Goodman & Company, Investment Counsel Ltd.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from self-dealing provisions in s. 4.2 of National Instrument 81-102 -- Mutual Funds to permit interfund trades between mutual funds and pooled funds and between mutual funds and closed-end funds -- inter-fund transfers will comply with conditions in s. 6.1(2) of National Instrument 81-107 - Independent Review Committee for Investment Funds (NI 81-107) including the requirement of independent review committee approval.
Applicable Legislative Provisions
National Instrument 81-102 -- Mutual Funds -- ss. 4.2(1), 4.3(1), 4.3(2), 19.1.
National Instrument 81-107 -- Independent Review Committee for Investment Funds -- s. 6.1(2).
September 12 , 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATION IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
GOODMAN & COMPANY, INVESTMENT COUNSEL LTD.
(the Filer) and the Existing NI 81-102 Funds,
Existing Closed-End Funds and Existing Pooled Funds,
the Future NI 81-102 Funds, Future Closed-End Funds
and Future Pooled Funds, all as defined below.
DECISION
Background
The securities regulatory authority or regulator in Ontario has received an application from the Filer for a decision under the securities legislation of the jurisdiction of the principal regulator (the Legislation) for an exemption from the prohibition in section 4.2(1) of National Instrument 81-102 -- Mutual Funds (NI 81-102) (together, the Exemption Sought) to permit the NI 81-102 Funds (as defined below) to purchase debt securities from or sell debt securities to a Pooled Fund (as defined below) or a Closed-End Fund (as defined below), (each purchase or sale, an Inter-Fund Trade).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(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, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Yukon and Nunavut.
Interpretation
Terms defined in MI 11-102, National Instrument 14-101 Definitions, NI 81-102 and NI 81-107 have the same meaning if used in this decision, unless otherwise defined.
Existing NI 81-102 Fund means each "NI 81-102 Fund" listed in Appendix A being a mutual fund that is a reporting issuer and subject to NI 81-102;
Existing Pooled Fund means each "Pooled Fund" listed in Appendix A being an investment fund that is not a reporting issuer;
Existing Closed-End Fund means each "Closed-End Fund" listed in Appendix A being a reporting issuer that is not a mutual fund and not subject to NI 81-102;
Filer means the Manager;
Funds means the NI 81-102 Funds, the Closed-End Funds and the Pooled Funds;
Future NI 81-102 Fund means each NI 81-102 Fund that may be established by the Manager in the future being a mutual fund that is a reporting issuer and subject to NI 81-102;
Future Pooled Fund means each Pooled Fund that may be established by the Manager in the future being an investment fund that is not a reporting issuer;
Future Closed-End Fund means each Closed-End Fund that may be established by the Manager in the future being a reporting issuer that is not a mutual fund and not subject to NI 81-102;
Inter-Fund Trading Prohibition means section 4.2(1) of NI 81-102;
Manager means Goodman & Company, Investment Counsel Ltd., the manager of the Funds;
NI 81-102 Funds means collectively, the Existing NI 81-102 Funds and the Future NI 81-102 Funds;
Pooled Funds means collectively, the Existing Pooled Funds and the Future Pooled Funds;
Closed-End Funds means collectively, the Existing Closed-End Funds and the Future Closed-End Funds;
Section 4.2(1) Relief means the exemptive relief from section 4.2(1) of NI 81-102, which prohibits an NI 81-102 Fund from engaging in Inter-Fund Trades with a Closed-End Fund and a Pooled Fund to permit NI 81-102 Funds to engage in Inter-Fund Trades with a Closed-End Fund or a Pooled Fund; and
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
1. Each of the Closed-End Funds, the NI 81-102 Funds and the Pooled Funds is or will be established under the laws of the Province of Ontario or of Canada as investment funds that are (a) open-ended mutual fund trusts, (b) open-ended mutual fund corporations, or (c) closed-ended limited partnerships and/or closed-ended trusts.
2. Each of the NI 81-102 Funds are or will be subject to the provisions of NI 81-102. The securities of each of the NI 81-102 Funds and the Closed-End Funds (being the closed-ended limited partnership and/or closed ended trusts) are or will be qualified for distribution pursuant to simplified prospectuses and annual information forms or long form prospectuses, as the case may be, that have been prepared or will be prepared and filed in accordance with the securities legislation of each of the applicable provinces and territories of Canada. The securities of the Pooled Funds are or will be qualified for distribution on a private placement basis pursuant to an offering memorandum, and will not be reporting issuers. The Closed-End Funds are not or will not be subject to NI 81-102.
3. Each of the NI 81-102 Funds and the Closed-End Funds is or will be a reporting issuer in each of the provinces and territories of Canada.
4. The Filer is, or will be, the manager, trustee (where applicable), principal distributor and registrar of the Funds. The Filer and/or sub-advisors, including a related sub-advisor, may be the portfolio manager(s) of the Funds.
5. The Filer is a corporation incorporated under the laws of the Province of Ontario, and holds a registration in the categories of "investment counsel" and "portfolio manager" in Ontario. The Filer also holds a registration in the categories of "investment counsel" and "portfolio manager" or the equivalent in each of Québec, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia and New Brunswick. The head office of the Filer is in Toronto, Ontario.
6. Certain of the Closed-End Funds, the NI 81-102 Funds and the Pooled Funds are "associates" of the Filer.
7. The Filer and each of the Funds are not in default of securities legislation in any jurisdiction of Canada.
8. The Filer is currently compliant with and acting in reliance on NI 81-107 and has established an independent review committee (IRC) for the Existing NI 81-102 Funds and the Existing Closed-End Funds. The Filer will establish an IRC for the Future NI 81-102 Funds and the Future Closed-End Funds and an IRC for the Pooled Funds with respect to Inter-Fund Trades, all in accordance with the requirements of NI 81-107.
9. The mandate of the IRC of a Pooled Fund, among other things, will include approving Inter-Fund Trades between the Pooled Fund and an NI 81-102 Fund or between the Pooled Fund and a Closed-End Fund. The IRC of the Pooled Funds will be composed by the Manager in accordance with the requirements of section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. Further, the IRC of the Pooled Funds will not approve Inter-Fund Trades between a Pooled Fund and a NI 81-102 Fund or between a Pooled Fund and a Closed-End Fund unless it has made the determination set out in section 5.2(2) of NI 81-107.
10. Purchases and sales of securities involving NI 81-102 Funds will be referred to the IRC of the NI 81-102 Funds under section 5.2(1) of NI 81-107 and will be subject to the requirements of section 5.2(2) of NI 81-107.
11. The Filer has established policies and procedures to enable the NI 81-102 Funds or the Closed-End Funds to engage in Inter-Fund Trades, and such policies and procedures will be revised and extended to the Pooled Funds for Inter-Fund Trades.
12. The Filer has determined that it would be in the interests of the NI 81-102 Funds to be able to purchase securities from or sell securities to a Closed-End Fund or to a Pooled Fund. An exemption currently exists in section 4.3(1) of NI 81-102 to permit the NI 81-102 Funds to interfund trade listed equity securities with the Closed-End Funds and/or the Pooled Funds. The NI 81-102 Funds, however, are unable to rely upon the exemption from section 4.2(1) of NI 81-102 for inter-fund trades in debt securities codified in subsection 4.3(2) of NI 81-102 because it would only apply where funds on both sides of the interfund trade are mutual funds governed by NI 81-107. The Pooled Funds are not subject to NI 81-107 and the Closed-End Funds, although subject to NI 81-107, are not mutual funds. The NI 81-102 Funds are also unable to rely on the exemption in section 4.3(1) of NI 81-102 because debt securities are typically not subject to public quotations as required by section 4.3(1) of NI 81-102.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the following conditions are satisfied for Inter-Fund Trades:
(a) the IRC of the NI 81-102 Fund has approved the transaction in respect of the NI 81-102 Fund under section 5.2 of NI 81-107;
(b) the IRC of the Closed-End Fund or the Pooled Fund has approved the transaction in respect of the Closed-End Fund or Pooled Fund under section 5.2 of NI 81-107; and
(c) the transaction complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.
Appendix A
NI 81-102 FUNDS
DYNAMIC FUNDS
MARQUIS INVESTMENT PROGRAM
RADIANT STRATEGIC PORTFOLIOS
CLOSED-END FUNDS
DIVERSIFUNDS
CDR FUNDS
CMP FUNDS
DPF INDIA OPPORTUNITIES FUND
POOLED FUNDS