Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from the insider reporting requirement in respect of the acquisition and disposition of the Filer’s holdings in special trust securities of various trust entities – Filer is a significant shareholder and management company of various trusts entities and as such is required to file insider reports in respect of the special trust securities over which it has control or direction – any increases or reductions in the Filer’s holdings of such voting securities of these trust entities has not been, and will not be, based on any material undisclosed information regarding the Filer or the applicable trust entity - relief from the insider reporting requirements granted, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., s. 107 National Instrument 55-104 Insider Reporting Requirements and Exemptions, Parts 3 and 4
November 9, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
BANK OF MONTREAL
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer be exempt from the Primary Insider Reporting Requirement (as defined below) and the Supplemental Insider Reporting Requirement (as defined below) in respect of the acquisition or disposition of each of:
(i) the Special Trust Securities (as defined below) of BMO Capital Trust (Capital Trust) (including any Special Trust Securities of the Capital Trust that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future),
(ii) the Voting Trust Units (as defined below) of BMO Capital Trust II (Capital Trust II) (including any Voting Trust Units of the Capital Trust II that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future), and
(iii) the BSN Voting Trust Units (as defined below) of BMO Subordinated Notes Trust (BSN Trust) (including any BSN Voting Trust Units of the BSN Trust that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
“Primary Insider Reporting Requirement” means relief from the requirement to file:
i. insider reports under section 107 of the Securities Act (Ontario) and Part 3 of NI 55-104 Insider Reporting Requirements and Exemptions (NI 55-104); and
ii. insider reports under any provisions of Canadian securities legislation substantially similar to section 107 of the Securities Act (Ontario) and Part 3 of NI 55-104.
“Supplemental Insider Reporting Requirement” means relief from the requirement to file:
i. insider reports under Part 4 of NI 55-104;
ii. insider reports under any provisions of Canadian securities legislation substantially similar to Part 4 of NI 55-104; and
iii. an insider profile under National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI) (NI 55-102) in respect of Capital Trust and Capital Trust II.
Representations
This decision is based on the following facts represented by the Filer:
- The Filer is a Schedule I bank under the Bank Act (Canada), which constitutes its charter. The principal executive offices are located at Bank of Montreal, 100 King Street West, 1 First Canadian Place, Toronto, Ontario, Canada M5X 1A1. The Filer’s head office is located at 129 Rue St. Jacques, Montreal, Québec, Canada H2Y 1L6.
The Capital Trust
The Capital Trust is a trust established under the laws of the Province of Ontario. The Capital Trust was established solely for the purpose of offering securities to the public in order to provide the Filer with a cost-effective means of raising capital for Canadian bank regulatory purposes. The Capital Trust does not and will not carry on any operating activity other than in connection with the offering of its securities to the public.
The beneficial interests of the Capital Trust are divided into units issued in one or more classes and one or more series of each such class, as determined by the trustee of the Capital Trust from time to time, including classes of units designated as Trust Capital Securities (the BMO BOaTS) and units designated as Special Trust Securities (collectively, the Special Trust Securities).
The Capital Trust has previously issued five series of BMO BOaTS (being Series A, Series B, Series C, Series D and Series E). In connection with the issuance of each series of BMO BOaTS and on October 28, 2004, the Capital Trust issued Special Trust Securities to the Filer. On June 30, 2010, the Capital Trust redeemed BMO BOaTS – Series A. In order to ensure that the Capital Trust did not exceed the overcollateralization limit of 40% mandated by the Office of Superintendent of Financial Institutions Canada, the Capital Trust also redeemed $140 million of Special Trust Securities in connection with the redemption of BMO BOaTS – Series A.
The Capital Trust may from time to time offer for sale and issue to the public subsequent series of BMO BOaTS and issue additional Special Trust Securities to the Filer.
The BMO BOaTS have been distributed pursuant to prospectuses and are held by the public and the Special Trust Securities are held by the Filer. The Filer has covenanted that all of the outstanding Special Trust Securities will be owned at all times by the Filer.
The BMO BOaTS are non-voting except in limited circumstances. The Special Trust Securities entitle the Filer to vote with respect to certain matters regarding the Capital Trust.
The Special Trust Securities may only be held by the Filer and are not traded securities. Pursuant to agreements entered into by the Filer in connection with the offering of BMO BOaTS, the Filer will maintain 100% ownership of the outstanding Special Trust Securities.
Pursuant to an administrative agreement entered into between BNY Trust Company of Canada, as trustee of the Capital Trust (the Capital Trust Trustee) and the Filer, the Capital Trust Trustee has delegated to the Filer certain of its obligations in relation to the administration of the Capital Trust. The Filer, as administrative agent, provides advice and counsel with respect to the administration of the day-to-day operations of the Capital Trust and other matters as may be requested by the Capital Trust Trustee from time to time.
The Capital Trust has received an exemption (the Capital Trust CD Relief) from the requirements contained under the Legislation and under the legislation of other applicable jurisdictions to: (a) file interim financial statements and audited annual financial statements with the applicable securities authorities or regulators and deliver such statements to the security holders of the Capital Trust; (b) make an annual filing in lieu of filing an information circular, where applicable; (c) file an annual report and an information circular and deliver such report or information circular to the security holders of the Capital Trust resident in Quebec; and (d) prepare and file an annual information form, including management’s discussion and analysis (MD&A) of the financial condition and results of operation of the Capital Trust and send such MD&A to security holders of the Capital Trust.
The Capital Trust II
The Capital Trust II is a trust established under the laws of the Province of Ontario. The Capital Trust II was established solely for the purpose of effecting the offering of $450,000,000 principal amount of 10.221% BMO Tier 1 Notes – Series A due December 31, 2107 (the Tier 1 Notes) and other offerings of debt securities that the Filer may offer from time to time in order to provide the Filer with a cost-effective means of raising capital for Canadian bank regulatory purposes. The Capital Trust II does not and will not carry on any operating activity other than in connection with the offering of its securities to the public.
The capital of Capital Trust II is divided into the Tier 1 Notes and voting trust units (the Voting Trust Units). The Tier 1 Notes are debt securities of the Capital Trust II. The Voting Trust Units are voting securities of the Capital Trust II.
The Capital Trust II may from time to time offer for sale and issue to the public additional series of debt securities and issue additional Voting Trust Units to the Filer.
The Tier 1 Notes have been distributed pursuant to a prospectus and are held by the public and all outstanding Voting Trust Units are held by the Filer. The Filer has covenanted that all of the outstanding Voting Trust Units will be owned at all times by the Filer.
The Tier 1 Notes are non-voting. The Voting Trust Units entitle the Filer to vote with respect to certain matters regarding the Capital Trust II.
The Voting Trust Units may only be held by the Filer and are not traded securities. Pursuant to agreements entered into by the Filer in connection with the offering of Tier 1 Notes, the Filer will maintain 100% ownership of the outstanding Voting Trust Units.
Pursuant to an administration agreement entered into between Montreal Trust Company of Canada, as trustee of the Capital Trust II (the Capital Trust II Trustee), and the Filer, the Capital Trust II Trustee has delegated to the Filer certain of its obligations in relation to the administration of the Capital Trust II. The Filer, as administrative agent, provides advice and counsel with respect to the administration of the day-to-day operations of the Capital Trust II and other matters as may be requested by the Capital Trust II Trustee from time to time.
The Capital Trust II has received an exemption (the Capital Trust II CD Relief) from the requirements contained under the Legislation and under the legislation of other applicable jurisdictions to: (a) file interim financial statements and audited annual financial statements and deliver same to the security holders of the Capital Trust II, pursuant to sections 4.1, 4.3 and 4.6 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102); (b) file interim and annual MD&A and deliver same to the security holders of the Capital Trust II pursuant to sections 5.1 and 5.6 of NI 51-102; (c) file an annual information form pursuant to section 6.1 of NI 51-102; and (d) comply with any other provisions of NI 51-102. The Capital Trust II also received an exemption from the requirements contained under the Legislation and under the legislation of other applicable jurisdictions to file interim and annual certificates pursuant to Parts 4 and 5 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (the Capital Trust II Certification Relief).
The BSN Trust
The BSN Trust is a trust established under the laws of the Province of Ontario. The BSN Trust was established solely for the purpose of effecting an offering of $800,000,000 principal amount of 5.75% trust subordinated notes due September 26, 2022 (the BMO TSNs) and other offerings of debt securities in order to provide the Filer with a cost-effective means of raising capital for Canadian regulatory purposes. The BSN Trust does not and will not carry on any operating activity other than in connection with the offering of its securities to the public.
The capital of the BSN Trust is divided into the BMO TSNs and voting securities of the Trust (the BSN Voting Trust Units).
The BSN Trust may from time to time offer for sale and issue to the public additional series of debt securities and issue additional BSN Voting Trust Units to the Filer.
The BMO TSNs have been distributed pursuant to a prospectus and are held by the public and all outstanding BSN Voting Trust Units are held by the Filer. The Filer has covenanted that all of the outstanding BSN Voting Trust Units will be owned at all times by the Filer.
The BMO TSNs are non-voting. The BSN Voting Trust Units entitle the Filer to vote with respect to certain matters regarding the BSN Trust.
The BSN Voting Trust Units may only be held by the Filer and are not traded securities. Pursuant to agreements entered into by the Filer in connection with the offering of Tier 1 Notes, the Filer will maintain 100% ownership of the outstanding BSN Voting Trust Units.
Pursuant to an administration agreement entered into between Computershare Trust Company of Canada, as trustee of the BSN Trust (the BSN Trustee), and the Filer, the BSN Trustee has delegated to the Filer certain of its obligations in relation to the administration of the BSN Trust. The Filer, as administrative agent, offers advice and counsel with respect to the administration of the day-to-day operations of the BSN Trust and other matters as may be requested by the BSN Trustee from time to time.
The BSN Trust has received an exemption (the BSN CD Relief) from the requirements contained in the Legislation and under the legislation of other applicable jurisdictions to: (a) file interim financial statements and audited annual financial statements and deliver same to the security holders of the BSN Trust, pursuant to Sections 4.1, 4.3 and 4.6 of NI 51-102; (b) file interim and annual MD&A of the financial conditions and results of operations and deliver same to the security holders of the BSN Trust pursuant to Section 5.1 and 5.6 of NI 51-102; and (c) file an annual information form pursuant to Section 6.1 of NI 51-102. The BSN Trust also received an exemption from the requirements contained under the Legislation and the legislation of other applicable jurisdictions to file interim and annual certificates contained in Sections 2.1 and 3.1 of Multilateral Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings (the BSN Certification Relief).
Section 107 of the Securities Act (Ontario) and Parts 3 and 4 of NI 55-104 impose certain reporting requirements on insiders and “reporting insiders”, respectively, (including management companies that provide significant management or administrative services to a reporting issuer).
The Filer holds the Special Trust Securities of the Capital Trust, the Voting Trust Units of the Capital Trust II and the BSN Voting Trust Units of the BSN Trust and therefore, the Filer is considered a “significant shareholder” and a “reporting insider”, of each of the Capital Trust, Capital Trust II and the BSN Trust within the meaning of NI 55-104.
Because the Filer, as administrative agent of each of the Capital Trust, Capital Trust II and the BSN Trust provides advice and counsel with respect to the administration of the day-to-day operations of each of the Capital Trust, Capital Trust II and the BSN Trust, and other matters as may be requested by the applicable trustee from time to time, the Filer is considered a “management company” of each of the Capital Trust, Capital Trust II and the BSN Trust within the meaning of NI 55-104.
Because the Filer is a “significant shareholder” and a “management company” of each of the Capital Trust, Capital Trust II and the BSN Trust, the insider reporting requirements require the Filer to file insider reports in respect of each of the Special Trust Securities, Voting Trust Units and the BSN Voting Trust Units over which it has control or direction.
Prior to NI 55-104 coming into effect, under the predecessor Canadian securities legislation, the Filer, by virtue of holding more than 10% of the voting securities of the Capital Trust, Capital Trust II and the BSN Trust, respectively, was required to file insider reports in respect of each of the Special Trust Securities, Voting Trust Units and the BSN Voting Trust Units.
Through inadvertence, the Filer has not filed any insider reports in respect of the Special Trust Securities of the Capital Trust or the Voting Trust Units of the Capital Trust II.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Filer is exempt from the Primary Insider Reporting Requirement from and after the date of this decision in respect of the acquisition or disposition of:
a) the Special Trust Securities of the Capital Trust (including any Special Trust Securities of the Capital Trust that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future),
b) the Voting Trust Units of the Capital Trust II (including any Voting Trust Units of the Capital Trust II that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future), and
c) the BSN Voting Trust Units of the BSN Trust (including any BSN Voting Trust Units of the BSN Trust that may be issued, purchased, redeemed or otherwise acquired, from time to time in the future),
provided that:
i. the acquisition or disposition of the Special Trust Securities, Voting Trust Units and BSN Voting Trust Units (A) is incidental to the administration of the Filer or the applicable trust entity or is for the purpose of complying with the applicable Canadian banking regulatory requirements or guidelines, and (B) does not otherwise involve a discrete investment decision;
ii. any increases or reduction in the Filer’s holdings of the Special Trust Securities, Voting Trust Units and BSN Voting Trust Units has not been, and will not be, based on any material undisclosed information regarding the Filer or the applicable trust entity, and has not, and will not reflect, any change in the Filer’s views of the prospects of the applicable trust entity;
iii. the Capital Trust, the Capital Trust II and the BSN Trust do not and will not carry on any operating activity other than in connection with the offering of its securities to the public;
iv. the Filer continues to comply with all other continuous disclosure and insider reporting requirements under the Legislation and files all other documents required to be filed by the Legislation except if the Filer is otherwise exempted from complying with such requirements;
v. the Filer keeps its insider profile under NI 55-102 accurate and up to date except if the Filer is otherwise exempted from complying with this requirement under NI 55-102;
vi. the relief from the Primary Insider Reporting Requirement only relieves the Filer from its obligations to file insider reports under section 107 of the Securities Act (Ontario) and Part 3 of NI 55-104 and any provisions of Canadian securities legislation substantially similar to section 107 of the Securities Act (Ontario) and Part 3 of NI 55-104, in each case, in respect of the Special Trust Securities, Voting Trust Units and BSN Voting Trust Units, respectively, of the Capital Trust, the Capital Trust II and the BSN Trust, as applicable, and will not apply to any other insider transactions of the Filer, including any transactions involving the BMO BOaTS, Tier 1 Notes or BMO TSNs;
vii. the relief from the Supplemental Insider Reporting Requirement only relieves the Filer from its obligations (A) to file insider reports under Part 4 of NI 55-104 and any provisions of Canadian securities legislation substantially similar to Part 4 of NI 55-104, and (B) under NI 55-102, in each case, in respect of the Special Trust Securities, Voting Trust Units and BSN Voting Trust Units of the Capital Trust, the Capital Trust II and the BSN Trust, as applicable, and will not apply to any other insider transactions of the Filer, including any transactions involving the BMO BOaTS , Tier 1 Notes or BMO TSNs;
viii. the Filer and the Capital Trust continue to satisfy all of the conditions contained in the Capital Trust CD Relief;
ix. the Filer and the Capital Trust II continue to satisfy all of the conditions contained in the Capital Trust II CD Relief and Capital Trust II Certification Relief; and
x. the Filer and the BSN Trust continue to satisfy all of the conditions contained in the BSN CD Relief and BSN Certification Relief.
"Margot C. Howard"
"James Carnwath"
Commissioner
Ontario Securities Commission
Commissioner
Ontario Securities Commission
It is the further decision of the principal regulator under the Legislation that the Filer is exempt from the Supplemental Insider Reporting Requirement from and after the date of this decision in respect of the entities and securities referred to in paragraphs a), b) and c) above and subject to the same conditions set out in paragraphs (i) to (x) above.
"Michael Brown"
__________________________________
Michael Brown, Assistant Manager Corporate Finance Branch