SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

DIVISION OF

TRADING AND MARKETS

April 8, 2011

Robert E. Buckholz

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 of Montreal, a Schedule 1 Bank under the Bank Act (Canada) and a financial

holding company ("BMO"), an exemption from Rules 101 and 102 of Regulation 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

of such 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 of your 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.

Robert E. Buckholz

April 8, 2011

Page 2 of5

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 of Regulation 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% of the 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% of the 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 of the United States;

Robert E. Buckholz

April 8, 2011

Page 3 of5

•

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 of facilitating 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;

Robert E. Buckholz

April 8, 2011

Page 4 of5

4. BMO and each of the Companies shall provide to the Division of Trading 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 of its 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 of the 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 of Regulation 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.

Robert E. Buckholz

April 8, 2011

Page 5 of5

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 of disclosure concerning, and the applicability of any other

federal or state laws to, the proposed transactions.

For the Commission,

by the Division of Trading and Markets,

pursuant to delegated authority,

//r

Josephine 1. Tao

Assistant Director

Attachment

SULLIVAN & CROMWELL LLP

TELEPHONE:

FACSIMILE:

1-212-558-4000

1-212-558-3588

WWW.SULLCROM.COM

125[!IJ~~

..Aleut o/~J JVVI0004-24.98

LOS ANGELES' PALO ALTO' WASHINGTON, D.C.

FRANKFURT' L.ONDON 'PARIS

BEIJING' HONG KONG' TOKYO

MELBOURNE' SYDNEY

April 8, 2011

Division of Trading and Markets,

Securities and Exchange Conunission,

100 F Street, N.E.,

Washington, D.C. 20549.

Attention: Josephine J. Tao, Assistant Director

Re:

Bank of Montreal: Request for Exemptive Relief from Rules 101

and 102 of Regulation 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 of Regulation 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 of Regulation M to permit

BMO and its affiliates to continue, in the ordinary course of business 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 of Montreal 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

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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 of their 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 of Canadian securities. In order to appropriately hedge its

positions in these ETFs, BMO Nesbitt will effect trades in the securities that are

components of the 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 of business and not in

contemplation or facilitation of the 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 of the 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.

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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 of the 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 of these 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 of their ordinary investment management activities on

behalf of the Managed Funds, the Asset Managers may buy and sell BMO Shares for

2

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

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Securities and Exchange Commission

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certain of the 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 of indices 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 if BMO Shares are

a component of the relevant index. The transactions described above may be routed

to certain BMO subsidiaries, including BMO Nesbitt, or to unaffiliated third parties,

at the direction of the applicable Asset Manager. In addition, SBSB and Stoker, both

of which 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

•

Purchases for 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 of the 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.

4

Unless expressly directed by a client to do otherwise, SBSB and Stoker route these orders to an

unaffiliated broker-dealer for execution.

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The availability of the 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 of Canadian 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 of ATSs 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)

of the 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 of the Exchange Act.

As of January 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 of BMO 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% of the 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 % of the

worldwide average daily trading volume value for that year, and the average daily trading

volume value of BMO Shares on the NYSE for the 2010 calendar year was

approximately $37.2 million, or approximately 19% of the 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

of this 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.

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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

6

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.

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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 of North 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 of locations

across North America and Europe: Personal and Commercial Banking, including P&C

Canada and P&C U.S.; Private Client Group, including BMO Bank of Montreal, 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 of IIROC and

other applicable Canadian regulatory agencies. The management of the 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 of Trading and Markets

Securities and Exchange Commission

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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.

7

•

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% of the value of each such ETF. These ETFs are listed

solely on Canadian exchanges and are comprised exclusively of Canadian

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 of the 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.

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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 of the 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 of the 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 of their ordinary investment management activities

on behalf of the Managed Funds, the Asset Managers may buy and sell BMO

Shares for certain of the 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 of indices 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 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.

9

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 of the definition of "affiliated purchaser" set

forth in Rule 100 of Regulation M and thus the restrictions of Regulation 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 of Rule 102, and respectfully requests the relief described in this

letter for the Asset Managers.

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unaffiliated third parties, at the direction of the applicable Asset Manager. In

addition, SBSB and Stoker, both of which 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 of the 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.

10

•

Purchases for 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 of the 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.

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activities in extraordinary circumstances. BMO will continue to maintain these

policies and procedures during the distribution related to the Acquisition.

•

III.

Other activities: BMO and its affiliates conduct other market activities in BMO

Shares in the ordinary course of their 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

of research 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.

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 of false information to affect the prices of listed 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 of such 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

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promulgated thereunder, pursuant to a registration statement on Form F-4. As noted

above, based on outstanding share information provided by M&I as of December 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 of January 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 of January 31, 2011). Upon completion of the 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 of the 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 of Regulation 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 of others 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

11

As noted above, however, certain divisions ofBMO, as autonomous divisions ofBMO, may not

be "afftliated purchasers," but for purposes of this letter BMO has assumed that they may be

deemed to be affiliated purchasers under Regulation M.

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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 of Regulation M, and we have assumed for purposes of the 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 of the

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 of time, 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 of Regulation 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 of positions established in the ordinary course of business

prior to commencement of the restricted period.

12

Although a limited set of the activities for which exemptive relief is requested under this letter

could be permitted under Rule 101 of Regulation 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 of Rule 100 of Regulation 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.

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If they 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 of the relevant index) would have a significant adverse effect on their ability

to manage their investments on behalf of their 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 of the Managed Funds.

BMO Nesbitt's role as purchaser for the Employee Plans is essential to the

administration of the 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 of business 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 of the issuer,

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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 of market 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 of the

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 of the 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

I4

legislation of all provinces and territories of Canada, it is a member of IIROC and the

TSX Venture Exchange, it is an approved participant of the Montreal Exchange and it is a

participating organization of the TSX. The Asset Managers are either registered as

advisors under the securities legislation of all provinces and territories of Canada 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 of Canada, BMO Nesbitt and the

14

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.

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Asset Managers are subject to regulatory oversight by the OSC and the securities

regulatory authorities of all other provinces and territories of Canada, 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 of the 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 of the Universal

Market Integrity Rules ("UMIR") that are summarized below. These provisions include

Rule 7.7, the Canadian securities regulatory version of Regulation 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 of the 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 of the securities laws of Ontario

for three reasons. First, Ontario has the most significant capital market in Canada and the greatest

number of market participants. As a result, the OSC is one of the most influential members of the

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 of the other jurisdictions. Second, Ontario's

securities laws have tended to be at least as onerous as the securities laws of the 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 of the securities laws of the other

provincial and territorial jurisdictions as a result of the 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.

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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 issuer l8

shall purchase or sell securities of the reporting issuer with the knowledge of a material

fact l9 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 of business, 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 of the reporting issuer, such as BMO

Nesbitt and the Asset Managers. Trading with knowledge of the 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 of the 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.

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The Ontario Act also regulates conflicts of interest by prohibiting certain

self dealing 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 of these prohibited transactions and

disclosure requirements are summarized below.

As the result of self 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 of the mutual fund, its management company or its

distribution company.22 BMO would be considered a substantial security holder of the

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 of the 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 of the definition of the term "responsible person", this self dealing restriction

serves to preclude any Asset Manager registered under the Ontario Act from causing any

of its clients to invest in BMO without the client's prior written consent to do so if any

director or officer of the Asset Manager or any director of officer of an affiliate of the

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 of interest

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 of interest matter relating to an investment fund to the independent review

committee of the investment fund.

22

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.

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Investment Industry Regulatory Organization ofCanada

The trading activity of those who trade securities through the TSX is

subject to regulation by IIROC. IIROC is recognized as a self regulatory organization by

the securities regulatory authorities of all provinces of Canada. Its responsibilities

include the regulation of securities trading and market-related activities of participants on

Canadian equity marketplaces through, among other things, the administration and

enforcement of a common set of market 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 of Regulation M. 23 Rule 7.7 prohibits a dealer-restricted person, such as BMO

Nesbitt in the context of the 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 of maintaining a fair and orderly market during the restricted period. For

purposes of Rule 7.7 24 , 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

Division of Trading and Markets

Securities and Exchange Commission

-20­

10 days prior to the commencement of the 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 of Rule 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 behalf of 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 of investment funds managed

by these subsidiaries; and

•

the purchase ofBMO Shares on behalf of insiders 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

Division of Trading and Markets

Securities and Exchange Commission

VI.

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Relief Requested

Pursuant to Rules 101(d) and 102(e) of Regulation 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 of this letter during the Regulation M restricted period related to the

Acquisition. These activities would be conducted in the ordinary course of business and

not for the purpose of facilitating 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 of the merger, BMO and certain of its 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 of its

affiliates intends to engage in trades in BMO common stock for its own

account and the accounts of its 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.

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Division of Trading and Markets

Securities and Exchange Commission

-22­

States) as part of their ordinary investment management activities on

behalf of their customers. These activities occur outside the United States

and, in the case of unsolicited 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 of preventing 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 of its affiliates to engage in the foregoing activities during the

proxy solicitation period.

As a further condition to the relief being 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 of the 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 of which is

restricted under applicable law). BMO will maintain such records for a period of two

years following the completion of the distribution related to the Acquisition. Upon the

written request of the Director of the Division of Trading and Markets of the SEC, BMO

will make a copy of the 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 of Regulation

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 of October 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 of March 5,

2009; Banco Santander, S.A. under your exemptive letter of December 22,2008; and the

Toronto-Dominion Bank under your exemptive letter of December 21,2007.

*

SCI :3000342.12

*

*

Division of Trading and Markets

Securities and Exchange Commission

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If you have any questions or comments with respect to any of the 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