A British Columbia credit union (“Westminster”), which provided wealth management services to its members but was not authorized to sell mutual fund units or securities to its members, entered into “participation agreements” with two arm’s-length companies (“CAMI” and “CSI”) which were so authorized, pursuant to which Westminster employees nominally became employees or representatives of CAMI or CSI while also remaining employees of Westminster, and became licensed and trained to sell securities while continuing to work in Westminster offices under the supervision of Westminster. Pursuant to the participation agreements, Westminster received percentages of the distribution and service fees received by CAMI from the mutual fund issuers, or of the commissions received by CSI.
In finding that the participating fees received by Westminster were exempted notwithstanding the exclusion in para. (r.4) for preparatory services, Wong J stated (at paras. 37 and 38):
The predominant element was the sale of CAMI/CSI mutual funds/securities to Westminster’s members, carried out by way of the dual employees/investment advisors using their training/licensing to recommend and sell CAMI/CSI products to Westminster members, commensurate with the members’ particular investment profiles.
Westminster arranged for the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of financial instruments, being CAMI mutual funds and CSI securities. It is the heart of the transaction and what CAMI/CSI really paid for. Therefore, Westminster provided the exempt financial service described in paragraph (l) of the definition by arranging for the financial service described in paragraph (d).