Guardian Capital LP
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted to facilitate the offering of securities of a conventional mutual fund class and securities of an exchange-traded fund class within the same fund structure -- conventional mutual fund class and exchange-traded fund class referable to the same portfolio and have substantially identical disclosure -- relief granted from the requirement in NI 81-101 to prepare and file a simplified prospectus for conventional mutual fund class securities provided that a long form prospectus is prepared and filed in accordance with NI 41-101 -- disclosure required by NI 81-101 for conventional mutual fund class securities and not contemplated by NI 41-101 will be disclosed in long form prospectus under relevant headings -- technical relief granted to enable the funds to comply with Parts 9, 10 and 14 of NI 81-102 as if the conventional mutual fund class and exchange-traded fund class were separate funds.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 6.1.
National Instrument 81-102 Investment Funds, Parts 9, 10 and 14 and s. 19.1.
National Instrument 41-101 General Prospectus Requirements.
January 19, 2021
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 GUARDIAN CAPITAL LP (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the fund listed in Schedule A (the Proposed Fund), which will offer exchange traded mutual fund units and conventional mutual fund units, and such other mutual funds as are managed or may be managed by the Filer now or in the future and that are structured in the same manner as the Proposed Fund (together with the Proposed Fund, the Funds and each individually, a Fund), for a decision under the securities legislation of the Jurisdiction (the Legislation) that
(a) exempts the Filer and each Fund from the requirement to prepare and file a simplified prospectus and annual information form for the Mutual Fund Securities (as defined below) in accordance with the provisions of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) and the forms prescribed by Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1) (the Simplified Prospectus Form Requirements) and Form 81-101F2 Contents of Annual Information Form (Form 81-101F2), subject to the terms of this decision and provided that the Filer files a prospectus for the Mutual Fund Securities in accordance with the provisions of National Instrument 41-101 General Prospectus Requirements (NI 41-101), other than the requirements pertaining to the filing of an ETF Facts, and in the form prescribed by Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2); and
(b) permits the Filer and each Fund to treat the ETF Securities and the Mutual Fund Securities as if such securities were separate funds in connection with their compliance with the provisions of Parts 9, 10 and 14 of National Instrument 81-102 Investment Funds (NI 81-102) (the Sales and Redemption Requirements),
(collectively, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
1. the Ontario Securities Commission is the principal regulator for this application; and
2. 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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and National Instrument 81-102 Investment Funds (NI 81-102) have the same meaning if used in this decision, unless otherwise defined.
Affiliate Dealer means a registered dealer that is an affiliate of an Authorized Dealer or Designated Broker and that participates in the re-sale of Creation Units (as defined below) from time to time.
Authorized Dealer means a registered dealer that has entered, or intends to enter, into an agreement with the manager of a Fund authorizing the dealer to subscribe for, purchase and redeem Creation Units from one or more Funds on a continuous basis from time to time.
Basket of Securities means, in relation to a Fund, a group of securities or assets representing the constituents of the Fund.
Designated Broker means a registered dealer that has entered, or intends to enter, into an agreement with the Filer or an affiliate of the Filer to perform certain duties in relation to the ETF Securities, including the posting of a liquid two-way market for the trading of the Fund's ETF Securities on the TSX or another Marketplace.
ETF Facts means a prescribed summary disclosure document required pursuant to National Instrument 41-101 General Prospectus Requirements, in respect of one or more classes of ETF Securities being distributed under a prospectus.
ETF Securities means securities of an ETF class of a Fund that are listed or will be listed on the TSX or another Marketplace and that will be distributed pursuant to a prospectus prepared in accordance with NI 41-101 and Form 41-101F2.
NI 41-101 means National Instrument 41-101 General Prospectus Requirements.
Form 81-101F1 means Form 81-101F1 Contents of Simplified Prospectus.
Form 81-101F2 means Form 81-101F2 Contents of Annual Information Form.
Fund Facts means a prescribed summary disclosure document required pursuant to NI 81-101, in respect of one or more classes of Mutual Fund Securities being distributed under a prospectus.
Marketplace means a "marketplace" as defined in National Instrument 21-101 Marketplace Operation that is located in Canada.
Mutual Fund Securities means, subject to obtaining the Exemption Sought, securities of a non-exchange-traded class of a Fund that are or will be distributed pursuant to a prospectus prepared in accordance with NI 41-101 and Form 41-101F2.
Prescribed Number of ETF Securities means, in relation to a Fund, the number of ETF Securities of the Fund determined by the Filer from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.
Securityholders means beneficial and registered holders of ETF Securities or Mutual Fund Securities, as applicable.
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is an Ontario limited partnership, which is wholly-owned by Guardian Capital Group Limited. The general partner of the Filer is Guardian Capital Inc., an Ontario corporation wholly-owned by Guardian Capital Group Limited, with its head office in Toronto, Ontario.
2. The Filer is registered as: (i) a portfolio manager in all of the provinces of Canada; (ii) an exempt market dealer in all of the provinces of Canada; (iii) an investment fund manager in Ontario, Québec and Newfoundland and Labrador; (iv) commodity trading counsel in Ontario; and (v) a commodity trading manager in Ontario.
3. The Filer is, or will be, the investment fund manager and portfolio manager of the Funds. The Filer has applied, or will apply, to list the ETF Securities on the TSX or another Marketplace.
4. The Filer is not in default of securities legislation in any of the Jurisdictions.
The Funds
5. The Proposed Fund will be a mutual fund structured as a trust that is governed by the laws of the Province of Ontario. The Funds are or will be either trusts or corporations or classes thereof governed by the laws of a Jurisdiction. Each Fund will be a reporting issuer in the Jurisdiction(s) in which its securities are distributed.
6. Each Fund will offer ETF Securities and Mutual Fund Securities under separate classes of the Fund that are referable to the same portfolio of assets.
7. Subject to any exemptions that have been or may be granted by the applicable securities regulatory authorities, each Fund will be an open-ended mutual fund subject to NI 81-102.
8. The ETF Securities will be listed on the TSX or another Marketplace. The Filer will not file a final prospectus for any of the Funds in respect of the ETF Securities until the TSX or other applicable Marketplace has conditionally approved the listing of the ETF Securities.
9. Mutual Fund Securities will not be listed on the TSX or another Marketplace.
10. The Filer has or will file a long form prospectus prepared and filed in accordance with NI 41-101 and Form 41-101F2 on behalf of the Funds in respect of the ETF Securities, subject to any exemptions that may be granted by the applicable securities regulatory authorities.
11. ETF Securities and Mutual Fund Securities, if any, are or will be distributed on a continuous basis in one or more of the Jurisdictions under a prospectus.
12. ETF Securities may generally only be subscribed for or purchased directly from the Funds (Creation Units) by Authorized Dealers or Designated Brokers. Generally, subscriptions or purchases may only be placed for a Prescribed Number of ETF Securities (or a multiple thereof) on any day when there is a trading session on the TSX or other Marketplace. Authorized Dealers or Designated Brokers subscribe for Creation Units for the purpose of facilitating investor purchases of ETF Securities on the TSX or another Marketplace.
13. In addition to subscribing for and re-selling Creation Units, Authorized Dealers, Designated Brokers and Affiliate Dealers are also generally engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market. Other dealers may also be engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market despite not being an Authorized Dealer, Designated Broker or Affiliate Dealer.
14. Each Fund will appoint, at any given time, a Designated Broker to perform certain other functions, which include standing in the market with a bid and ask price for ETF Securities for the purpose of maintaining liquidity for the ETF Securities.
15. Except for Authorized Dealer and Designated Broker subscriptions for Creation Units, as described above, ETF Securities generally are not able to be purchased directly from a Fund. Investors are generally expected to purchase and sell ETF Securities, directly or indirectly, through dealers executing trades through the facilities of the TSX or another Marketplace. ETF Securities may also be issued directly to Securityholders upon a reinvestment of distributions of income or capital gains.
16. Securityholders that are not Designated Brokers or Authorized Dealers that wish to dispose of their ETF Securities may generally do so by selling their ETF Securities on the TSX or other Marketplace, through a registered dealer, subject only to customary brokerage commissions. A Securityholder that holds a Prescribed Number of ETF Securities or multiple thereof may exchange such ETF Securities for Baskets of Securities and/or cash in the discretion of the Filer. Securityholders may also redeem ETF Securities for cash at a redemption price equal to 95% of the closing price of the ETF Securities on the TSX or other Marketplace on the date of redemption, subject to a maximum redemption price of the applicable net asset value per ETF Security.
17. Mutual Fund Securities may be subscribed for or redeemed directly from a Fund through qualified financial advisors or brokers.
Simplified Prospectus Form Requirements
18. Without the Exemption Sought, the Filer would be required to prepare and file a prospectus pursuant to NI 81-101 in respect of the Funds' Mutual Fund Securities. This would be in addition to the prospectus that would need to be filed and prepared pursuant to NI 41-101 in respect of the Funds' ETF Securities.
19. The Filer believes it is more efficient and expedient to include all of the classes of each Fund, including ETF Securities and Mutual Fund Securities of a Fund, in one prospectus form instead of two different prospectus forms. The Filer also believes that this presentation will assist in providing full, true and plain disclosure of all material facts relating to the securities of the Funds by permitting disclosure relating to all classes of securities to be included in one prospectus. The Filer will file a long form prospectus in respect of the Proposed Fund, and proposes to continue to file long form prospectuses in respect of Funds.
20. The Filer will ensure that any additional disclosure included in the prospectus relating to the Mutual Fund Securities will not interfere with an investor's ability to differentiate between the Mutual Fund Securities and the ETF Securities and their respective attributes.
21. The Funds will file Fund Facts in the form prescribed by Form 81-101F3 Contents of Fund Facts Document in respect of any Mutual Fund Securities, and will file ETF Facts in the form prescribed by Form 41-101F4 Information Required in an ETF Facts Document in respect of any ETF Securities.
22. The Funds will comply with the provisions of NI 41-101 when filing any amendment or prospectus.
23. The Mutual Fund Securities of each Fund will be subject to the prospectus and Fund Facts delivery obligations set out in NI 81-101.
Sales and Redemption Requirements
24. Parts 9, 10 and 14 of NI 81-102 do not contemplate both Mutual Fund Securities and ETF Securities being offered in a single fund structure. Accordingly, without the Exemption Sought from the Sales and Redemption Requirements, the Filer and the Funds would not be able to technically comply with those parts of the Instrument.
25. The Exemption Sought from the Sales and Redemption Requirements will permit the Filer and the Funds to treat the ETF Securities and the Mutual Fund Securities as if such securities were separate funds in connection with their compliance with Parts 9, 10 and 14 of NI 81-102. The Exemption Sought from the Sales and Redemption Requirements will enable each of the ETF Securities and Mutual Fund Securities to comply with Parts 9, 10 and 14 of NI 81-102 as appropriate for the type of security being offered.
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.
1. The decision of the principal regulator is that the Exemption Sought from the Simplified Prospectus Form Requirements is granted, provided that the Filer will be in compliance with the following conditions:
(a) the Filer files a long form prospectus in respect of the Mutual Fund Securities in accordance with the requirements of NI 41-101 and Form 41-101F2, other than the requirements pertaining to the filing of an ETF Facts document;
(b) the Filer includes disclosure required pursuant to Form 81-101F1 and Form 81-101F2 (that is not contemplated by NI 41-101F2) in respect of the Mutual Fund Securities in each Fund's prospectus, as applicable; and
(c) the Filer includes disclosure regarding this decision under the heading "Exemptions and Approvals" in each Fund's prospectus.
2. The decision of the principal regulator is that the Exemption Sought from the Sales and Redemption Requirements is granted, provided that the Filer will be in compliance with the following conditions:
(a) with respect to its Mutual Fund Securities, each Fund complies with the provisions of Parts 9, 10 and 14 of NI 81-102 that apply to mutual funds that are not exchange-traded mutual funds; and
(b) with respect to its ETF Securities, each Fund complies with the provisions of Parts 9 and 10 of NI 81-102 that apply to exchange-traded mutual funds.
"Darren McKall"
Manager, Investment Funds & Structured Products Branch
Ontario Securities Commission
SCHEDULE A
PROPOSED FUND
Guardian Canadian Sector Controlled Equity Fund