Finaix Corp. and Desautels Capital Management Inc.

Decision

Headnote

Under paragraph 4.1(1) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual acts as an officer, partner or director of another firm registered in any jurisdiction of Canada that is not an affiliate of the first-mentioned registered firm or if the individual is registered as a dealing, advising or associate advising representative of another firm registered in any jurisdiction of Canada. The individual will have sufficient time to adequately serve both firms. Conflicts of interest could arise, but the firms will address material conflicts of interest in the best interest of clients. The firms have policies and procedures in place to address material conflicts of interest that may arise as a result of the dual registration in the best interest of clients. The firms are exempted from the prohibition.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1 and 15.1.

COURTESY TRANSLATION

December 03, 2024

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the "Jurisdictions")

and

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF FINAIX CORP.
("FINAIX")
AND
DESAUTELS CAPITAL MANAGEMENT INC.
("DCM")
(collectively, the "Filers")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions ("Decision Maker") has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the "Legislation"), pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103"), for an exemption from the restrictions in paragraph 4.1(1) of NI 31-103 to permit Mr. Vadim di Pietro (the "Representative") to be registered as advising representative of FINAIX while also acting as an officer, advising representative and dealing representative of DCM (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in multiple jurisdictions (for a dual application):

a. the Autorité des Marchés Financiers is the principal regulator for this application;

b. the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

FINAIX

1. FINAIX is incorporated under the Canada Business Corporations Act. Its head office is located at 4590, boulevard Saint-Laurent, Montréal (Québec) H2T 1R3.

2. FINAIX has applied for registration in the category of portfolio manager in Québec.

3. FINAIX will provide discretionary investment management services primarily to accredited investors and high net worth individuals utilizing a quantitative fundamental investment strategy.

4. FINAIX is not in default of any requirements of securities legislation in any jurisdiction of Canada.

DCM

5. DCM is incorporated under the Business Corporations Act (Québec). Its head office is located at 1595, boulevard Daniel-Johnson, bureau 300, Laval (Québec) H7V 4C2. DCM is a wholly owned subsidiary of McGill University ("McGill").

6. DCM is registered as an exempt market dealer and investment fund manager in Ontario and Québec. It is also registered as a portfolio manager in Québec.

7. DCM is a university-owned, student-run registered investment management firm that was established to provide McGill students with real-world experience managing investment funds. All students enrolled in McGill's Honours Investment Management and Masters of Management in Finance programs work as analysts for DCM.

8. DCM manages four proprietary funds with approximately $7.5 million in assets utilizing a traditional fundamental investment strategy.

9. DCM provides services only to the McGill Endowment fund and McGill alumni (accredited investors), who seek to support student experiential learning at McGill. Its investor base has remained stable since inception.

10. DCM is not in default of any requirements of securities legislation in any jurisdiction of Canada.

FINAIX and DCM

11. The Filers are each independently owned and are not affiliates of one another.

12. The principal regulator of both Filers is the AMF.

Dual Registration

13. The Representative is an Associate Professor of Finance at McGill. He provides specialized teaching and student training in portfolio management, oversees the students' work and approves all trades.

14. The Representative is currently registered as Chief Compliance Officer ("CCO"), Advising Representative (Portfolio Manager) and Dealing Representative (Exempt Market Dealer) of DCM.

15. If the Exemption Sought is granted, the Representative will also be registered as Advising Representative of FINAIX.

16. The Representative also intends to submit an application to become the CCO of FINAIX.

17. The Representative is not in default of any requirements of securities legislation in any jurisdiction of Canada.

18. DCM employs traditional fundamental analysis, which is more long-term and rooted in educational purposes rather than immediate actionable investment strategies. DCM manages 3 long-only equity funds that invest in equities and equity ETFs. DCM also manages a long-only Fixed Income fund that invests in corporate and government bonds as well as bond ETFs. All four funds focus mainly on the Canadian and US markets but are permitted to invest in other countries as well.

19. The Representative's responsibilities at DCM align closely with his specialized teaching and student training activities, which are integral components of his role as an Associate Professor of Finance at McGill. Both positions involve imparting practical investment knowledge and fostering hands-on learning experiences for students.

20. FINAIX will provide comprehensive portfolio management services akin to those offered by traditional asset management firms. It will employ a quantitative fundamental strategy based on proprietary quantitative models.

21. Unlike DCM, which prioritizes experiential learning and fundamental analysis, FINAIX targets clients seeking substantial investment returns rather than donors supporting educational initiatives. FINAIX is dedicated to delivering superior investment outcomes with a focus on sustainable, long-term growth strategies tailored to meet the financial goals of its clientele. FINAIX will offer portfolio management through Segregated Managed Accounts (SMAs). FINAIX's focus will be on absolute return strategies, designed to generate positive returns regardless of market conditions.

22. The potential for conflicts of interest or client confusion due to the dual registration of the Representative is mitigated by DCM and FINAIX having distinct business objectives, investment approaches and client bases.

23. The Representative will have sufficient time and resources to adequately meet his obligations to each of FINAIX and DCM.

24. Each Filer's respective Ultimate Designated Person ("UDP") will ensure that the Representative has sufficient time and resources to adequately serve each Filer and its clients.

25. The Filers have in place policies and procedures to address any material conflicts of interest that may arise as a result of the dual registration of the Representative in the best interest of clients.

26. The Representative will be subject to supervision by, and the applicable compliance requirements of, both Filers.

27. Each of the Filers will have compliance and supervisory policies and procedures in place to monitor the conduct of its registered individuals, including the Representative, and to ensure each Filer addresses any material conflicts of interest in the best interests of clients.

28. The relationship between the Filers and the fact that the Representative is dually registered with both Filers will be fully disclosed in writing to clients and prospective clients of each Filer that deal with the Representative.

29. In the absence of the Exemption Sought, the Filers would be prohibited under paragraph 4.1(1) of NI 31-103 from permitting the Representative to be registered as an advising representative of FINAIX while also acting as an officer, advising representative and dealing representative of DCM.

30. The Representative will act in the best interest of all clients of each Filer and will deal fairly, honestly and in good faith with clients of each Filer.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

The Representative is subject to supervision by, and the applicable compliance requirements of, both Filers;

i. The UDP of each Filer ensures that the Representative has sufficient time and resources to adequately service each Filer and its respective clients;

ii. The Filers each have adequate policies and procedures in place to address material conflicts of interest that may arise as a result of the dual registration of the Representative, in the best interest of clients;

iii. The relationship between the Filers and the fact that the Representative is dually registered with both of them is fully disclosed in writing to clients and prospective clients of each of them that deal with the Representative;

iv. The Filers will maintain distinct business objectives as described herein;

v. The Filers will maintain distinct client bases as described herein;

vi. The Filers will continue to use distinct investment approaches as described herein;

vii. The Exemption Sought expires on the earlier of the date on which FINAIX hires another advising representative or three years from the date hereof.

French version signed by:

"Kim Lachapelle"
Superintendent, Client Services and Financial Education
Autorité des marchés financiers

OSC File #: 2024/0295