[Federal Register Volume 59, Number 149 (Thursday, August 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18962]
[[Page Unknown]]
[Federal Register: August 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20433; International Series Release No. 694; 812-8944]
Ontario Financing Authority; Notice of Application
July 28, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: Ontario Financing Authority (``OFA'').
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) from all
provisions of the Act.
SUMMARY OF APPLICATION: OFA, a public authority established by the
Province of Ontario, Canada, seeks an order exempting it from all
provisions of the Act in connection with the offer and sale of its debt
securities in the United States.
FILING DATE: The application was filed on April 20, 1994 and amended on
July 20, 1994.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on August 22, 1994,
and should be accompanied by proof of service on applicant, in the form
of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request such notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street N.W., Washington, D.C.
20549. Applicant, c/o Pamela M. Gibson, Shearman & Sterling, Commerce
Court West, 199 Bay Street, Suite 4405, Toronto, Canada, M5L 1E8.
FOR FURTHER INFORMATION CONTACT:
Marc Duffy, Senior Attorney, (202) 942-0565, or C. David Messman,
Branch Chief, (202) 942-0564 (Division of Investment Management, Office
of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. OFA is a statutory authority of the Province of Ontario
(``Ontario'' or the ``Province'') established on November 15, 1993 by
the Province under the Capital Investment Plan Act, 1993 (the ``Capital
Investment Act''). The Province established OFA to assist the Province,
and municipalities, school boards, post-secondary institutions,
hospitals and other public bodies (the ``Public Sector Clients'') to
borrow and invest money, and provide other financial services. Through
OFA, money will be raised to finance capital investment in the areas
of, among others, education, health-care, transportation, and water and
sewage infrastructure. OFA is expected to become a major financing
vehicle for borrowing by Public Sector Clients.
2. OFA proposes to issue and sell in the United States debt
securities unconditionally guaranteed by the Province (``Guaranteed
Debt Securities''). The proceeds of the Guaranteed Debt Securities will
be lent to various Public Sector Clients. Substantially all of the
moneys borrowed by OFA will be re-lent to the Public Sector Clients.
Funds not immediately lent to the Province or Public Sector Clients
will be invested by OFA. In order to assure favorable terms to the
Public Sector Clients, and in anticipation of their borrowing needs,
OFA may borrow and then invest the proceeds of such borrowings
temporarily in debt instruments, such as banker's acceptances, Treasury
bills, and commercial paper until the Public Sector Clients require
such funds.
3. Guaranteed Debt Securities will be direct, unsecured obligations
of OFA, with the payment of principal, and any interest or premium,
irrevocably and unconditionally guaranteed by the Province (the
``Provincial Guarantee'') pursuant to an order of the Lieutenant
Governor in Council under the Financial Administration Act (the
``FAA''). Section 22 of the FAA provides, in part, that the Lieutenant
Governor in Council may by order authorize the Minister of Finance, on
behalf of Ontario, ``to agree to guarantee or indemnify the debts,
obligations, securities or undertakings of any person * * * [and] may
fix such terms and conditions as are considered advisable * * *.''
Pursuant to this authority, Guaranteed Debt Securities will bear the
irrevocable unconditional guarantee of the Province so that, in the
event of a default, holders of Guaranteed Debt Securities may proceed
directly against the Province under such guarantee without first
proceeding against OFA, and such amount will then be payable out of the
Consolidated Revenue Fund of the Province.
4. The Capital Investment Act is the primary legislation governing
OFA and sets out OFA's constitution, functions, and powers. The
Minister of Finance of the Province is responsible for the
administration of the Capital Investment Act in respect of OFA.
Pursuant to the Capital Investment Act, OFA is required to submit an
annual report on its affairs, including audited financial statements,
to the Minister of Finance within 90 days of the end of its fiscal
year. The financial statements are audited by the Provincial Auditor.
5. The Lieutenant Governor in Council is empowered to make
regulations respecting the management, control, and administration of
the affairs of OFA. OFA's board of directors may pass by-laws
regulating OFA's proceedings, specifying the powers and duties of the
officers and employees and generally for the management of OFA. In
particular, the power of OFA to borrow, issue securities, make short-
term investments, manage risk associated with financing and investment,
or incur liabilities in order to facilitate financings by others only
may be exercised under the authority of a by-law that has been approved
by the Minister of Finance.
6. Substantially all of OFA's assets are expected to include: (i)
Obligations of Public Sector Clients to repay loans made to them by
OFA; (ii) the assets, consisting primarily of deposit obligations, of
The Province of Ontario Savings Office; (iii) obligations of certain
Public Sector Clients to repay loans made to them by the Province and
transferred to OFA; (iv) investments to facilitate OFA's cash flow
management and maximize the return on its surplus funds and those of
Public Sector Clients; and (v) such other assets, which may consist of
obligations or investments, as permitted by the Capital Investment Act.
Applicant's Legal Analysis
1. Section 3(a)(3) of the Act defines an investment company as an
issuer engaged in the business of investing, reinvesting, owning,
holding, or trading in securities, and owning ``investment securities''
having a value exceeding 40% of the value of such issuer's total
assets. Because substantially all of the moneys borrowed by OFA will be
lent to Public Sector Clients, a substantial portion of OFA's assets
will consist of obligations of the Public Sector Clients to repay such
loans. In addition, OFA will invest its own surplus funds and those of
other Public Sector Clients, as well as make temporary investments.
Such obligations and investments could be deemed to be ``investment
securities'' within the meaning of section 3(a)(3). As a result, OFA
could be deemed to be an ``investment company'' under the Act.
2. Section 6(c) permits the SEC to grant an exemption from the
provisions of the Act if and to the extent that such exemption is
necessary and appropriate in the public interest, consistent with the
protection of investors, and consistent with the purposes fairly
intended by the policy and provisions of the Act.
3. OFA believes that granting the exemption would be appropriate in
the public interest. It would benefit United States investors by making
the Guaranteed Debt Securities more readily available to such
investors. It also would expand the United States' market for OFA's
Guaranteed Debt Securities and thus encourage the free flow of capital
among nations.
4. OFA further believes that granting the exemption requested would
be consistent with the protection of investors. The payment of the
principal of, and any premium or interest on, the Guaranteed Debt
Securities will be irrevocably and unconditionally guaranteed by the
Province. As a result, the Guaranteed Debt Securities will be backed by
the sovereign credit of the Province and not merely the credit and
assets of OFA.
5. Finally, OFA believes an exemption would be consistent with the
purposes fairly intended by the policy and provisions of the Act. OFA
is a governmental central financing and investing authority that was
organized to obtain and arrange efficient financing and investments for
the requirements of public authorities of the Province. OFA is thus a
statutory body with characteristics different from the types of
investment companies at which the Act generally is directed and for
which its substantive provisions are necessary or suitable.
Applicant's Conditions
OFA agrees that any order of the SEC granting the requested relief
shall be subject to the following conditions:
1. No Guaranteed Debt Securities will be offered or sold within the
United States unless: (a) They are registered under the Securities Act
of 1933 (the ``Securities Act''); (b) in the opinion of United States
counsel for OFA, an exemption from registration under the Securities
Act is available with respect to such offer and sale; or (c) the staff
of the SEC states in writing that they will not recommend that the SEC
take any enforcement action under the Securities Act if such securities
are offered and sold in the United States without registration.
2. All borrowings by OFA, including the issuance by OFA of the
Guaranteed Debt Securities, will be effected in accordance with the
provisions of the Capital Investment Act and any applicable regulations
and by-laws promulgated thereunder. All investments of funds of OFA and
any Pubic Sector Client will be made by OFA in accordance with the
requirements of the Capital Investment Act and any applicable
regulations and by-laws promulgated thereunder. All temporary
investments by OFA will be made in accordance with the requirements of
the Capital Investment Act and any applicable regulations and by-laws
promulgated thereunder.
3. The payment of principal of, and any interest or premium on, all
Guaranteed Debt Securities issued by OFA will be irrevocably and
unconditionally guaranteed by the Province pursuant to an order of the
Lieutenant Governor in Council under the FAA.
4. Applicant and the Province will expressly submit to the
jurisdiction of any state or federal court in the City or State of New
York in any action or proceeding arising out of or relating to the
Guaranteed Debt Securities and the Provincial Guarantee, and Applicant
and the Province will agree that all claims in respect of such action
or proceeding may be heard and determined in such New York State court
or in any such federal court. Applicant and the Province also will
waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding. Applicant and the Province will appoint an
agent for service of process with an office in New York, New York, as
agent to receive on behalf of Applicant and the Province service of
copies of the summons and complaint and any other process which may be
served in any such action or proceeding. Such consent to jurisdiction
and appointment of an agent for service of process will be irrevocable
until all amounts due and payable in respect of any such Guaranteed
Debt Securities have been paid. Applicant will agree to explicitly
waive any immunity it may have from jurisdiction and from execution or
attachment or any process in the nature thereof in respect of any suit,
action, or proceeding arising out of or relating to the Guaranteed Debt
Securities. The Province will agree to explicitly waive any immunity
the Province may have from jurisdiction in respect of any such action.
5. In respect of any action or proceeding brought with respect to
such Guaranteed Debt Securities or Provincial Guarantee instituted in
any state or federal court in the United States (other than any action
or proceeding in any New York State or federal court in New York City
referred to in the preceding paragraph), each of OFA and the Province
will agree to accept service of process by any form of mail requiring a
signed receipt effected in accordance with Sections 1608(b)(3)(B) and
1608(a)(3), respectively, of the Foreign Sovereign Immunities Act of
1976 (28 U.S.C. 1608). In agreeing to accept such service of process in
any such action or proceeding, neither OFA nor the Province will waive
any claim of sovereign immunity it may have with respect to itself or
its property in any such action or proceeding, consent to the subject
matter jurisdiction or jurisdiction in personam of any such court,
agree that any such court is a proper forum for any such action or
proceeding, or waive any rights it may have to remove any such action
or proceeding from state court to federal court.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-18962 Filed 8-3-94; 8:45 am]
BILLING CODE 8010-01-M