BMO Investments Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Exemption from the reporting requirements of clause 117(1)(c) of the Securities Act (Ontario) provided that certain disclosure is made in the management reports of fund performance for each mutual fund and that certain records of portfolio transactions are kept.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 117(1)(c), 117(2).

Rules Cited

National Instrument 81-106 -- Investment Fund Continuous Disclosure.

February 6, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

ONTARIO, NOVA SCOTIA, NEW BRUNSWICK,

NEWFOUNDLAND AND LABRADOR

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

BMO INVESTMENTS INC. (BMOI)

GUARDIAN GROUP OF FUNDS LTD. (GGOF)

BMO HARRIS INVESTMENT MANAGEMENT INC. (BMOHIM)

BMO NESBITT BURNS INC. (BMONB)

(the Filers)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) that the provisions of the Legislation requiring a management company, or in British Columbia and New Brunswick, a mutual fund manager, to file a report, within thirty days after each month end and in respect of each mutual fund to which it provides services, relating to every purchase or sale effected by such mutual fund through any related person or company with respect to which the related person or company received a fee either from the mutual fund or from the other party to the transaction or both (the Reporting Requirement) shall not apply to purchases and sales effected by the Funds through BMONB, BMO Investorline Inc. (BMOILI) or any other Related Company (as defined below) (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications (MRRS):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

"BMO Group of Companies" means the Filers and their affiliates.

"Funds" means the mutual funds set out in Appendix "A" hereto, together with such other funds managed by a member of the BMO Group of Companies from time to time.

"Portfolio Managers" means the portfolio mangers of the Funds appointed by the Filers.

"Related Company" means BMONB, BMOILI, or other related brokers or dealers that are members of the BMO Group of Companies.

"NI 81-106" means National Instrument 81-106 -- Investment Fund Continuous Disclosure.

Representations

This Decision is based on the following facts represented by the Filer:

1. Each of the BMO Group of Companies is a corporation established under the laws of Canada with its head office currently in Toronto, Ontario.

2. Members of the BMO Group of Companies act as managers of the mutual funds that currently consist of the funds set out in Appendix "A" hereto. Specifically, BMOI is the manger of the BMO Mutual Funds, GGOF is the manager of the Guardian Group of Funds, BMOHIM is the manager of the BMO Harris Private Portfolios and BMONB is the manager of the BMO Nesbitt Burns Group of Funds.

3. BMONB is registered as a broker and investment dealer (equities, options, managed accounts and futures). BMOILI is registered as an investment dealer (equities and options).

4. The Funds are open-ended investment trusts or mutual fund corporations established under the laws of the Province of Ontario or the laws of Canada. Other than as set out in Appendix "A" hereto, each Fund is a reporting issuer in each of the provinces and territories of Canada.

5. Each of the BMO Group of Companies, including BMOILI, is a direct or indirect subsidiary of Bank of Montreal. BMONB and BMOILI are "related companies" to the Funds for purposes of the Legislation.

6. As disclosed in the annual information forms or prospectuses of the Funds, the Portfolio Managers may allocate brokerage business of the Funds to a Related Company, provided such transactions are made on terms and conditions comparable to those offered by unrelated brokers and dealers.

7. The Portfolio Managers of the Funds have discretion to allocate brokerage business in any manner that they believe to be in a Fund's best interests. The purchase or sale of securities effected through a Related Company represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Funds. In allocating brokerage, consideration is given to commission rates and to research, execution and other services offered.

8. The Funds will disclose in their interim and annual financial statements and in their interim and annual management reports of fund performance the amount of brokerage commissions paid by each Fund on trades with Related Companies.

9. In the absence of this Decision, reports must be filed on behalf of each member of the BMO Group of Companies on a monthly basis in respect of every purchase or sale of securities effected through a Related Company stating the issuer of the securities purchased or sold, the class or designation of the securities, the amount or number of securities, the consideration, the name of the Related Company receiving the fee, the name of the person or company that paid the fee to the Related Company and the amount of the fee received by the Related Company.

10. It would be costly and time consuming to provide the information required by the Legislation on a monthly and segregated basis.

11. Exemptive relief from the Reporting Requirement was previously granted to the Filers pursuant to a MRRS Decision Document dated August 6, 2002. This relief was conditional on the Funds disclosing, in their statements of portfolio transactions, in respect of every class or designation of securities of an issuer bought or sold during the period to which the statement of portfolio transactions related, the name of each Related Company, the amount of fees paid to each Related Company, and the person or company that paid the fees.

12. Since the introduction of NI 81-106, mutual funds are no longer required to prepare a statement of portfolio transactions. Therefore, the Funds are no longer able to comply with the exemptive relief previously granted. However, NI 81-106 now requires the Funds to prepare and file annual and interim management reports of fund performance that include a discussion of transactions involving related parties to the Funds. When discussing portfolio transactions with related parties, NI 81-106 requires the Funds to include the dollar amount of commission, spread or any other fee paid to a related party in connection with a portfolio transaction. NI 81-106 also requires the Funds, if they have an independent review committee, to disclose whether they have relied on the positive recommendation or approval of the independent review committee to proceed with a transaction.

Decision

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

The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) the annual and interim management reports of fund performance for each Fund disclose

(i) the name of the Related Company,

(ii) the amount of fees paid to each Related Company, and

(iii) the person or company who paid the fees, if they were not paid by the Fund; and

(b) the records of portfolio transactions maintained by each Fund include, separately for every portfolio transaction effected by the Fund through a Related Company,

(i) the name of the Related Company,

(ii) the amount of fees paid to the Related Company, and

(iii) the person or company who paid the fees.

Appendix "A"

Funds

BMO Investments Inc. (BMO Mutual Funds)

Guardian Group of Funds Ltd. (Guardian Group of Funds)

BMO Nesbitt Burns Inc. (BMO Nesbitt Burns Group of Funds)

BMO Harris Investment Management Inc. (BMO Harris Private Portfolios)

{(•)} reporting issuers in each of the provinces and not the territories.