IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA, BRITISH
COLUMBIA, MANITOBA, NEW BRUNSWICK, NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA, SASKATCHEWAN
AND YUKON TERRITORY
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF FRANK RUSSELL CANADA LIMITED
MRRS DECISION DOCUMENT
1 WHEREAS the local securities regulatory authority or regulator (the "Decision
Maker") in Alberta, British Columbia, Manitoba, New Brunswick,
Newfoundland and Labrador, Nova Scotia, Saskatchewan, and Yukon Territory (the
"Jurisdictions") has received an application from Frank Russell Canada
Limited
("Frank Russell") for a decision under the securities legislation of
the
Jurisdictions (the "Legislation") that the requirement contained in
the
Legislation to be registered as an adviser (the "Registration Requirement")
not
apply to Frank Russell Securities Inc. ("FRS") and certain selected
affiliated
investment advisers (collectively the "Sub-advisers") who provide investment
counsel and portfolio management services to Frank Russell for the benefit of
Frank
Russell's clients resident in the Jurisdictions;
2 AND WHEREAS under the Mutual Reliance Review System for Exemptive
Relief Applications (the "System"), the British Columbia Securities
Commission
is the principal regulator for this application;
3 AND WHEREAS Frank Russell has represented to the Decision Makers that:
1. it is incorporated under the laws of Canada with its head office
located in Toronto, Ontario;
2. it is registered as an adviser in each of the Jurisdictions, in the
categories of investment counsel and/or portfolio manager and as a dealer in
the category
of mutual fund dealer in Ontario;
3. it is an affiliate of FRS, which trades in securities for the United
States and foreign institutional customers, and is:
(a) registered as a dealer in the category of international dealer in Ontario;
(b) registered as a broker-dealer and as an investment adviser with the U.S. Securities and Exchange Commission;
(c) a member in good standing of the National Association of Securities Dealers, Inc.; and
(d) is registered as a broker-dealer with the appropriate state securities regulatory authority in each of Washington, New York, Texas, Arizona, Vermont, Rhode Island and Ohio;
4. it wishes to retain the services of FRS and other selected
Sub-advisers to provide advice in connection with accounts managed by it for
the benefit
of its clients;
5. it believes that the Sub-advisers will provide it and its clients
with access to specialized expertise relating to specific market segments or
specific investment strategies for investment management mandates through their
familiarity and
experience with certain markets;
6. the discretionary investment accounts for which the Sub-advisers will
be retained will be accounts for high net worth individuals or institutional
clients;
7. none of the Sub-advisers will be residents of Canada, and all will be
registered or otherwise legally qualified, to provide investment advice and/or
portfolio
management services under the laws of their home jurisdiction;
8. it will comply with the requirements of Section 7.3 of Ontario
Securities Commission Rule 35-502 Non Resident Advisers, and:
(a) the obligations and duties of each Sub-adviser will be set out in a written agreement with Frank Russell;
(b) Frank Russell will contractually agree with its clients on whose behalf investment advice or portfolio management services are to be provided by a Sub-adviser to be responsible for any loss that arises out of the failure of the Sub-adviser:(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of Frank Russell and each client of Frank Russell for whose benefit the advice or portfolio management services are to be provided, or
(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;
9. it will assume responsibility to clients for all advice
received from the Sub-advisers, including responsibility for losses sustained
by a client as a
result of the negligence, wilful misconduct, bad faith or wilful neglect, default
or failure to comply with applicable laws and regulations by Frank Russell
or a Sub-adviser,
and Frank Russell cannot be relieved by its clients from this responsibility;
10 it will be responsible for providing all client reports and
statements required under the securities legislation of the applicable Jurisdictions;
11. all direct contact with clients will be with Frank Russell and its
employees, although representatives of the Sub-advisers may participate in such
communications from time to time;
12. a Sub-adviser providing investment counselling or portfolio
management services to Frank Russell and indirectly to Frank Russell's clients
would be required to be registered or otherwise exempt from the Registration
Requirement; and
13. the Sub-advisers cannot rely on any exemptions in the Legislation
from the Registration Requirement to provide investment counselling and portfolio
management services to Frank Russell for the benefit of Frank Russell's clients.
4 AND WHEREAS under the System, this MRRS decision document evidences
the decision of each Decision Maker (collectively, the "Decision");
5 AND WHEREAS each of the Decision Makers is satisfied that the test
contained in the Legislation that provides the Decision Maker with the jurisdiction
to
make the Decision has been met;
6 THE DECISION of the Decision Makers under the Legislation is that the
Registration Requirement shall not apply to the Sub-advisers who provide investment
counsel and portfolio management services to Frank Russell for the benefit of
Frank
Russell's clients.
7DATED November 8, 2002
Brenda Leong
Director
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – relief
from the requirement to be registered as an adviser for sub-advisers not resident
in Canada,
subject to conditions
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(c), 48
Securities Rules, B.C. Reg. 194/97, s. 36