DoubleLine Income Solutions Trust
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Closed-end investment fund exempt from prospectus requirements in connection with resale of securities purchased under market purchase or redemption programs -- relief needed so that repurchased securities can be resold in the market without the need for a prospectus each time -- fund is a reporting issuer and subject to continuous disclosure requirements -- resales by the fund also subject to insider trading restrictions, including applicable hold periods -- resales of repurchased or redeemed securities will be made subject to same conditions applicable to resales by a control person -- sales to be conducted through the TSX -- securities resold in a calendar year must be equivalent to no more than 10% of the fund's outstanding units at beginning of that year -- any repurchased securities unsold after 16 months will be cancelled.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53(1), 74(1).
August 19, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF DOUBLELINE INCOME SOLUTIONS TRUST (the Filer)
DECISION
Background
The securities regulatory authority or regulator in the Jurisdiction (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirement to file a prospectus (the Prospectus Requirement) in connection with the distribution of Class A Units of the Filer (the Class A Units) that have been repurchased by the Filer pursuant to the Purchase Programs (as that term is defined below) or redeemed by the Filer pursuant to the Redemption Programs (as that term is defined below) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Northwest Territories, Nunavut and Yukon.
Interpretation
Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is an unincorporated closed-end investment trust established under the laws of Ontario.
2. The holders of Class A Units and Class U Units (the Class U Units, together with the Class A Units, the Units) of the Filer (collectively, the Unitholders) are not entitled to receive on demand an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets of the Filer. Accordingly, the Filer is not considered a "mutual fund" as that term is defined in the Legislation.
3. The Filer is a reporting issuer or equivalent in each of the provinces and territories of Canada and is not in default of any of the requirements of securities legislation applicable to it.
4. The Class A Units are listed and posted for trading on the Toronto Stock Exchange (the TSX). As of June 30, 2014, the Filer had 7,632,046 Class A Units and 700,140 Class U Units issued and outstanding.
5. BMO Nesbitt Burns Inc., which was amalgamated pursuant to the Canada Business Corporations Act, and has its head office in Toronto, Ontario, is the manager of the Filer.
6. CIBC Mellon Trust Company is the trustee of the Filer.
Mandatory Purchase Program
7. The constating document of the Filer provides that the Filer, subject to certain exceptions and compliance with any applicable regulatory requirements, is obligated to purchase (the Mandatory Purchase Program) any Class A Units offered on the TSX (or any successor thereto) if, at any time after the closing of the Filer's initial public offering, the price at which Class A Units are then offered for sale on the TSX (or any successor thereto) is less than 98% of the net asset value (Net Asset Value) per Class A Unit, provided that the maximum number of Units that the Filer is required to purchase pursuant to the Mandatory Purchase Program in any rolling 10 business day period is 10% of the number of Class A Units outstanding at the beginning of such 10 business day period.
Discretionary Purchase Program
8. Subject to applicable regulatory requirements and limitations, the Filer may purchase outstanding Class A Units in the market from time to time at prevailing market prices (the Discretionary Purchase Program and together with the Mandatory Purchase Program, the Purchase Programs).
Monthly Redemptions
9. Subject to the Filer's right to suspend redemptions, Class A Units may be surrendered for redemption (the Monthly Redemption Program) on the second last business day of any month (except, starting in 2015, the month of June) (Monthly Redemption Date) in order to be redeemed at a redemption price per Class A Unit equal to the Monthly Redemption Amount (as defined in the Filer's long form (final) prospectus dated October 24, 2013 (the Prospectus)).
Annual Redemption
10. Subject to the Filer's right to suspend redemptions, Class A Units may be surrendered for redemption (the Annual Redemption Program and together with the Monthly Redemption Program, the Redemption Programs) on the second last business day of June of each year (the Annual Redemption Date) commencing in 2015 at a redemption price per Class A Unit equal to the applicable Net Asset Value per Class A Unit on the Annual Redemption Date, less any costs and expenses incurred by the Filer in order to fund such redemption, including Filer brokerage costs, and less any net realized capital gains or income of the Filer that are distributed to redeeming holders of Class A Units (the Class A Unitholders) concurrently with the proceeds of disposition on redemption.
Resale of Repurchased or Redeemed Class A Units
11. Purchases of Class A Units made by the Filer under the Purchase Programs or Redemption Programs are exempt from the issuer bid requirements of the Legislation pursuant to exemptions contained therein.
12. The Filer wishes to resell, in its sole discretion and at its option, through one or more securities dealers and through the facilities of the TSX (or another exchange on which the Class A Units are then listed), the Class A Units repurchased by the Filer pursuant to the Purchase Programs (Repurchased Class A Units), or redeemed pursuant to the Redemption Programs (Redeemed Class A Units).
13. All Repurchased Class A Units or Redeemed Class A Units will be held by the Filer for a period of four months after the repurchase or redemption thereof by the Filer (the Holding Period), prior to any resale.
14. The resale of Repurchased Class A Units or Redeemed Class A Units will not have a significant impact on the market price of the Class A Units.
15. The Filer's constating document requires that any Repurchased Class A Units or Redeemed Class A Units held by the Filer for resale not be resold for less than the applicable repurchase or redemption price paid for such Units by the Filer.
16. Repurchased Class A Units or Redeemed Class A Units that the Filer does not resell within 12 months after the Holding Period (that is, within 16 months after the date of repurchase or redemption, as applicable) will be cancelled by the Filer.
17. During any calendar year, the Filer will not resell an aggregate number of Repurchased Class A Units and Redeemed Class A Units that is greater than 10% of the number of Class A Units outstanding at the beginning of such calendar year.
18. Prospective purchasers of Repurchased Class A Units or Redeemed Class A Units will have access to the Filer's continuous disclosure, which will be filed on SEDAR.
19. The Legislation provides that a trade by or on behalf of an issuer in previously issued securities of that issuer that have been purchased or redeemed by that issuer is a distribution and, as such, is subject to the Prospectus Requirement. In the absence of the Exemption Sought, any sale by the Filer of Repurchased Class A Units or Redeemed Class A Units would be a distribution that is subject to the Prospectus Requirement.
Decision
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided that:
(a) the Repurchased Class A Units and Redeemed Class A Units are otherwise sold by the Filer in compliance with the Legislation through the facilities of and in accordance with the regulations and policies of the TSX or of any other exchange on which the Class A Units are then listed; and
(b) the Filer complies with the conditions of paragraphs 1 through 5 of subsection 2.8(2) of National Instrument 45-102 Resale of Securities with respect to the sale of the Repurchased Class A Units and Redeemed Class A Units.