Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from eligibility requirements under NI 44-102 for reporting issuer whose equity securities are not listed on a short form eligible exchange – issuer is a wholly-owned subsidiary – issuer is a substantial global financial services provider – issuer has American Depository Shares representing its preference shares listed on NYSE – consolidated results and financial position of issuer and parent are materially the same – issuer and parent comply with SEC reporting obligations by filing joint reports – equity securities of parent listed on London Stock Exchange and American Depository Shares representing equity securities of parent listed on NYSE
Applicable Legislative Provisions
National Instrument 44-102 Shelf Distributions, ss. 2.2 and 11.1.
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 BARCLAYS BANK PLC (THE FILER)
Decision
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption, pursuant to subsection 11.1(1) of National Instrument 44-102 – Shelf Distributions (NI 44-102), from the qualification requirements in subsection 2.2(1) and subparagraph 2.2(3)(b)(iii) of NI 44-102, which would otherwise require that the Filer’s equity securities be listed and posted for trading on a short form eligible exchange (as defined in National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) in order for the Filer to distribute by short form prospectus Global Medium-Term Notes, Series A (Notes) of the Filer issued under a trust indenture (Indenture) dated September 16, 2004 between the Filer and The Bank of New York Mellon.
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 all of the provinces of Canada other than Ontario.
Interpretation
Terms defined in National Instrument 14-101 – Definitions, MI 11-102, NI 44-101 and NI 44-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a public limited company registered in England and Wales having its registered office at 1 Churchill Place, London, England E14 5HP.
The Filer is a reporting issuer in each of the provinces of Canada and is not in default of securities legislation in any province of Canada.
In accordance with Section 3.4(5) of National Instrument 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, the Filer has selected Ontario as the principal regulator because the Canada branch of the Filer has its principal office in Ontario and therefore the Filer has the most significant connection to Ontario.
The Filer and its subsidiary undertakings is a major global financial services provider engaged in retail banking, credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia.
The Filer is a wholly owned subsidiary of Barclays PLC. The consolidated results and financial position of the Filer and Barclays PLC are materially the same.
As of December 31, 2009, the Filer was among the largest financial institutions in the world measured by total assets. As of that date, the Filer had total assets of £1,378 billion and total shareholders’ equity of £58.5 billion.
The main listing and principal trading market for the ordinary shares of Barclays PLC is the London Stock Exchange (LSE). Preference shares of the Filer are listed and posted for trading on the Luxembourg Stock Exchange. American Depositary Shares (ADSs) representing the ordinary shares of Barclays PLC and ADSs representing preference shares of the Filer are listed and posted for trading on the New York Stock Exchange (NYSE).
Each of the Filer and Barclays PLC has a class of securities registered under section 12 of the U.S. Securities Exchange Act of 1934 (1934 Act). The joint reports filed by Barclays PLC and the Filer satisfy the reporting obligations under the 1934 Act of each of them.
The Filer satisfies its continuous disclosure obligations under securities legislation as a “SEC foreign issuer” as defined in National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.
The Filer offers and sells Notes by prospectus in the United States and Canada. As at September 30, 2010 there were more than US$40 billion principal amount of Notes outstanding. Certain Notes are listed and posted for trading on NYSE Arca, the Toronto Stock Exchange and the Singapore Exchange.
The Filer filed and obtained a receipt for a base shelf prospectus dated December 9, 2010 (the 2010 Prospectus) qualifying the issuance of principal protected Notes. The Filer satisfied the qualification criteria of NI 44-102 under the alternative qualification criteria for issuers of approved rating non-convertible securities set out in section 2.3 of NI 44-101 and section 2.3 of NI 44-102.
The Filer has obtained a rating of AA- from Standard & Poor’s, a division of The McGraw Hill Companies, Inc. (S&P) and a rating of Aa3 from Moody’s Investors Service Ltd. (Moody’s) for Notes issued under the Indenture. The Filer is not aware of any pending lowering of such ratings. These ratings are assigned to Notes issued under the Indenture generally, and not to any specific issuances of Notes.
In June 2009 Moody’s announced it would no longer assign new public ratings to bonds, notes, or preferred stock for which the amount of promised principal repayment is dependent on the occurrence of a non-credit event or the performance of an index. S&P announced in December 2009 that it would no longer rate obligations with variable principal payments linked to commodity prices, equity prices, or indices linked to either commodity or equity prices. At the date hereof neither S&P nor Moody’s will provide a rating for a specific issuance of non-principal protected Notes. Absent the grant of Exemption Sought, the Filer would not be qualified under Part 2 of NI 44-102 to file a preliminary base shelf prospectus and final base shelf prospectus qualifying the distribution of non-principal protected Notes.
Upon receipt of the Exemption Sought, the Filer intends to file and obtain a receipt for a preliminary short form base shelf prospectus and then file and obtain a receipt for a short form base shelf prospectus (the Prospectus) qualifying Notes both principal protected and non-principal protected.
The Filer satisfies the basic qualification criteria set forth in section 2.2 of NI 44-101 and section 2.2 of NI 44-102, other than the requirement that its equity securities be listed and posted for trading on a short-form eligible exchange.
The Filer does not plan to seek ratings for the specific issuances of Notes under the Prospectus.
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 Exemption Sought is granted so long as:
(i) the Filer satisfies the criteria in paragraphs 2.2(a), (b), (c) and (d) of NI 44-101;
(ii) the Filer is not an issuer whose operations have ceased or whose principal asset is cash, cash equivalents or an exchange listing;
(iii) the equity securities of Barclays PLC are listed and posted for trading on the LSE and ADSs representing the ordinary shares of Barclays PLC are listed and posted for trading on the NYSE.
(iv) each shelf prospectus supplement qualifying non-principal protected Notes distributed under a Prospectus includes cover page disclosure that:
a. the non-principal protected Notes qualified under the Prospectus are not rated;
b. any non issue specific credit rating applicable to Notes issued under the Indenture only applies to credit-related factors such as the Filer’s ability to make any payments it would be obligated to make under the Notes;
c. any non issue specific credit rating applicable to Notes issued under the Indenture does not apply to non-principal protected Notes and, for so long as S&P and Moody’s continue not to rate non-principal protected Notes, an explanation to that effect; and
d. an investor’s principal is at risk as a result of non credit-related factors such as the performance of the underlying reference asset; and
(v) the Filer files before or concurrently with the Prospectus an undertaking that it will not distribute in any local jurisdiction under the Prospectus specified derivatives that, at the time of distribution, are novel without pre-clearing with the regulator the disclosure contained in a shelf prospectus supplement pertaining to the distribution of the novel specified derivatives, in accordance with subsection 4.1(2) of NI 44-102.
"Michael Brown"
Assistant Manager, Corporate Finance
Ontario Securities Commission