SEC no-action letter: Bank of Montreal exemption from Regulation M Rules 101 and 102

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
DIVISION OF
TRADING AND MARKETS April 8, 2011

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004
Re: Bank of Montreal

File No. TP 11-09

Dear Mr. Buckholz:
In your letter dated April 8, 2011, as supplemented by conversations with members ofthe staff(the "Staff") ofthe Securities and Exchange Commission ("Commission"), you request on behalfofBank ofMontreal, a Schedule 1 Bank under the Bank Act (Canada) and a financial holding company ("BMO"), an exemption from Rules 101 and 102 ofRegulation M under the Securities Exchange Act of 1934 ("Exchange Act") in connection with a proposed acquisition of the Marshall & Ilsley Corporation ("M&I") by BMO (the "Acquisition"). You seek an exemption to permit BMO and its affiliates to conduct specified transactions outside the United States in the common shares ofBMO ("BMO Shares") as well as derivatives ofsuch shares ("BMO Share Derivatives") during the Acquisition. Specifically, you request that: (i) BMO, BMO Nesbitt, and BMO Ireland be permitted to continue to engage in market making and customer-facilitation trading in BMO Share Derivatives as described in your letter; (ii) BMO Nesbitt and BMO Ireland be permitted to continue to engage in derivatives hedging and index-related adjustments as described in your letter; (iii) the Brokerage Providers be permitted to continue to engage in brokerage activities as described in your letter; (iv) the Asset Managers be permitted to continue to engage in asset management activities as described in your letter; and (v) BMO Nesbitt be permitted to continue to engage in plan-related activities as described in your letter. You also seek an exemption to permit certain BMO affiliates to conduct specified transactions in the United States in BMO Shares during the Acquisition. Specifically, you request that: (i) SBSB and Stoker be permitted to continue to engage in unsolicited asset management activities and trading indexes ofwhich BMO Shares are a component; and (ii) BMO Capital Ma,rkets, BMO Capital Markets GKST Inc., BMO Nesbitt Burns Trading Corp. S.A., and Harris Investor Services (collectively ''US Brokerage Providers") be permitted to continue to engage in unsolicited brokerage activities in the United States as described in your letter. We have attached a copy ofyour correspondence to avoid reciting the facts set forth therein. Unless otherwise noted, each defined term in our response has the same meaning as defined in your letter.

Response:
Based on the facts and representations that you have made in your letter, but without necessarily concurring with your analysis, the Commission hereby grants BMO an exemption from Rules 101 and 102 ofRegulation M to pennit BMO, BMO Nesbitt, BMO Ireland, the Brokerage Providers, the Asset Managers, SBSB, Stoker, and the US Brokerage Providers (collectively, the "Companies") to continue to engage in the transactions described in your letter. In particular, in your correspondence you make the following key representations:

• The average daily trading volume ("ADTV") value ofBMO Shares on the TSX in the
  2010 calendar year was approximately $154.1 million, or approximately 81 % ofthe worldwide ADTV value for that year, and for the Prescribed Period was approximately $190.6 million, or approximately 68% ofthe worldwide ADTV value for that period. BMO's market capitalization at January 31,2011 was approximately $32..8 billion, the fourth largest for any Canadian bank and the ninth largest of any Canadian company, representing 2.6% ofthe S&P TSX 60 Index;

• The worldwide ADTV value ofBMO Shares was approximately $191.3 million for the
  2010 calendar year and approximately $280 million for the Prescribed Period and the estimated public float value for BMO Shares was approximately $35.2 billion as of March 15, 2011;

• The ADTV value ofBMO Shares on the NYSE in the 2010 calendar year was
  approximately $37.2 million, or approximately 19% ofthe worldwide ADTV value for that year, and for the Proscribed Period was approximately $89.4 million, or approximately 32% ofthe worldwide ADTV ofBMO Shares for that period;

• The principal trading market for BMO Shares is the TSX in Canada;

• BMO expects to issue approximately 66.45 million BMO Shares as part ofthe
  Acquisition. The number ofBMO Shares expected to be issued in connection with the Acquisition as consideration for shares ofM&I common stock will represent approximately 11.7% ofthe BMO Shares outstanding January 31, 2011 and, assuming the full exercise of all converted M&I stock options as described in your letter, will then represent approximately 12.5% ofBMO Shares outstanding January 31, 2011;

• BMO has established information barrier policies and procedures to prevent material
  non-pUblic information from passing between the sales/trading areas ofBMO and its affiliates and other areas ofBMO and its affiliates;

• BMO, BMO Nesbitt, and BMO Ireland conduct their market making and customer￾facilitation trading activities outside ofthe United States;

• BMO Nesbitt and BMO Ireland conduct their derivatives hedging and index-related
  adjustments outside the United States;

• The Brokerage Providers, other than the US Brokerage Providers, conduct their

brokerage activities outside the United States;

• The Asset Managers, other than SBSB and Stoker, conduct their asset management
  activities outside the United States;
• BMO Nesbitt conducts its plan-related activities outside ofthe United States;
• BMO Nesbitt, BMO Ireland, the Brokerage Providers (other than the US Brokerage
  Providers), and the Asset Managers (other than SBSB and Stoker) each has confirmed that the activities for which it is requesting reliefwill be conducted in the ordinary course ofbusiness and not for the purpose offacilitating the Acquisition, in accordance with applicable law in Canada, which permits such activities during a distribution;
• In the United States, BMO conducts a securities business through the US Brokerage
  Providers who are all members ofFINRA;
• The US Brokerage Providers will only engage in unsolicited brokerage activities in the
  normal course ofbusiness with its customers;
• In the United States, BMO conducts asset management activities through SBSB and
  Stoker which are registered with the Commission as investment advisers; and
• SBSB and Stoker will only engage in unsolicited asset management activities and trading
  broad indices ofwhich BMO is a component in the normal course ofbusiness with its customers. The exemption is subject to the following conditions:

1. None ofthe transactions ofthe Companies described in your letter shall occur in the
   United States, with the exception ofthe transactions ofSBSB, Stoker, and the US Brokerage Providers described in your letter;

2. All ofthe transactions described in your letter shall be effected in the ordinary course of
   business and not for the purpose of facilitating the Acquisition;

3. The proxy statement/prospectus to be distributed to M&I shareholders shall disclose the
   possibility of, or the intention to make, the transactions described in your letter;

4. BMO and each ofthe Companies shall provide to the Division ofTrading and Markets
   (the "Division"), upon request, a daily time-sequenced schedule of all transactions made during the period beginning on the day the proxy solicitation or offering materials are frrst disseminated to security holders, and ending upon the completion ofthe distribution. Such schedule shall include:
   (a) size, broker (if any), time of execution, and price ofthe transactions; (b) the exchange, quotation system, or other facility through which the transactions occurred; and (c) whether the transactions were made for a customer account or a proprietary account;

5. Upon request ofthe Division, BMO and each ofthe Companies will transmit the
   information requested in item 4 (above) to the Division at its offices in Washington, D.C. within 30 days ofits request;

6. BMO and each ofthe Companies shall retain all documents and other information
   required to be maintained pursuant to this exemption for at least two years following the completion ofthe Acquisition;

7. Representatives ofBMO and each ofthe Companies shall be made available (in person at
   the offices ofthe Commission in Washington, D.C. or by telephone) to respond to inquiries ofthe Division relating to their records; and

8. Except as otherwise exempted by this letter, BMO and each ofthe Companies will
   comply with Regulation M.
   The foregoing exemption from Rules 101 and 102 ofRegulation M is based solely on your representations and the facts presented to the Staff and is strictly limited to the application ofthis rule to the proposed transactions. Such transactions should be discontinued, pending presentation ofthe facts for our consideration, in the event that any material change occurs with respect to any ofthose facts or representations.

In addition, your attention is directed to the anti-fraud and anti-manipulation provisions ofthe Exchange Act, including Sections 9(a) and lO(b), and Rule IOb-5 thereunder. Responsibility for compliance with these and any other applicable provisions ofthe federal securities laws must rest with the participants in the various transactions. The Division expresses no view with respect to any other questions that the proposed transactions may raise, including, but not limited to, the adequacy ofdisclosure concerning, and the applicability of any other federal or state laws to, the proposed transactions. For the Commission,

by the Division ofTrading and Markets,

pursuant to delegated authority,

//r Josephine 1. Tao
Assistant Director
Attachment

SULLIVAN & CROMWELL LLP

TELEPHONE: 1-212-558-4000
FACSIMILE: 1-212-558-3588 125[!IJ~~ WWW.SULLCROM.COM ..Aleut o/~J JVVI0004-24.98 LOS ANGELES' PALO ALTO' WASHINGTON, D.C. FRANKFURT' L.ONDON 'PARIS BEIJING' HONG KONG' TOKYO MELBOURNE' SYDNEY Division ofTrading and Markets, Securities and Exchange Conunission, 100 F Street, N.E., Washington, D.C. 20549. Attention: Josephine J. Tao, Assistant Director Re: Bank ofMontreal: Request for Exemptive Relieffrom Rules 101 and 102 ofRegulation M Ladies and Gentlemen:
We are writing on behalf of our client, Bank of Montreal, a Schedule I Bank under the Bank Act (Canada) and a financial holding company ("BMO"), regarding the application ofRegulation M to transactions by BMO and its affiliates in the common shares ofBMO ("BMO Shares") during the distribution ofBMO Shares to be made by BMO to shareholders of Marshall & Ilsley Corporation, a bank holding company organized as a Wisconsin corporation ("M&I"), in connection with the proposed acquisition ofM&I by BMO (the "Acquisition"). Specifically, on behalf ofBMO, we ask the Staffto grant exemptive relief from Rules 101 and 102 ofRegulation M to permit BMO and its affiliates to continue, in the ordinary course ofbusiness as described below and in accordance with applicable local law, to engage in the following activities outside the United States (and, to the extent specified, in the United States) during the Regulation M restricted period applicable to the Acquisition:

• Market Making and Facilitation Trading in Equity Derivatives: BMO and its
  subsidiaries BMO Nesbitt Burns, Inc. and its subsidiaries (collectively, "BMO Nesbitt") and Bank ofMontreal Ireland PLC ("BMO Ireland") regularly make bids and offers for, and purchase and sell futures and forwards, swaps and options, relating to baskets and indices that include BMO Shares, and other derivatives relating to BMO Shares (such futures, forwards, options, swaps, baskets, indices and other SCl:3000342.l2

Division ofTrading and Markets
Securities and Exchange Commission -2 derivatives, collectively, "BMO Share Derivatives") on the Montreal Exchange ("MX") and in the over-the-counter market. l In addition, BMO Nesbitt and BMO Ireland purchase and sell, solely in the over-the-counter market, certain BMO Share Derivatives for which, for credit quality purposes, BMO is the counterparty. BMO Nesbitt and BMO Ireland effect these transactions for their own accounts, on both solicited and unsolicited bases, in order to provide liquidity to the market, to facilitate customer transactions and to readjust BMO Nesbitt's and BMO Ireland's ownership position in BMO Shares as appropriate following such transactions. BMO Nesbitt is a designated market maker on the Toronto Stock Exchange ("TSX") for certain third￾party exchange traded funds ("ETFs").

• Derivatives Hedging and Index-Related Adjustments: In connection with the
  trading activities described above under "Market Making and Facilitation Trading in Equity Derivatives" and customer trades, BMO Nesbitt and BMO Ireland solicit and effect trades in BMO Shares, and enter into cash-settled swaps, for their own account and for the accounts oftheir customers, for the purpose of hedging positions (or adjusting or liquidating existing hedge positions) ofBMO and its affiliates and of their customers. BMO Nesbitt is the designated market maker on the TSX for certain ETFs that are index-based and also trades certain ETFs that are index-based and include BMO Shares. The traded ETFs for which BMO is not the market maker generally consist of 10 or more securities and BMO Shares comprise less than 10% of the value of each such ETF. These ETFs are listed solely on Canadian exchanges and are comprised exclusively ofCanadian securities. In order to appropriately hedge its positions in these ETFs, BMO Nesbitt will effect trades in the securities that are components ofthe applicable ETFs, including BMO Shares. In addition, BMO Nesbitt solicits and effects trades in BMO Shares in order to appropriately adjust BMO Nesbitt's proprietary index-related portfolio in response to changes in the applicable indices. During the restricted period related to the Acquisition, these hedging and other transactions will be effected exclusively on the TSX or other exchanges or alternative trading systems ("ATSs") in Canada, and all such transactions will be entered into in the ordinary course ofbusiness and not in contemplation or facilitation ofthe Acquisition.
• Brokerage Activities and Facilitation Trading: Some ofBMO's subsidiaries,
  including BMO Nesbitt, BMO InvestorLine Inc. ("InvestorLine"), BMO Capital Markets Corp. ("BMO Capital Markets"), Harris Investor Services, Inc. ("Harris Although these activities and the others described in this letter are conducted outside ofthe United States (except for those activities specifically described as occurring in the United States), BMO's customers or counterparties involved in such activities may be based in the United States, Canada or elsewhere. SCI :3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -3
Investor Services"), BMO Capital Markets Limited and BMO Nesbitt Bums Securities Ltd. (''Nesbitt Bums Ltd.") (such subsidiaries collectively the "Brokerage Providers"), engage in discount brokerage and full-service brokerage activities for their customers through ordinary customer facilitation and related services. The discount brokerage division engages only in unsolicited brokerage activities, while the full service brokerage division provides additional services, including discussions with customers regarding investment strategies (including with respect to BMO Shares) and solicited and unsolicited brokerage activities? The Brokerage Providers also effect transactions in BMO Shares for their own account in order to facilitate unsolicited customer transactions. The Brokerage Providers may accomplish these activities by either relaying buy or sell orders for BMO Shares to BMO Nesbitt for execution or relaying buy and sell orders for BMO Shares to unaffiliated third parties. These activities are conducted outside the United States, and the related trades are executed on the TSX.3 Additionally, four United States BMO subsidiaries - BMO Capital Markets, BMO Capital Markets GKST Inc., BMO Nesbitt Bums Trading Corp. S.A. and Harris Investor Services (such subsidiaries collectively the "US Brokerage Providers") - engage in unsolicited brokerage activities ofthe kind described above with their customers and related trades may be effected on either the New York Stock Exchange (''NYSE'') or the TSX. All ofthe US Brokerage Providers are members of FINRA. We ask that the requested relief also cover these United States activities ofthese BMO subsidiaries.

• Asset Management: Certain subsidiaries ofBMO, including BMO Nesbitt, BMO
  Asset Management Inc. ("BMO Asset Management"), BMO Harris Investment Management Inc. ("BMO Harris"), Pyrford International Limited ("Pyrford"), Harris Investment Management, Inc. ("Harris Investment"), HIM Monegy, Inc. ("HIM Monegy"), Harris N.A., The Harris Bank N.A. ("THBNA"), Sullivan, Bruyette, Speros & Blayney, Inc. ("SBSB"), Stoker Ostler Wealth Advisors ("Stoker"), Harris myCFO Investment Advisory Servicers LLC and Harris Investor Services (such subsidiaries individually an "Asset Manager" and collectively the "Asset Managers"), manage the assets of certain mutual funds, pooled funds, pension funds, trust accounts, estate portfolios and other investor portfolios (including those of endowments, corporations and individuals) (such funds, accounts and portfolios, the "Managed Funds"). As part oftheir ordinary investment management activities on behalfofthe Managed Funds, the Asset Managers may buy and sell BMO Shares for During the applicable restricted period, BMO will fully restrict and direct employees in the full service brokerage division not to solicit orders from customers with respect to BMO Shares. From time to time, BMO Capital Markets may engage in direct buying and selling ofBMO Shares rather than relaying orders to other entities. SCl:3000342.12 2

Division ofTrading and Markets
Securities and Exchange Commission -4 certain ofthe Managed Funds' accounts. A substantial majority of such activity takes place in Canada, and a small portion of such activity may occur in other non-United States jurisdictions. During the restricted period related to the Acquisition, the Asset Managers will only effect such transactions on an unsolicited basis at the direction of a client and, based on the applicable exemptive relief that BMO has received from the Investment Industry Regulatory Organization of Canada ("IIROC") and the Ontario Securities Commission ("OSC"), the Asset Managers may exercise their discretion to acquire BMO Shares when directed to do so by a client or beneficiary or pursuant to the terms of a client's or beneficiary's investment mandate. In order to replicate an underlying index in accordance with stated investment guidelines or upon receipt of cash contributions on behalf ofindices and enhanced index funds managed by the Asset Managers, certain Asset Managers may also acquire BMO Shares on behalf of index, and enhanced index, funds managed by the Asset Managers ifBMO Shares are a component ofthe relevant index. The transactions described above may be routed to certain BMO subsidiaries, including BMO Nesbitt, or to unaffiliated third parties, at the direction ofthe applicable Asset Manager. In addition, SBSB and Stoker, both ofwhich are registered with the Securities and Exchange Commission (the "SEC") as investment advisors, may buy and sell in the United States (i) BMO Shares on the NYSE, but only on an unsolicited basis at the direction of a client and (ii) broad￾based indices in which BMO Shares are a component.4

• Purchasesfor Certain Plans: In order to deliver BMO Shares to BMO employees
  under certain BMO employee plans, including (i) the Employee Share Ownership Plan for employees of BMO or its subsidiaries living and working in Canada or expatriates who continue to be on the Canadian payroll, (ii) the Employee Share Ownership Plan for employees ofBMO Nesbitt and its subsidiaries living and working in Canada or expatriates who continue to be on the Canadian payroll and (iii) the All Employee Share Ownership Plan for employees of BMO or its subsidiaries who are subject to income tax in the United Kingdom (such plans collectively the "Employee Plans"), BMO Nesbitt purchases BMO Shares on the TSX. BMO Nesbitt makes the purchases on a bi-weekly or monthly basis, depending on the plan, solely to satisfy BMO's obligation to deliver shares based on pre-determined payroll deductions ofthe employee. During the restricted period related to the Acquisition, these purchases may only be made pursuant to exemptive relief granted by the OSC on behalf ofBMO Nesbitt. Unless expressly directed by a client to do otherwise, SBSB and Stoker route these orders to an unaffiliated broker-dealer for execution. SCI :3000342.12 4

Division ofTrading and Markets
Securities and Exchange Commission -5
The availability ofthe exemptions requested by this letter would be conditioned on the disclosure and record-keeping undertakings outlined below under "Relief Requested." BMO has provided us with, and authorized us to make on its behalf, the factual representations set forth in this letter about the market for BMO Shares and the activities ofBMO and its affiliates. The description ofCanadian laws and regulations has been provided by Osler, Hoskin & Harcourt LLP.
I. The Market for BMO Shares
The principal trading market for BMO Shares is the TSX. Additionally, there are a number ofATSs in Canada where BMO Shares may be traded. BMO Shares are also listed on the NYSE. BMO is a foreign private issuer as defined in Rule 3b-4(c) ofthe Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act") and is subject to the information reporting requirements ofthe Exchange Act. As ofJanuary 31, 2011, BMO had approximately 567.8 million common shares outstanding. BMO's market capitalization at January 31,2011, was approximately $32.8 billion,S the fourth largest of any Canadian bank and the ninth largest of any Canadian company, representing 2.6% ofthe S&P TSX 60 Index. The average daily trading volume value ofBMO Shares on the TSX during the two month period beginning on January 4,2011 and ending on March 4,2011 (the "Prescribed Period") was approximately $190.6 million, or approximately 68% ofthe worldwide average daily trading volume value for that period. The average daily trading volume value ofBMO Shares on the NYSE for the Prescribed Period was approximately $89.4 million, or approximately 32% ofthe worldwide average daily trading volume value for that period. In addition, the average daily trading volume value ofBMO Shares on the TSX for the 2010 calendar year was approximately $154.1 million, or approximately 81 % ofthe worldwide average daily trading volume value for that year, and the average daily trading volume value ofBMO Shares on the NYSE for the 2010 calendar year was approximately $37.2 million, or approximately 19% ofthe worldwide average daily trading volume value for that year. BMO expects to issue approximately 66.45 million BMO Shares (representing approximately 11.70% ofBMO Shares outstanding as of January 31, 2011, and, assuming the full exercise of all converted M&I stock options as described below, representing approximately 12.50% ofBMO Shares outstanding as of As used in this letter, "$" refers to u.s. dollars and "C$" refers to Canadian dollars. For purposes ofthis letter, and except as otherwise noted, Canadian dollars have been converted to United States dollars at the rate ofC$1.0010 = $1.00, the average exchange rate from December 1, 2010 through January 31,2011, as published by the Federal Reserve. SCI :3000342.12

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Securities and Exchange Commission -6
January 31, 2011) as consideration for shares of M&I common stock in the Acquisition, based on approximately 528.68 million shares ofM&I common stock outstanding as of December 31, 2010. In addition, as described in more detail below under "The Acquisition," BMO currently expects that approximately 4.5 million BMO Shares will be issuable in respect of converted M&I stock options. The TSX provides for trading in equities through a fully automated electronic exchange trading system. Order entry is restricted to persons with authorized access and the system provides for fully automated order matching and trade execution. The TSX is an auction market based on time and price priority (subject to priority to crosses between orders from the same participating organization). There is full pre-trade transparency of orders (price and volume) other than a portion of the volume that may be hidden on an "iceberg order" where a large order is to be traded. 6 Public identification of the participating organization entering the order is optional. There is full post trade transparency (price and volume) of executions. There is a Market on Close facility for certain securities with no pre-trade transparency other than broadcast imbalance and indicative calculated closing price. There is a 45-minute post-closing Special Trading Session that permits trades effected solely at the regular session closing prices. Order and trade data is disseminated in real time to various information vendors. Other Canadian markets (the ATSs) offer similar functionality but do not all provide pre-trade transparency. Some markets only provide post-trade transparency. The MX is Canada's exchange for listed derivatives. It provides for trading in single stock equity options, currency options (U.S. Dollar), index futures and options and interest rates futures and options through a fully automated electronic exchange trading system. Order entry is restricted to persons with authorized access and the system provides for fully automated ordering matching and trade execution. The MX is a continuous auction market based on time and price priority. There is full pre-trade transparency of orders (price and volume) with the exception that participants may opt to only disclosure a portion of the total volume that they wish to trade. The balance may be hidden as part of an "iceberg order" that becomes visible as the disclosed portion is executed. There is full post trade transparency (price and volume) of executions. Order and trade data is disseminated in real time to various information vendors. In 2010, the aggregate turnover on the TSX for equity securities was in excess of$I,020 billion, and as of September 30,2010, the overall market capitalization of equity securities listed on the TSX was approximately $1,928 billion. As of September 30,2010, there were approximately 1485 listed companies on the TSX. The Additional information regarding iceberg orders is provided by the TSX and is available
at http://www.tsx.com/en/trading/products_services/iceberg_orders.html. SCl:3000342.l2 6

Division ofTrading and Markets
Securities and Exchange Commission -7 primary market index is the S&P/TSX Composite, which currently is comprised of211 of the most prominent domestic companies listed on the TSX, including BMO.
II. BMO's Market Activities
BMO is one ofNorth America's leading fmancial services firms, offering banking and asset management products and services throughout the world. For the fiscal year ended October 31, 2010, BMO had consolidated reported net income of approximately $2.81 billion and at October 31, 2010 it had total assets of approximately $411.23 billion and shareholders' equity of approximately $21.86 billion. BMO serves more than 8 million customers in three key operating groups in a number oflocations across North America and Europe: Personal and Commercial Banking, including P&C Canada and P&C U.S.; Private Client Group, including BMO Bank ofMontreal, BMO Nesbitt, InvestorLine, BMO Guardian, HIM Monegy, BMO Harris Private Banking, HPB, Harris Investment Management, Pyford, BMO Life Insurance and BMO Life Assurance Company; and the BMO Capital Markets group, including BMO Capital Markets. BMO's head office is in Montreal, Quebec, Canada and its executive offices are located in Toronto, Ontario, Canada. The market activities for which BMO is seeking relief will be managed principally by representatives in Toronto. As described in more detail below under "Canadian Market Regulation," in Canada, BMO and its affiliates are regulated by, among others, the OSC and other provincial securities regulatory authorities and IIROC. The trading activities for which BMO is seeking relief will, except as described below with respect to United States activities, occur solely on securities exchanges or the over-the-counter market in Canada and be managed principally by representatives within Canada and subject to the regulation and supervision ofIIROC and other applicable Canadian regulatory agencies. The management ofthe ordinary course trading activities ofthe applicable affiliates is operated separately from the management ofBMO responsible for decisions relating to the Acquisition. The clients and counterparties involved may be based or organized in Canada, the United States or other jurisdictions. BMO has confirmed that the activities described below for which it is requesting relief are permitted under, and would be conducted in accordance with, applicable Canadian law (including, where applicable, pursuant to relevant exemptive relief).

• Market Making and Facilitation Trading in Equity Derivatives: BMO and its
  subsidiaries BMO Nesbitt and BMO Ireland regularly make bids and offers for, and purchase and sell BMO Share Derivatives on the MX and in the over-the￾counter market. In addition, BMO Nesbitt purchases and sells, solely in the over￾the-counter market, certain BMO Share Derivatives for which, for credit quality purposes, BMO is the counterparty. BMO Nesbitt and BMO Ireland effect these SCI :3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -8 transactions for their own accounts, on both solicited and unsolicited bases, in order to provide liquidity to the market, to facilitate customer transactions and to readjust BMO Nesbitt's and BMO Ireland's ownership position in BMO Shares as appropriate following such transactions. BMO Nesbitt is a designated market maker on the TSX for certain third-party ETFs. Other BMO Share Derivatives that are involved in these transactions include (i) over-the-counter swaps, options, forwards and other structured products relating to BMO Shares and baskets and indices that include BMO Shares and (ii) listed futures and options relating to BMO Shares and baskets and indices that include BMO Shares.

• Derivatives Hedging and Index-Related Adjustments: In connection with the
  trading activities described above under "Market Making and Facilitation Trading in Equity Derivatives" and customer trades, BMO Nesbitt and BMO Ireland solicit and effect trades in BMO Shares, and enter into cash-settled swaps, for their own accounts and for the accounts of customers, for the purpose of hedging positions (or adjusting or liquidating existing hedge positions) ofBMO and its affiliates and their customers. BMO Nesbitt is the designated market maker on the TSX for certain ETFs that are index-based and also trades certain ETFs that are index-based and include BMO Shares. The traded ETFs for which BMO is not the market maker generally consist of 10 or more securities and BMO Shares comprise less than 10% ofthe value of each such ETF. These ETFs are listed solely on Canadian exchanges and are comprised exclusively ofCanadian securities. In order to appropriately hedge its positions in these ETFs, BMO Nesbitt will effect trades in the securities that are components ofthe applicable ETFs, including BMO Shares. In addition, BMO Nesbitt solicits and effects trades in BMO Shares in order to appropriately adjust BMO Nesbitt's proprietary index-related portfolio in response to changes in the applicable indices. During the restricted period related to the Acquisition, these hedging and other transactions will be effected exclusively on the TSX or other exchanges or ATSs in Canada, and all such transactions will be entered into in the ordinary course of business and not in contemplation or facilitation ofthe Acquisition.
• Brokerage Activities and Facilitation Trading: The Brokerage Providers engage
  in discount brokerage and full-service brokerage activities for their customers through ordinary customer facilitation and related services. The discount brokerage division engages only in unsolicited brokerage activities, while the full service brokerage division provides additional services, including discussions with customers regarding investment strategies (including with respect to BMO Shares) and solicited and unsolicited brokerage activities.? The Brokerage During the applicable restricted period, BMO will fully restrict and direct employees in the full service brokerage division not to solicit orders from customers with respect to BMO Shares. SCI :3000342.12 7

Division ofTrading and Markets
Securities and Exchange Commission -9
Providers also effect transactions in BMO Shares for their own account in order to facilitate unsolicited customer transactions. The Brokerage Providers may accomplish these activities by either relaying buy or sell orders for BMO Shares to BMO Nesbitt for execution or relaying buy and sell orders for BMO Shares to unaffiliated third parties. These activities are conducted outside the United States, and the related trades are executed on the TSX.8 In addition, the US Brokerage Providers engage in unsolicited brokerage activities ofthe kind described above with their customers and related trades may be effected on either the NYSE or the TSX. We ask that the requested relief also cover these activities ofthe United States broker-dealers. During the restricted period, the Brokerage Providers will suspend all brokerage activities except for unsolicited brokerage transactions and customer facilitation trades in Canada and unsolicited brokerage activities in the United States.

• Asset Management: As part oftheir ordinary investment management activities
  on behalf ofthe Managed Funds, the Asset Managers may buy and sell BMO Shares for certain ofthe Managed Funds' accounts.9 A substantial majority of such activity takes place in Canada, and a small portion of such activity may occur in other non-United States jurisdictions. During the restricted period related to the Acquisition, the Asset Managers will only effect such transactions on an unsolicited basis at the direction of a client and, based on the applicable exemptive relief that BMO has received from the IIROC and the OSC, the Asset Managers may exercise their discretion to acquire BMO Shares when directed to do so by a client or beneficiary or pursuant to the terms of a client's or beneficiary's investment mandate. In order to replicate an underlying index in accordance with stated investment guidelines or upon receipt of cash contributions on behalf ofindices and enhanced index funds managed by the Asset Managers, certain Asset Managers may also acquire BMO Shares on behalf ofindex, and enhanced index, funds managed by the Asset Managers ifBMO Shares are a component of the relevant index. The transactions described above may be routed to certain BMO subsidiaries, including BMO Nesbitt, or to From time to time, BMO Capital Markets may engage in direct buying and selling ofBMO Shares rather than relaying orders to other entities. The Asset Managers comprise the autonomous global asset management business ofBMO and provide asset management services on a worldwide basis. As autonomous divisions ofBMO, the Asset Managers might be considered to fall outside ofthe definition of "affiliated purchaser" set forth in Rule 100 ofRegulation M and thus the restrictions ofRegulation M would not apply to them. Nevertheless, BMO has assumed for the purpose of this request that the Asset Managers will be subject to the provisions ofRule 102, and respectfully requests the relief described in this letter for the Asset Managers. SCI :3000342.12 9

Division ofTrading and Markets
Securities and Exchange Commission -10 unaffiliated third parties, at the direction of the applicable Asset Manager. In addition, SBSB and Stoker, both ofwhich are registered with the SEC as investment advisors, may buy and sell in the United States (i) BMO Shares on the NYSE, but only on an unsolicited basis at the direction of a client and (ii) broad￾based indices in which BMO Shares are a component. 10 Under Canadian law, the Asset Managers have a fiduciary duty to oversee the Managed Funds in a manner that is in the best interests ofthe Managed Funds and to deal fairly, honestly and in good faith in doing so. Further, only portfolio managers registered as advising representatives of an Asset Manager are pennitted to advise the Managed Funds in respect of any securities. The Restrictions under Regulation M therefore make it more difficult for an Asset Manager to meet its fiduciary duty to purchase, or to bid for, BMO Shares when such actions are otherwise in the best interests of the Managed Funds.

• Purchasesfor Certain Plans: In order to deliver BMO Shares to BMO
  employees under certain BMO employee plans, including the Employee Plans, BMO Nesbitt purchases BMO Shares on the TSX. BMO Nesbitt makes the purchases on a bi-weekly or monthly basis, depending on the plan, solely to satisfy BMO's obligation to deliver shares based on pre-determined payroll deductions ofthe employee. Employees cannot make lump sum contributions to the Employee Plans. The deductions, together with matching contributions from BMO (where applicable) and net of certain deductions (where applicable) are aggregated by third party administrators. These third party administrators also advise BMO Nesbitt ofthe aggregate dollar amount ofBMO Shares to be purchased. (In the United States, purchases for, and the administration of, the applicable employee plans are performed by a third party and are therefore exempted by Rule 102(c)(2) of Regulation M and, accordingly, are not part of our request for exemptive relief.) During the restricted period related to the Acquisition, the purchases described in this paragraph may be made pursuant to exemptive relief granted by the OSC.
• Information Barriers: BMO has established information barrier policies and
  procedures to prevent material non-public information from passing between the sales/trading areas ofBMO and its affiliates and other areas ofBMO and its affiliates. Accordingly, during restricted periods prior to announcements of earnings results or other material developments that have not yet become public, BMO's traders and sales force who conduct trading activities are generally able to continue their market activities, although senior management may restrict such Unless expressly directed by a client to do otherwise, SBSB and Stoker route these orders to an unaffiliated broker-dealer for execution. SCl :3000342.12 10

Division ofTrading and Markets
Securities and Exchange Commission -11 activities in extraordinary circumstances. BMO will continue to maintain these policies and procedures during the distribution related to the Acquisition.

• Other activities: BMO and its affiliates conduct other market activities in BMO
  Shares in the ordinary course oftheir business, such as publishing research reports with respect to BMO and trading in BMO Shares or in BMO Share Derivatives. In connection with the distribution related to the Acquisition, BMO and its affiliates will comply with Regulation M, either by suspending market activities not subject to exemptive relief during the relevant period (such as the publishing ofresearch reports) or by conducting those actions in accordance with an available exception from Regulation M. Accordingly, BMO is not seeking relief from the Staff for these activities.
  III. The Acquisition
  On December 17, 2010, BMO and M&I entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which M&I will be acquired by BMO in a stock-for-stock transaction. Under the Merger Agreement, Mike Merger Sub, LLC, a newly formed Delaware limited liability company and wholly-owned indirect subsidiary ofBMO ("Merger Sub"), will merge with and into M&I, with Merger Sub surviving the merger. In connection with the Acquisition, M&I's common shareholders will have the right to receive, for each share of common stock of M&I, 0.1257 BMO Shares. The number ofBMO Shares to be distributed in the Acquisition is based on a fixed exchange ratio and is not subject to change based on fluctuations in the price ofBMO Shares on the TSX or the NYSE. Consequently, during the distribution related to the Acquisition, BMO does not have an incentive to seek to increase the market price of BMO Shares in order to deliver fewer BMO Shares to M&I shareholders. In addition, as discussed below under "Canadian Market Regulation," market manipulation and dissemination offalse information to affect the prices oflisted securities are prohibited under Canadian law. The Acquisition is subject to the approval ofM&I shareholders. M&I plans to mail the proxy statement/prospectus to its common shareholders as soon as practicable following the declaration of effectiveness of the registration statement referred to below, and the meeting ofM&I's shareholders to vote on whether to approve the Acquisition is expected to occur approximately (but not earlier than) 20 business days from the date ofsuch mailing. The BMO Shares to be delivered in the Acquisition distribution will be registered under the Securities Act of 1933, as amended, and the rules and regulations SCI :3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -12 promulgated thereunder, pursuant to a registration statement on Form F-4. As noted above, based on outstanding share information provided by M&I as ofDecember 31, 2010, BMO currently expects that approximately 66.45 million BMO Shares would be issued as merger consideration in the Acquisition, representing approximately 11.70% of BMO Shares outstanding as ofJanuary 31, 2011 (and, assuming the full exercise of all converted M&I stock options as described below, representing approximately 12.50% of BMO Shares outstanding as ofJanuary 31, 2011). Upon completion ofthe Acquisition, all outstanding options to purchase shares ofM&I common stock will be converted into options to purchase BMO Shares on the basis set forth in the Merger Agreement. Based on information provided by M&I, BMO currently expects that approximately 4.5 million BMO Shares will be issuable in respect of converted M&I stock options. All ofthe BMO Shares to be delivered in the Acquisition and upon exercise of converted M&I stock options will be newly issued shares. In addition, an application will be made to list on the TSX and the NYSE the BMO Shares issuable in the Acquisition and upon exercise of converted M&I stock options.
IV. Application of Regulation M
In connection with the Acquisition, BMO will distribute BMO Shares to M&I shareholders and, therefore, will be engaged in a "distribution" in the United States for purposes of Regulation M. Pursuant to Rule 100 ofRegulation M, the restricted period for the distribution will begin on the day that the proxy statement/prospectus is first mailed to M&I shareholders and will end when the M&I shareholder vote is completed. Thus, the restricted period is likely to last at least four weeks. The Asset Managers, BMO Ireland, InvestorLine, BMO Capital Markets, BMO Capital Markets Limited, BMO Capital Markets GKST Inc., BMO Nesbitt Bums Trading Corp. S.A. and Nesbitt Bums Ltd. may, from time to time, purchase BMO Shares for their own accounts and/or the accounts ofothers and may recommend and exercise investment discretion with respect to the purchase ofBMO Shares. Depending upon the specific subsidiary and type of activity, these purchases may occur on either a solicited or unsolicited basis and may be performed by the subsidiary directly, through another BMO subsidiary or through an unaffiliated third party. Accordingly, the BMO subsidiaries may be deemed to be "affiliated purchasers" of BMO, as defined in Rule 100 of Regulation M. ll Additionally, BMO Nesbitt is serving as a financial advisor to BMO in connection with the Acquisition and therefore BMO believes that it qualifies as a As noted above, however, certain divisions ofBMO, as autonomous divisions ofBMO, may not be "afftliated purchasers," but for purposes ofthis letter BMO has assumed that they may be deemed to be affiliated purchasers under Regulation M. SCI :3000342.12 11

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Securities and Exchange Commission -13 distribution participant subject to Rule 101 of Regulation M. 12 The other affiliates described in this letter that constitute affiliated purchasers, as well as BMO itself, would be subject to Rule 102 ofRegulation M, and we have assumed for purposes ofthe relief requested in this letter that BMO Nesbitt would also be deemed to be subject to Rule 102. Under Rule 102, BMO and its affiliated purchasers would not be permitted to bid for or purchase, or attempt to induce any person to bid for or purchase, BMO Shares during the applicable restricted period, except to the extent that one ofthe specified exceptions under the applicable rule is available. There are no exceptions available under Rule 102 that would permit BMO and its affiliated purchasers to engage in the activities described in this letter. Therefore, without the requested exemptive relief, BMO and its affiliates would not be permitted to engage in their respective ordinary course financial services activities for an extended period oftime, which will last at least four weeks. BMO Nesbitt is a significant market maker in listed options on BMO Shares and a significant participant in trading of other BMO Share Derivatives, including in connection with providing expected services to their customers. 13 Accordingly, if BMO Nesbitt is precluded from conducting ordinary course market-making and trading activities in BMO Share Derivatives, the application ofRegulation M could have adverse effects on the Canadian market for BMO Share Derivatives. Additionally, ifBMO and BMO Nesbitt (and, as applicable, BMO Ireland) are prohibited from hedging their derivatives and adjusting or terminating those hedges, they would be exposed to market price movement in respect ofpositions established in the ordinary course ofbusiness prior to commencement ofthe restricted period. 12 Although a limited set ofthe activities for which exemptive relief is requested under this letter could be permitted under Rule 101 ofRegulation M to the extent effected by a distribution participant, BMO respectfully requests exemptive relieffor all such activities in the event that BMO Nesbitt was deemed not to be a distribution participant. We note that the investment banking department ofBMO Nesbitt, which is serving in the fmancial advisory role, is subject to information barrier policies and procedures, which are in compliance with applicable OSC regulations, to prevent material non-public information from passing between it and the sales/trading areas ofBMO and its affiliates (including the departments ofBMO Nesbitt for which relief is requested under this letter). 13 Derivatives on BMO Shares (other than securities futures) generally would not be "covered securities" for the purpose ofRule 100 ofRegulation M. See, e.g., Release 34-38067 (Dec. 20, 1996),62 FR 520,524. Derivative market activities by BMO affiliates, however, might in some cases be regarded as involving inducements to
purchase BMO Shares. To avoid uncertainty, the activities covered by this request for exemption include the BMO Share Derivatives trading and hedging and other activities in BMO Shares described in this letter. SCI :3000342.12

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Securities and Exchange Commission -14
Ifthey are restricted by Regulation M, the Brokerage Providers may be unable to execute unsolicited brokerage orders submitted by their customers in the normal course, or customer facilitation trades in the ordinary course, thereby forcing their customers to take their orders elsewhere (with related delays and inconvenience) or to refrain from completing ordinary course financial transactions. Likewise, given the importance ofBMO Shares to the overall Canadian securities market, to prohibit the Asset Managers from trading BMO Shares during the restricted period (which, as noted above, would be limited to transactions effected on an unsolicited basis at the discretion of a client and, based on the applicable exemptive relief that BMO has received from the OSC and the IIROC, to transactions effected by certain Asset Managers at the discretion of a beneficiary and to transactions effected by certain Asset Managers on behalf of index, and enhanced index, funds managed by certain Asset Managers if BMO Shares are a component ofthe relevant index) would have a significant adverse effect on their ability to manage their investments on behalf oftheir clients. Additionally, the restrictions imposed by Regulation M make it more difficult for an Asset Manager to meet it fiduciary duty to purchase, or to bid for, BMO Shares when such actions are otherwise in the best interests ofthe Managed Funds. BMO Nesbitt's role as purchaser for the Employee Plans is essential to the administration ofthe plans. With respect to these plans, BMO Nesbitt purchases BMO Shares solely to satisfy BMO's obligation to deliver shares based on pre-determined payroll deductions ofthe employee. BMO Nesbitt serves as the purchaser in Canada solely because it is an in-house broker-dealer and, accordingly, BMO's use ofBMO Nesbitt allows BMO to reduce the expense of engaging a third-party agent. The market making, derivatives hedging, brokerage, asset management and plan-related activities described in this letter are also important aspects ofBMO's business as a major Canadian financial institution, are standard activities for Canadian financial institutions and are permissible under home country law under comparable circumstances (including, where applicable, pursuant to relevant exemptive relief). Accordingly, interrupting these activities for such an extended period could also have an adverse impact on BMO's business, including its ability to properly manage its risks and loss ofbusiness to customer and employee dissatisfaction. BMO Shares would easily qualify as actively traded securities that are exempt under Rule 101(c)(I), with a worldwide average daily trading volume value for the Prescribed Period of approximately $280.0 million, a worldwide average daily trading volume for the 2010 calendar year of $191.3 million and an estimated public float value (as of March 15, 2011) of approximately $35.2 billion. Regulation M normally would not interfere with market activities in actively
traded securities, such as BMO Shares. However, because the BMO affiliates may constitute affiliated purchasers ofthe issuer, SC 1:3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -15 they may not rely on the actively traded securities exception to do what brokers for large United States issuers are normally allowed to do during distributions by those issuers. Finally, BMO believes that the risk ofmarket manipulation by affiliates of BMO is further limited by the information barrier policies and procedures and fiduciary duties described above, the fact that the market activities that are the subject of this request for exemptive relief are ordinary course market activities ofBMO and its affiliates rather than activities commenced or managed in contemplation ofthe Acquisition, the fixed exchange ratio applicable to the Acquisition and the fact that applicable Canadian law prohibits market manipulation and dissemination of false information to affect the prices oflisted securities. As discussed further below under "Canadian Market Regulation," the activities for which exemptive relief is being requested are subject to and will be conducted in accordance with applicable Canadian law (including, where applicable, pursuant to relevant exemptive relief). Applicable Canadian law provides important safeguards against the risk ofthe types of abuse that Regulation M was designed to prevent. For these reasons, BMO asks the Staff to provide an exemption from Regulation M that would allow BMO and its affiliates to continue to engage in the ordinary course market activities described above during the restricted period applicable to the Acquisition, as permitted under market practice and applicable Canadian law.
V. Canadian Market Regulation
Regulation ofthe BMO and its Subsidiaries
BMO Nesbitt is registered as an investment dealer under the securities legislation of all provinces and territories ofCanada, it is a member ofIIROCI4 and the TSX Venture Exchange, it is an approved participant ofthe Montreal Exchange and it is a participating organization ofthe TSX. The Asset Managers are either registered as advisors under the securities legislation of all provinces and territories ofCanada or they are exempt from the requirement to be registered as such. As dealers and advisors that, to the extent applicable, are registered under the securities legislation of all provinces and territories ofCanada, BMO Nesbitt and the IIROC is a national self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. IIROC was formed in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc. IIROC performs its regulatory responsibilities by setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees. IIROC also enforces market integrity rules regarding trading activity on Canadian equity marketplaces. SCl:3000342.12 14

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Securities and Exchange Commission -16
Asset Managers are subject to regulatory oversight by the OSC and the securities regulatory authorities of all other provinces and territories ofCanada, and are required to comply with those requirements of Ontario securities law that are summarized below. IS As a member ofthe IIROC, BMO Nesbitt is also subject to regulatory oversight by the IIROC and is required to comply with the by-laws, regulations and policies ofthe IIROC. As a participating organization ofthe TSX, BMO Nesbitt is also subject to regulatory oversight by IIROC and is required to comply with the provisions ofthe Universal Market Integrity Rules ("UMIR") that are summarized below. These provisions include Rule 7.7, the Canadian securities regulatory version ofRegulation M. Ontario Securities Law The principal regulatory authority in Ontario is the OSC. Like the securities regulatory authorities in the other provinces and territories, the OSC is responsible for regulating a variety of different market participants that include investment fund managers, dealers, advisers, issuers of securities, investment funds, self￾regulatory organizations, clearing agencies and marketplaces, including exchanges and alternative trading systems. The principal source of such regulation is the Securities Act (Ontario) (the "Ontario Act,,)16 which grants the OSC extensive authority to enforce its prOVISIons. In addition to the regulation ofthe market participants referred to above, the Ontario Act regulates, among other things, the conduct of takeover bids and issuer 15 Due to the impracticality of attempting to summarize the securities laws of all Canadian provinces and territories, this summary has been limited to a consideration ofthe securities laws ofOntario for three reasons. First, Ontario has the most significant capital market in Canada and the greatest number ofmarket participants. As a result, the OSC is one ofthe most influential members ofthe association established by the securities regulatory authorities of Canada's provinces and territories, referred to as the Canadian securities administrators, and Ontario's securities laws have a broader application than the securities laws ofthe other jurisdictions. Second, Ontario's securities laws have tended to be at least as onerous as the securities laws ofthe other jurisdictions and compliance with the standards established by such laws has therefore generally served to ensure compliance with the securities laws of the other provinces and territories. Third, Ontario's securities laws have become increasingly representative ofthe securities laws ofthe other provincial and territorial jurisdictions as a result ofthe regulatory uniformity that has been achieved through the publication of national instruments by the Canadian securities adInirristrators. 16 The term "Ontario Act" includes, for purposes of this letter, any relevant regulations and rules made under the Ontario Act. SCI:3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -17 bids as well as trading by insiders. 17 The Ontario Act prohibits insider trading by providing that no person or company in a special relationship with a reporting issuerl8 shall purchase or sell securities ofthe reporting issuer with the knowledge of a material factl9 or material change20 that has not been generally disclosed. It also provides that no reporting issuer and no person or company in a special relationship with a reporting issuer shall inform, other than in the necessary course ofbusiness, another person or company of a material fact or material change with respect to the reporting issuer before the material fact or material change has been generally disclosed. For purposes of these trading and tipping prohibitions, a person or company in a special relationship includes a person or company that is an insider or affiliate21 ofthe reporting issuer, such as BMO Nesbitt and the Asset Managers. Trading with knowledge ofthe trading activity of a managed account is also prohibited in certain circumstances. According to the Ontario Act, any person or company having information concerning the investment program of a managed account, including a mutual fund, is also prohibited from purchasing or selling the securities of an issuer for the person or company's own account where the portfolio securities ofthe managed account include securities of that issuer and the information is used by the person or company for its own advantage. 17 The term "insider" is defmed in section 1(1) of the Ontario Act to include, in part, every director or officer of a reporting issuer, such as BMO, and every director or officer of a company that is a subsidiary of a reporting issuer, such as BMO Nesbitt and the Asset Managers. 18 The term "reporting issuer" is defined in section 1(1) of the Ontario Act to mean, in part, an issuer that has qualified its securities for distribution pursuant to a prospectus under the Act or that has had its securities listed and posted for trading on a recognized stock exchange. 19 The term "material fact" is defmed in section 1(1) of the Ontario Act to include, in part, a fact that would reasonably be expected to have a significant effect on the market price or value of securities. 20 The term "material change" is defmed in section 1(1) of the Ontario Act to mean a change in the business, operations or capital of an issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer. 21 A company is deemed to be an affiliate of another company if one of them is the subsidiary of the other, or ifboth are subsidiaries of the same company, or each of them is controlled by the same person or company. A company is deemed to be a subsidiary of another company if, among other things, it is controlled by that other company, it is controlled by that other company and one or more companies each of which is controlled by that other
company or it is a subsidiary of a company that is the other company's subsidiary. A company is deemed to be controlled by another company, or by two or more companies, if the voting securities of the first company carrying more than 50% of the votes for the election of directors are held for the benefit of the other company or companies and the votes carried by such securities are entitled to elect a majority of the directors of the frrst company. SCI:3000342.12

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The Ontario Act also regulates conflicts ofinterest by prohibiting certain selfdealing transactions and by prescribing disclosure requirements for transactions that involve related issuers of registrants such as BMO Nesbitt and those Asset Managers that are registered under the Ontario Act. Certain ofthese prohibited transactions and disclosure requirements are summarized below. As the result ofself dealing restrictions, a mutual fund is prohibited from knowingly making an investment in, among others, any person or company who is a substantial security holder ofthe mutual fund, its management company or its distribution company.22 BMO would be considered a substantial security holder ofthe Asset Managers and mutual funds managed by the Asset Managers would therefore be prohibited from making an investment in BMO in the absence of any exemption. A mutual fund that is a reporting issuer is also prohibited from purchasing securities from, or selling securities to, the manager ofthe fund, such as an Asset Manager, or any affiliate ofthe manager, such as BMO Nesbitt, unless the price for the security is not more than the ask price in the case of a purchase, or less than the bid price in the case of a sale, all as reported on a public quotation system in common use. The Ontario Act also prohibits a portfolio manager from causing any investment portfolio that is managed by it to invest in any issuer in which a "responsible person" is an officer or director unless the specific fact is disclosed to the portfolio manager's client and the client's written consent is obtained prior to the investment. As a result ofthe definition of the term "responsible person", this self dealing restriction serves to preclude any Asset Manager registered under the Ontario Act from causing any ofits clients to invest in BMO without the client's prior written consent to do so if any director or officer ofthe Asset Manager or any director of officer of an affiliate ofthe Asset Manager that participates in the formulation of, or has access prior to implementation to, any investnient decisions that are made on behalf of, or any advice that is given to, the client is also a director or officer ofBMO. Registrants are also required to identify any material conflicts ofinterest that may exist or arise between the firm and a client and to provide a description of any such conflicts that a reasonable investor would be expected to be informed of to the client before purchasing or selling any securities for the client. Investment fund managers are also required under the Ontario Act to refer any conflict ofinterest matter relating to an investment fund to the independent review committee ofthe investment fund. For such purpose, a person or company is considered to be a substantial security holder of an issuer if that person or company owns beneficially voting securities to which are attached more than 20% of the voting rights attached to all voting securities of the issuer.
SCI:3000342.12 22

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Securities and Exchange Commission -19
Investment Industry Regulatory Organization ofCanada The trading activity ofthose who trade securities through the TSX is subject to regulation by IIROC. IIROC is recognized as a selfregulatory organization by the securities regulatory authorities of all provinces of Canada. Its responsibilities include the regulation ofsecurities trading and market-related activities ofparticipants on Canadian equity marketplaces through, among other things, the administration and enforcement of a common set ofmarket integrity rules known as UMIR. The Canadian equity marketplaces that are currently regulated by IIROC include the TSX; TSX Venture Exchange; CNSX Markets Inc.; Omega ATS; Pure Trading; Alpha ATS; Bloomberg Tradebook Canada Company; Chi-X Canada; Liquidnet Canada Inc.; and MATCH Now. As noted above, Rule 7.7 ofUMIR is the Canadian securities regulatory version ofRegulation M.23 Rule 7.7 prohibits a dealer-restricted person, such as BMO Nesbitt in the context ofthe distribution ofBMO Shares contemplated by the Acquisition, from trading restricted securities for its own account, an account over which it exercises control or direction or the account of an issuer-restricted person during the restricted period in relation to a distribution of an issuer's securities, subject to certain exemptions. A dealer-restricted person is comparable to a "distribution participant" under Regulation M and an issuer-restricted person is comparable to an "issuer" under Regulation M. The exemptions that are available to a dealer-restricted person when trading for its own account, or an account over which it exercises control or direction, include an exemption that permits the dealer-restricted person to trade ''highly-liquid securities" during the restricted period as well as an exemption that permits the dealer￾restricted person to engage in market stabilization and market-balancing activities for the purpose ofmaintaining a fair and orderly market during the restricted period. For purposes ofRule 7.724, the term "highly-liquid security" is defined to mean a listed security or quoted security that has traded, in total, on one or more marketplaces as reported on a consolidated market display during a 60-day period ending not earlier than 23 Rule 7.7 ofUMIR is also comparable to, and complemented by, OSC Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transaction administered by the OSC. Unlike Rule 7.7 ofUMIR, OSC Rule 48-501 has a broader application to issuer-restricted persons. As described above, Rule 7.7 prohibits a dealer-restricted person from trading restricted securities for its own account, an account over which it exercises control or direction or an account of an issuer-restricted person during the restricted period in relation to a distribution of the issuer's securities. It does not impose an express trading restriction on issuer-restricted persons such as BMO, its affiliates and the directors and officers thereof. In addition to the
trading restrictions that are imposed upon dealer-restricted persons by Rule 7.7, OSC Rule 48-501 expressly prohibits an issuer-restricted person from trading restricted securities for its own account and any account over which it exercises control or discretion during the restricted period. 24 The term "higWy liquid security" has the same meaning for purposes of OSC Rule 48-501. SCI :3000342.12

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Securities and Exchange Commission -20
10 days prior to the commencement ofthe restricted period: (i) an average of at least 100 times per trading day and (ii) with an average trading value of at least C$l ,000,000 per trading day; or is subject to Regulation M and is considered to be an "actively-traded security" for purposes of Regulation M. IIROC maintains, and posts each trading day, a list of securities that meet the definition of "highly-liquid security" for purposes ofRule 7.7 and BMO shares appear on this list. The above-described exemptions that are generally available to dealer￾restricted persons are not available to a dealer-restricted person when acting for an issuer￾restricted person. Accordingly, although BMO Nesbitt may purchase BMO Shares for either its own account or an account over which it exercises control or direction throughout the restricted period, and it may attempt to induce or cause persons to purchase BMO Shares during the restricted period, it may not purchase BMO Shares for an issuer-restricted person as the result of subsection 7.7(2) ofUMIR and subsection 2.1(a) ofOSC Rule 38-501. BMO Nesbitt has therefore applied to, and received from, IIROC and the OSC an exemption from subsection 7.7(2) ofUMIR and subsection 2.1 (a) ofOSC Rule 48-501, respectively, to permit it to engage in the following trading activity:

• the purchase ofBMO Shares on behalfof an Asset Manager when the Asset
  Manager is purchasing BMO Shares on behalf of Managed Funds;
• the purchase ofBMO Shares on behalf ofBMO Nesbitt, BMO Asset
  Management, BMO Harris, Harris Investment, HIM Monegy and Pyrford when these subsidiaries purchase BMO Shares on behalf ofinvestment funds managed by these subsidiaries; and
• the purchase ofBMO Shares on behalf ofinsiders ofBMO when such purchase is
  made in accordance with the terms and conditions of a benefit or compensation plan. UMIR also requires marketplace participants to transact business openly and fairly and in accordance with just and equitable principles oftrade25 and it prohibit participants from directly or indirectly, engaging in, or participating in the use of, any manipulative or deceptive method, act or practice in connection with any order or trade on a marketplace.26 UMIR also imposes best execution27 and best price28 obligations on participants and it prohibits participants from frontrunning?9 25 UMIR Rule 2.1(1). 26 UMIR Rule 2.2(1). SCl:3000342.12

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VI. Relief Requested
Pursuant to Rules 101(d) and 102(e) ofRegulation M, BMO is seeking exemptive relief from the application of Rules 101 and 102 of Regulation M to permit BMO and its affiliates to continue to engage in the market making, derivatives hedging, brokerage, customer facilitation, asset management and plan-related activities described in Section II ofthis letter during the Regulation M restricted period related to the Acquisition. These activities would be conducted in the ordinary course ofbusiness and not for the purpose offacilitating the Acquisition. The activities would (subject to the requested relief and, where applicable, applicable relief received from Canadian regulators) be conducted in accordance with all applicable law, all as described in this letter. As a condition to the relief being requested, BMO would undertake to include disclosure in the proxy statement/prospectus that will be distributed to M&I shareholders. The disclosure will be substantially similar to the following:
Since the announcement ofthe merger, BMO and certain ofits affiliates have engaged, and intend to continue to engage throughout the proxy solicitation period, in various market making, derivatives hedging, brokerage, asset management and plan-related activities involving BMO common stock outside the United States (and, to a limited extent, within the United States). Among other things, BMO or one or more ofits affiliates intends to engage in trades in BMO common stock for its own account and the accounts ofits customers (and, to the extent described below, its employees) for the purpose of hedging their positions established in connection with the trading of certain derivatives relating to BMO common shares, hedging BMO's position in respect of positions in its market making obligations related to certain exchange traded funds, effecting brokerage transactions for its customers and other customer facilitation transactions, in BMO common stock, and effecting delivery of BMO common stock as required pursuant to certain ofBMO's benefit or compensation plans for employees. Further, certain ofBMO's asset management affiliates may buy and sell BMO common stock, or ETFs, funds or indices including BMO common stock, outside the United States (and, in the case of certain asset management activities, within the United 27 UMIRRule 5.1. 28 UMIR Rule 5.2. 29 UMIR Rule 4.1. SCI :3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -22
States) as part oftheir ordinary investment management activities on behalfoftheir customers. These activities occur outside the United States and, in the case ofunsolicited brokerage transactions (including in the context of asset management activities) and certain trades in broad-based indices that include BMO common stock, in the United States and the transactions in BMO common stock are effected on the Toronto Stock Exchange and the New York Stock Exchange. The foregoing activities could have the effect ofpreventing or retarding a decline in the market price of BMO common stock. BMO has sought certain exemptive relief from the SEC in relation to Regulation M under the Exchange Act, and has received certain exemptive relief from the Ontario Securities Commission in relation to its Rule 48-501 Trading During Distributions, Formal Bids And Share Exchange Transactions, in order to permit BMO and certain ofits affiliates to engage in the foregoing activities during the proxy solicitation period. As a further condition to the reliefbeing requested, BMO will undertake to keep records ofthe date and time when any BMO Shares are purchased or sold, the market in which the purchase or sale is effected, the amount ofBMO Shares purchased or sold and the price ofthe purchase or sale, for each purchase or sale ofBMO Shares that any BMO affiliates make during the restricted period (this information with respect to purchases or sales will not include any client-specific data, the disclosure ofwhich is restricted under applicable law). BMO will maintain such records for a period oftwo years following the completion of the distribution related to the Acquisition. Upon the written request ofthe Director ofthe Division ofTrading and Markets ofthe SEC, BMO will make a copy ofthe relevant records described above available at the SEC's offices in Washington, D.C. within 30 days. In connection with the relief requested by BMO in this letter, please note that substantially similar exemptive relief from Rule 101 and/or Rule 102 ofRegulation M was granted with respect to market making activities, brokerage activities, asset management activities and plan-related activities to: Banco Bilbao Vizcaya Argentaria, S.A. under your exemptive letter ofOctober 28, 2010; Deutsche Bank Aktiengesellschaft under your exemptive letter of September 16,2010; the Toronto-Dominion Bank under your exemptive letter of August 19, 2010; ING under your exemptive letter ofNovember 19,2009; Shinhan Financial Group Co., Ltd. under your exemptive letter ofMarch 5, 2009; Banco Santander, S.A. under your exemptive letter ofDecember 22,2008; and the Toronto-Dominion Bank under your exemptive letter ofDecember 21,2007.

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SCI :3000342.12

Division ofTrading and Markets
Securities and Exchange Commission -23
If you have any questions or comments with respect to any ofthe matters discussed in this letter or require any additional information, please contact the undersigned at (212) 558-3876. v~ R:bert E. Buc(holz (Enclosures) cc: Simon Fish Conni Gibson (Bank of Montreal) SCl:3000342.l2