Altamira Investment Services Inc. et al. - MRRS Decision

Headnote

Relief granted from prohibition in s. 4.1(2) of NI 81-102 to permit applicant funds to purchase securities of related entity on secondary market - Relief subject to conditions including IRC approval and pricing requirements.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.1(2), 19.1.

National Instrument 81-107 Independent Review Committee for Investment Funds.

May 15, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

PRINCE EDWARD ISLAND, NOVA SCOTIA,

NEWFOUNDLAND AND LABRADOR, NORTHWEST

TERRITORIES, YUKON and NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ALTAMIRA INVESTMENT SERVICES INC.,

NATIONAL BANK SECURITIES INC.,

TD ASSET MANAGEMENT INC.,

SCOTIA CASSELS INVESTMENT COUNSEL LIMITED,

SCOTIA SECURITIES INC., SCOTIA CAPITAL INC.,

RBC ASSET MANAGEMENT INC.,

BMO HARRIS INVESTMENT MANAGEMENT INC.,

BMO NESBITT BURNS INC.,

GUARDIAN GROUP OF FUNDS LTD.,

BMO INVESTMENTS INC.,

AND JONES HEWARD INVESTMENT COUNSEL INC.,

CIBC ASSET MANAGEMENT INC. AND

CIBC GLOBAL ASSET MANAGEMENT INC.

(the Applicants)

AND

IN THE MATTER OF

THE MUTUAL FUNDS

listed under an Applicant's name in Schedule A and any

mutual funds subject to National Instrument 81-102 --

Mutual Funds (NI 81-102) that may be established in the

future for which the Applicant acts as portfolio advisor

and/or manager (the Applicant Funds)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions received an application (the Application) from the Applicants on behalf of each Applicant Fund under section 19.1 of NI 81-102 for relief from the requirement in Section 4.1(2) of NI 81-102 (the Requested Section 4.1(2) Relief) which prevents a dealer managed mutual fund from investing in a class of securities of an issuer (a Related Person) of which a partner, director, officer or employee of the dealer manager of the mutual fund, or a partner, director, officer or employee of an affiliate or associate of the dealer manager, is a partner, director or officer unless the partner, director, officer or employee

(a) does not participate in the formulation of investment decisions made on behalf of the dealer managed mutual fund;

(b) does not have access before implementation to information concerning investment decisions made on behalf of the dealer managed mutual fund; and

(c) does not influence, other than through research, statistical and other reports generally available to clients, the investment decisions made on behalf of the dealer managed mutual fund.

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(i) the Ontario Securities Commission (the OSC) is the principal regulator for the Application; and

(ii) this MRRS decision document (MRRS Decision) represents the decision of each of the Decision Makers.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions (NI 14-101), in NI 81-102 and in National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) have the same meaning in this MRRS Decision Document unless they are otherwise defined in this Decision Document.

Representations

This decision is based on the following facts represented by an Applicant in respect of the Applicant and the Applicant Funds of the Applicant:

1. Each of the Applicants is or will be the portfolio adviser and/or the manager of the Applicant Funds of the Applicant.

2. Each of the Applicants and the Applicant Funds is or will be compliant with the requirements of NI 81-107. Accordingly, each Applicant Fund has or will have an independent review committee (IRC) established in accordance with NI 81-107.

3. The investment strategies of an Applicant Fund that relies on the Requested Section 4.1(2) Relief permit or will permit it to invest in the securities purchased, either as a principal strategy in achieving its investment objective or as a temporary strategy pending the purchase of other securities.

4. TD Asset Management Inc. (TDAM) previously obtained relief from Section 4.1(2) (the TDAM Existing Related Person Securities Relief) so that an Applicant Fund of TDAM could invest in securities of certain Related Persons of TDAM. These securities included exchange-traded securities and non-exchange-traded securities of The Toronto-Dominion Bank (TD Bank) such as long-term bonds and bankers acceptances.

5. Pursuant to section 7.2 of NI 81-107, the TDAM Existing Related Person Securities Relief expired on November 1, 2007. Each of the remaining Applicants did not previously obtain relief from section 4.1(2) of NI 81-102.

6. Section 6.2 of NI 81-107 provides an exemption from the mutual fund conflict of interest investment restrictions for purchases of Related Person securities if the purchase is made on an exchange. It does not provide an exemption from section 4.1(2) of NI 81-102 and it does not provide an exemption for purchases of non-exchange traded securities.

7. Related Persons of each Applicant are significant issuers of both exchange --traded and non-exchange-traded securities.

8. Non-exchange-traded securities that are debt securities issued by Related Persons, in addition to securities that are listed and traded on an exchange, may be appropriate investments for the Applicant Funds.

9. In respect of Applicant Funds of an Applicant, directors, officers and employees of each Applicant or of an affiliate or associate of an Applicant may be directors, officers or employees of a Related Person who do not meet the exceptions in section 4.1(2) of NI 81-102 such that the Requested Section 4.1(2) Relief is required by an Applicant to permit Applicant Funds to invest in securities of a Related Person.

10. Each purchase of securities of a Related Person will occur in the secondary market and not under primary distributions or treasury offerings of a Related Person.

11. Each non-exchange-traded security purchased by an Applicant Fund pursuant to the Requested Section 4.1(2) Relief will be a debt security issued by a Related Person that has been given, and continues to have at the time of purchase, an "approved credit rating" by an approved credit rating organization.

12. The Applicants consider that the Applicant Funds should have access to such securities for the following reasons:

a) There is currently and has been for several years a very limited supply of highly rated corporate debt.

b) Diversification is reduced to the extent that an Applicant Fund is limited with respect to investment opportunities.

c) To the extent that an Applicant Fund is trying to track or outperform a benchmark it is important for the Applicant Fund to be able to purchase any securities included in the benchmark. Debt securities of Related Persons of the Applicants are included in most of the Canadian debt indices.

13. If a Fund's purchase of non-exchange-traded securities issued by Related Persons involves an interfund trade with another fund to which NI 81-107 applies, the provisions of section 6.1.(2) of NI 81-107 will apply to such transaction.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met.

The decision of the Decision Makers is that the Requested Section 4.1(2) Relief is granted to permit purchases of Related Person securities in the secondary market on the conditions that:

(a) the purchase is consistent with, or is necessary to meet, the investment objective of the Applicant Fund;

(b) the IRC of the Applicant Fund has approved the transaction in accordance with Section 5.2(2) of NI 81-107;

(c) the manager of the Applicant Fund complies with section 5.1 of NI 81-107 and the manager and the IRC of the Applicant Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(d) if the security is an exchange-traded security, the purchase is made on an exchange on which the securities of the issuer are listed and traded;

(e) if the security is not an exchange-traded security,

(a) the price payable for the security is not more than the ask price of the security;

(b) the ask price of the security is determined as follows:

(i) if the purchase occurs on a marketplace, the price payable is determined in accordance with the requirements of that marketplace; or

(ii) if the purchase does not occur on a marketplace,

(A) the Applicant Fund may pay the price for the security at which an independent, arm's length seller is willing to sell the security, or

(B) if the Applicant Fund does not purchase the security from an independent, arm's length seller, the Applicant Fund must pay the price quoted publicly by an independent marketplace or obtain, immediately before the purchase, at least one quote from an independent, arm's length purchaser or seller and not pay more than that quote.;

(f) the transaction complies with any applicable "market integrity requirements";

(g) no later than the time the Applicant Fund files its annual financial statements, the Applicant files with the securities regulatory authority or regulator the particulars of any such investments; and

(h) the reporting obligation in section 4.5 of NI 81-107 applies to the Requested Section 4.1(2) Relief granted in this Decision and the IRC of the Applicant Fund complies with section 4.5 of NI 81-107 in connection with any instance that it becomes aware that the Applicant did not comply with any of the conditions of this Decision.

SCHEDULE A

APPLICANTS AND APPLICANT FUNDS

A. ALTAMIRA INVESTMENT SERVICES INC., NATIONAL BANK SECURITIES INC.

B. TD ASSET MANAGEMENT INC.

C. SCOTIA CASSELS INVESTMENT COUNSEL LIMITED, SCOTIA SECURITIES INC., SCOTIA CAPITAL INC.

D. RBC ASSET MANAGEMENT INC.

E. BMO HARRIS INVESTMENT MANAGEMENT INC., BMO NESBITT BURNS INC., GUARDIAN GROUP OF FUNDS LTD., BMO INVESTMENTS INC., AND JONES HEWARD INVESTMENT COUNSEL INC.

F. CIBC ASSET MANAGEMENT INC., CANADIAN IMPERIAL BANK OF COMMERCE