Goodman & Company, Investment Counsel Ltd.
Headnote
NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Coordinated Review -- The relief provides an exemption, pursuant to section 233 of Regulation 1015 (the Regulation) made under the Securities Act (Ontario) from the prohibition in section 227(2)(b)(ii) of the Regulation. The prohibition prevents a registrant, when acting as a portfolio manager with discretionary authority, from providing advice with respect to a client's account to purchase and/or sell the securities of a related issuer or a connected issuer of the registrant, unless the registrant (i) secures the specific and informed written consent of the client once in each twelve month period and (ii) provides the client with its statement of policies.
Statutes Cited
Regulation 1015 made under the Securities Act (Ontario), ss. 227(2)(b)(ii), 233.
August 5, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, NEW BRUNSWICK, NOVA SCOTIA AND
NEWFOUNDLAND AND LABRADOR
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
GOODMAN & COMPANY,
INVESTMENT COUNSEL LTD.
(the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the prohibition that a registrant shall not act as an adviser in respect of securities of the registrant or of a related issuer of the registrant or, in the course of a distribution, in respect of securities of a connected issuer of the registrant (the Related/Connected Issuer Prohibition) unless, before acquiring discretionary authority and once within each twelve month period thereafter, (i) a statement of policies of the registrant is provided to the client (the Statement of Policies Requirement), and (ii) the specific and informed written consent of the client to invest in related or connected issuers of the registrant has been obtained (the Annual Consent Requirement) in the case of the Filer acting as a portfolio manager where the Filer purchases or sells, under its discretionary authority in connection with its managed account programs, securities of The Bank of Nova Scotia (Scotiabank) for the client's managed account (the Exemptive Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):
(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application, and
(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.
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 Filer:
1. The Filer is a corporation incorporated under the laws of the Province of Ontario. The head office of the Filer is located in Toronto, Ontario.
2. The Filer is registered under the Securities Act (Ontario) (the Act) as an adviser in the categories of investment counsel and portfolio manager, and is also registered in equivalent categories in British Columbia, Alberta, Manitoba, Québec, New Brunswick and Nova Scotia.
3. The Filer is not in default of securities legislation in any Jurisdiction.
4. Goodman Private Wealth Management (GPWM), the investment counsel division of the Filer, offers investment management services to institutional and high net worth clients.
5. Clients whose investments are managed by GPWM (each a Client) will enter into an investment management agreement (the Investment Management Agreement) with GPWM that authorizes GPWM to manage their investments on a discretionary basis.
6. The Investment Management Agreement authorizes the Filer to exercise discretion in managing the Client's investments by investing in a variety of securities, and such securities may include securities of Scotiabank. Under the Investment Management Agreement, clients have the ability to set constraints regarding the securities that may or may not be purchased for the client's account.
7. The Related/Connected Issuer Prohibition prohibits a registrant, such as the Filer, from acting as an adviser of securities of the registrant, or of a related issuer of the registrant, or in the course of a distribution in respect of securities of a connected issuer of the registrant.
8. The Annual Consent Requirement and the Statement of Policies Requirement, to the extent applicable, exempts a registrant from the Related/Connected Issuer Prohibition.
9. The Filer is an indirect wholly-owned subsidiary of DundeeWealth Inc. (DundeeWealth), a corporation incorporated under the laws of Ontario with securities listed for trading on the TSX. Dundee Corporation, a corporation existing under the laws of Ontario with securities listed for trading on the TSX, owns approximately 60% of the voting securities in DundeeWealth.
10. Scotiabank is a related issuer to the Filer by virtue of the fact that, for so long as Scoitabank holds Series F shares (non-voting shares), it shall be entitled to nominate three members to the Board of DundeeWealth, representing 25% of the Board. Scotiabank holds approximately 18.6% voting interest in DundeeWealth. Further, pursuant to a shareholder agreement dated September 28, 2007 with Dundee Corporation, so long as Scotiabank holds a minimum of 10% of the voting shares of DundeeWealth, it has the right to nominate two members to the Board of DundeeWealth. In addition, so long as Scotiabank holds Series F shares in the capital of DundeeWealth it is entitled to propose one additional nominee to the Board of DundeeWealth. Scotiabank is currently a holder of Series F shares.
11. As a result of this relationship, the Filer is prohibited from acting as an adviser in respect of securities of Scotiabank for Clients, unless the Filer complies with the Annual Consent Requirement and the Statement of Policies Requirement. Clients thereby may be prevented from investing in securities of Scotiabank, even where the inclusion of these securities would be in the best interests of the Client.
12. All Clients of GPWM will receive a statement of policies when they enter into an Investment Management Agreement that lists the related and connected issuers of the Filer, including Scotiabank. In the event of a significant change in its statement of policies, GPWM will provide to each Client a copy of the revised version of, or amendment to, its statement of policies.
13. The Filer will disclose, in writing, to each of its Clients who enters into an Investment Management Agreement, the relationship between the Filer, GPWM and Scotiabank.
14. Under the Investment Management Agreement, Clients will specifically authorize the Filer to invest in securities of Scotiabank.
Decision
Each of the Decision Makers 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 Makers under the Legislation is that the Exemptive Relief Sought is granted to the Filer provided that:
(a) GPWM has secured the specific and informed written consent of the Client in advance of the exercise of discretionary authority on behalf of the Client in respect of securities of Scotiabank;
(b) GPWM has previously provided its Clients with a statement of policies of the Filer which identifies the relationship between the Filer, GPWM and Scotiabank and, in the event of a significant change in the statement of policies, will provide to each of its Clients a copy of the revised version of, or amendment to, such statement of policies; and
(c) all investment decisions of the Filer to invest in securities of Scotiabank are uninfluenced by considerations other than the best interest of the Client.