Guardian Capital LP
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from NI 41-101 to funds offering exchange-traded and conventional mutual fund series under a single simplified prospectus -- subject to conditions -- Technical relief granted from Parts 9, 10 and 14 of NI 81-102 to permit each fund to treat its exchange-traded and conventional mutual fund series as if each such series was a separate fund for the purpose of compliance with Parts 9, 10 and 14 of NI 81-102 -- subject to conditions.
Applicable Legislative Provisions
National Instrument 41-101 -- General Prospectus Requirements, ss. 3.1(2) and 19.1(1).
National Instrument 81-102 -- Investment Funds, Parts 9, 10 and 14 and s. 19.1(1).
July 13, 2023
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 each existing mutual fund managed by the Filer that offers securities under a simplified prospectus in accordance with the provisions of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) (the Existing Funds) and any additional mutual funds established in the future of which the Filer is the manager that may offer an ETF Series (as defined below) under a simplified prospectus in accordance with NI 81-101 (the Future Funds, and together with the Existing Funds, 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 long form prospectus for the ETF Securities (as defined below) in the form prescribed by Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2), subject to the terms of this decision and provided that the Filer files a simplified prospectus for the ETF Securities in accordance with the provisions of NI 81-101, other than the requirements pertaining to the filing of a Fund Facts (as defined below) (the ETF Prospectus Form Requirement); and
(b) permits the Filer and each Fund to treat the ETF Securities and the Mutual Fund Securities (as defined below) 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 Redemptions Requirements)
(collectively, 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 subsection 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 Canadian Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 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 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, NEO or another Marketplace.
ETF Facts means a prescribed summary disclosure document required pursuant to National Instrument 41-101 General Prospectus Requirements, in the form prescribed by Form 41-101F4, in respect of one or more series of ETF Securities being distributed under a prospectus.
ETF Securities means securities of an ETF Series that are listed or will be listed on the TSX, NEO or another Marketplace and that will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
ETF Series means an exchange-traded series of a Fund that is listed or will be listed on the TSX, NEO or other Marketplace and that will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
Form 41-101F4 means Form 41-101F4 Information Required in an ETF Facts Document.
Form 81-101F1 means Form 81-101F1 Contents of Simplified Prospectus.
Form 81-101F3 means Form 81-101F3 Contents of Fund Facts Document.
Fund Facts means a prescribed summary disclosure document required pursuant to NI 81-101 in the form prescribed by Form 81-101F3 in respect of one or more series of Mutual Fund Securities being distributed under a simplified prospectus.
Marketplace means a "marketplace" as defined in National Instrument 21-101 Marketplace Operation that is located in Canada.
Mutual Fund Securities means securities of a non-exchange-traded series of a Fund that are or will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
NEO means the NEO Exchange.
Other Dealer means a registered dealer that acts as authorized dealer or designated broker to exchange-traded funds that are not managed by the Filer.
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.
Prospectus Delivery Requirement means the requirement that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement of the Legislation applies, send or deliver to the purchaser or its agent, unless the dealer has previously done so, the latest prospectus and any amendment either before entering into an agreement of purchase and sale resulting from the order or subscription, or not later than midnight on the second business day after entering into that agreement.
Securityholders means beneficial or 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 located in Toronto, Ontario.
2. The Filer is registered as: (a) a portfolio manager in all of the provinces of Canada; (b) an exempt market dealer in all of the provinces of Canada; (c) an investment fund manager in Ontario, Québec, and Newfoundland and Labrador; (d) commodity trading counsel in Ontario; and (e) 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, NEO or another Marketplace.
4. Neither the Filer nor any of the Existing Funds is in default of securities legislation in any of the Canadian Jurisdictions.
The Funds
5. Each Fund is, or will be, a mutual fund structured as a trust or a corporation or a class thereof that is organized and governed by the laws of a Canadian Jurisdiction. Each Fund is, or will be, a reporting issuer in the Canadian Jurisdiction(s) in which its securities are distributed.
6. Each Fund offers, or will offer, Mutual Fund Securities and ETF Securities.
7. Subject to any exemptions that have been, or may be, granted by the applicable securities regulatory authorities, each Fund is, or will be, an open-ended mutual fund subject to the provisions of NI 81-102. Securityholders will have the right to vote at a meeting of Securityholders in respect of matters prescribed by NI 81-102.
8. The Filer will apply to list the ETF Securities of the Funds on the TSX, NEO or another Marketplace and will not file a final simplified prospectus for any of the Funds in respect of the ETF Securities until the TSX, NEO or other applicable Marketplace has conditionally approved the listing of the ETF Securities.
9. Mutual Fund Securities of the Funds will not be listed on the TSX, NEO or another Marketplace.
10. The Filer has filed or will file a simplified prospectus prepared and filed in accordance with NI 81-101 and Form 81-101F1 on behalf of the Funds in respect of the Mutual Fund Securities, subject to any exemptions that may be granted by the applicable securities regulatory authorities.
11. Mutual Fund Securities may be subscribed for or purchased directly from a Fund through qualified financial advisors or brokers.
12. ETF Securities will be distributed on a continuous basis in one or more of the Jurisdictions under a prospectus.
13. 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, NEO 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, NEO or another Marketplace.
14. In addition to subscribing for and re-selling Creation Units, Authorized Dealers, Designated Brokers and Affiliate Dealers will also generally be 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.
15. Each Designated Broker or Authorized Dealer that subscribes for Creation Units must deliver, in respect of each Prescribed Number of ETF Securities to be issued, a Basket of Securities and/or cash in an amount sufficient so that the value of the Basket of Securities and/or cash delivered is equal to the net asset value of the ETF Securities subscribed for next determined following the receipt of the subscription order. In the discretion of the Filer, the Funds may also accept subscriptions for Creation Units in cash only, in securities other than Baskets of Securities and/or in a combination of cash and securities other than Baskets of Securities, in an amount equal to the net asset value of the ETF Securities subscribed for next determined following the receipt of the subscription order.
16. Upon notice given by the Filer from time to time and, in any event, not more than once quarterly, a Designated Broker may be contractually required to subscribe for Creation Units of a Fund for cash in an amount not to exceed a specified percentage of the net asset value of the Fund or such other amount established by the Filer.
17. The Designated Brokers and Authorized Dealers will not receive any fees or commissions in connection with the issuance of Creation Units to them. On the issuance of Creation Units, the Filer or a Fund may, in the Filer's discretion, charge a fee to a Designated Broker or an Authorized Dealer to offset the expenses incurred in issuing the Creation Units.
18. Each Fund will appoint 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.
19. Except for Authorized Dealer and Designated Broker subscriptions for Creation Units, as described above, and other distributions that are exempt from the Prospectus Delivery Requirement under the Legislation, ETF Securities generally will not be 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, NEO or another Marketplace. ETF Securities may also be issued directly to Securityholders upon a reinvestment of distributions of income or capital gains.
20. 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, NEO 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, as determined 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, NEO or other Marketplace on the date of redemption, subject to a maximum redemption price of the applicable net asset value per ETF Security.
ETF Prospectus Form Requirement
21. The Filer believes it is more efficient and expedient to include all of the series of each Fund, including Mutual Fund Securities and ETF Securities of a Fund, in one prospectus form instead of two different prospectus forms and 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 series of securities to be included in one prospectus. The Filer has already filed a simplified prospectus in respect of the Existing Funds, and proposes to continue to file simplified prospectuses in respect of Future Funds.
22. The Filer will ensure that any additional disclosure included in the simplified prospectus relating to the ETF Securities will not interfere with an investor's ability to differentiate between the Mutual Fund Securities and the ETF Securities and their respective attributes.
23. The Funds will file ETF Facts in the form prescribed by Form 41-101F4 in respect of any ETF Securities, and will continue to file Fund Facts in the form prescribed by Form 81-101F3 in respect of Mutual Fund Securities.
24. The Funds will comply with the provisions of NI 81-101 when filing any amendment or simplified prospectus.
Sales and Redemptions Requirements
25. 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.
26. 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 ETF Prospectus Form Requirement is granted, provided that the Filer will be in compliance with the following conditions:
(a) the Filer files a simplified prospectus in respect of the ETF Securities in accordance with the requirements of NI 81-101and Form 81-101F1, other than the requirements pertaining to the filing of a Fund Facts document;
(b) the Filer includes disclosure required pursuant to Form 41-101F2 (that is not contemplated by Form 81-101F1) in respect of the ETF Securities in a Fund's simplified prospectus; and
(c) the Filer includes disclosure regarding this decision under the heading "Additional Information" and "Exemptions and Approvals" in a Fund's simplified prospectus.
2. The decision of the principal regulator under the Legislation is that the Exemption Sought from the Sales and Redemptions 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.
Application File #: 2023/0293
SEDAR+ File #: 6008716