behalf, and will be under RWL USA branding;

(i) RWL USA provides all Ex-U.S. Clients with disclosure that explains the relationship between RWL USA and RWL Canada;

(j) RWL USA discloses to the Ex-U.S. Clients that it (and the Dual Representatives providing advice on its behalf) is not subject to full regulatory requirements otherwise applicable under the Act;

(k) RWL USA and the Dual Representatives, in the course of their dealings with Ex-U.S. Clients, act fairly, honestly and in good faith;

(l) RWL USA notifies the Commission of any regulatory action after the date of this order in respect of the Filer, or any predecessors or specified affiliates of the Filer by completing and filing Appendix A hereto with the Commission within 10 days of the commencement of such action;

(m) RWL Canada complies with its obligations under applicable securities laws to report actions relating to RWL Canada and its specified affiliates to securities regulators and/or self-regulatory organizations having jurisdiction over RWL Canada;

(n) the execution of each trade identified or recommended by RWL USA (and each Dual Representative providing the advice on its behalf) for an Ex-U.S. Client resident in Ontario will be conducted by a person registered as a dealer under the Act in a category that would permit them to execute the trade or otherwise exempt them from the dealer registration requirement of the Act for purposes of the trade;

(o) if the amount of revenue derived from Ex-U.S. Clients exceed 10% of RWL USA's total revenue as at the end of each quarter, then RWL USA will promptly submit a letter to the Commission advising of the same. The letter will refer to this Order and this requirement, and will also provide details with respect to the percentage of the revenue derived from Ex-U.S. Clients and the date on which the revenue exceeded 10% of its total revenue;

(p) this Order will terminate on the earlier of:

(i) five years after the date of this Order; and

(ii) the coming into force of a change in Ontario securities law (as defined in the Act) that exempts RWL USA from the registration requirement in the Act in connection with the advice it provides to an Ex-U.S. Client with respect to the U.S. Plan on terms and conditions other than those set out in this Order.

AND WHEREAS section 144 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 that, pursuant to subsection 144(1) of the Act, the Ontario Order is revoked.

DATED at Toronto this 26th day of November, 2021.

"Cecilia Williams"

"Mary Anne De Monte-Whelan"

Ontario Securities Commission

Ontario Securities Commission

OSC File #: 2021/0499

 

APPENDIX "A"

NOTICE OF REGULATORY ACTION

1. 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. 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. 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

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

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

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.