Managers of Mutual Funds Listed on Schedule A and Assante Capital Management Ltd.
Headnote
National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirement in s.3.2(2), NI 81-101 to deliver a fund facts document to investors for subsequent purchases of mutual fund securities made pursuant to pre-authorized investment plans, subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 3.2(2), 6.1.
June 11, 2014
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 THOSE MANAGERS OF MUTUAL FUNDS LISTED ON SCHEDULE A (THE FILERS) AND IN THE MATTER OF ASSANTE CAPITAL MANAGEMENT LTD. (THE REPRESENTATIVE DEALER)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers on behalf of the mutual funds that are or will be managed from time to time by such Filers or by an affiliate or successor of such Filers (the Funds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the requirement in the Legislation to send or deliver the most recently filed fund facts document (Fund Facts) at the same time and in the same manner as otherwise required for the prospectus (the Fund Facts Delivery Requirement), not apply in respect of purchases of securities of the Funds pursuant to a pre-authorized investment plan, including employee purchase plans, capital accumulation plans, or any other contracts or arrangements for the purchase of a specified amount on a dollar or percentage basis of securities of the Funds on a regularly scheduled basis (each an Investment Plan) (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 Filers have 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, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (together with Ontario, the 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.
Ontario-based Filer means those Filers listed in Schedule A whose head office is located in Ontario.
Québec-based Filer means those Filers listed in Schedule A whose head office is located in Québec.
Representations
This decision is based on the following facts represented by the Filers:
1. The head office of each Ontario-based Filer is located in Ontario.
2. The head office of each Québec-based Filer is located in Québec. For the Québec-based Filers, the exemption is not being sought in Québec and, as a result, each Québec-based Filer has determined that Ontario is the jurisdiction where the Québec-based Filer has the most significant connection because either the Filer has operations in Ontario or because Ontario is the Jurisdiction with the most securityholders in the Québec-based Filer's Funds (after Québec).
3. The Funds are, or will be, reporting issuers in one or more of the Jurisdictions. Securities of the Funds are, or will be, qualified for sale on a continuous basis pursuant to a simplified prospectus.
4. None of the Filers or any of the Funds are in default of any of the requirements of securities legislation in any Jurisdiction.
5. Securities of each Fund are, or will be, distributed through dealers which may or may not be affiliated with the applicable Filer that is the manager of the Fund (individually, each dealer that distributes securities of a Fund managed by the Filers is a Dealer and collectively, the Dealers).
6. Each Dealer is, or will be, registered as a dealer in one or more of the Jurisdictions.
7. Securities of the existing Funds may be purchased through the Representative Dealer, other than securities of certain Funds of a Filer and/or certain series or classes of the Funds which are distributed exclusively through a Filer in reliance upon its dealer registration or exemption from dealer registration, through a Dealer affiliated with a Filer, through a non-affiliated Dealer that acts as principal distributor, through a Dealer that is affiliated with the purchaser, or through an affiliate of a Filer that is a financial institution distributing securities in reliance upon an exemption from dealer registration.
8. Each of the investors may be offered the opportunity to invest in a Fund on a regular or periodic basis pursuant to an Investment Plan.
9. Under the terms of an Investment Plan, an investor instructs a Dealer to accept additional contributions on a pre-determined frequency and/or periodic basis and to apply such contributions on each scheduled investment date to additional investments in specified Funds. The investor authorizes a Dealer to debit a specified account or otherwise makes funds available in the amount of the additional contributions. An investor may terminate the instructions, or give amended instructions, at any time.
10. Currently, an investor who establishes an Investment Plan (a Participant) receives a copy of the latest simplified prospectus (or Fund Facts) relating to the relevant securities of the Fund at the time an Investment Plan is established.
11. An agreement of purchase and sale of mutual fund securities is not binding on the purchaser if a Dealer receives notice of the intention of the purchaser not to be bound by the agreement of purchase and sale within a specified time period.
12. The terms of an Investment Plan are such that a Participant can terminate the instructions to the Dealer at any time. Therefore, there is no agreement of purchase and sale until a scheduled investment date arrives and the instructions have not been terminated. At this point, the securities are purchased.
13. Pursuant to the prospectus delivery requirement in the Legislation (the Prospectus Delivery Requirement), a Dealer not acting as agent of the purchaser, who receives an order or subscription for a security of a Fund offered in a distribution to which the Legislation applies, must, unless it has previously done so, send to the purchaser the latest simplified prospectus and any amendment to the simplified prospectus filed either before entering into an agreement of purchase and sale resulting from the order or subscription or not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after entering into such agreement.
14. Currently, the Prospectus Delivery Requirement obligates a Dealer not acting as agent for the applicable investor to send or deliver to all Participants who purchase securities of the Funds pursuant to an Investment Plan, the latest simplified prospectus of the applicable Funds at the time the investor enters into the Investment Plan and thereafter, any subsequent simplified prospectus or amendment thereto (a Renewal Prospectus).
15. With the implementation of the amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) and consequential amendments as described in Stage 2 of Point of Sale Disclosure for Mutual Funds -- Delivery of Fund Facts (Stage 2 POS), Dealers must deliver the Fund Facts in lieu of delivering the simplified prospectus to all investors, including the Participants, pursuant to the Fund Facts Delivery Requirement, effective June 13, 2014.
16. Pursuant to the Fund Facts Delivery Requirement, a Dealer not acting as agent of the purchaser, who receives an order or subscription for a security of a Fund offered in a distribution to which the Legislation applies, must, unless it has previously done so, send to the purchaser the Fund Facts most recently filed either before entering into an agreement of purchase and sale resulting from the order or subscription or not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after entering into such agreement.
17. Each Filer has obtained exemptive relief (PAC Relief) (pursuant to the decision document listed opposite each Filer's name in Schedule A) from the Prospectus Delivery Requirement to deliver the Renewal Prospectus of the Funds to Participants in an Investment Plan unless the Participant asks to receive them.
18. The PAC Relief for each Filer terminates one year after the publication in final form of any legislation or rule dealing with the Prospectus Delivery Requirement (the Sunset Clause).
19. As a result of the publication of Stage 2 POS on June 13, 2013, the PAC Relief will terminate on June 13, 2014, pursuant to the Sunset Clause.
20. The proposed amendments to NI 81-101 and consequential amendments as described in Stage 3 of the Point of Sale Disclosure for Mutual Funds -- Point of Sale Delivery of Fund Facts, and published for comment on March 26, 2014, contemplate an exception from the Fund Facts Delivery Requirement for Investment Plans (Proposed Exception).
21. Until the Canadian Securities Administrators publish final amendments to implement the Proposed Exception, the Filers would like the Investment Plans to continue to operate in the same manner and using the same process as the existing regime under the PAC Relief with the exception of the delivery of a Fund Facts to a Participant instead of a simplified prospectus.
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:
1. A one-time notice is sent or delivered to current Participants, no later than the next scheduled annual reminder notice required by the Filer's current PAC Relief, in lieu of receiving a Fund Facts for any purchase of securities of the Funds made on or after June 13, 2014 under the Investment Plan, advising the current Participants:
(a) that they will not receive the Fund Facts when they purchase securities of the applicable Fund under the Investment Plan unless
(i) the Participant requests the Fund Facts; or
(ii) the Participant has previously instructed that they want to receive the simplified prospectus, in which case, the Fund Facts will now be sent or delivered in lieu of the simplified prospectus;
(b) that they may request the most recently filed Fund Facts by calling a specified toll-free number or by sending a request via mail or e-mail to a specified address or email address;
(c) that the most recently filed Fund Facts will be sent or delivered to any Participant that requests it at no cost to the Participant;
(d) that the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(e) that they will not have the right to withdraw from an agreement of purchase and sale (a Withdrawal Right) in respect of a purchase of securities of any Funds made pursuant to an Investment Plan, but they will have the right of action for damages or rescission in the event any Fund Facts or document incorporated by reference into any Renewal Prospectus contains a misrepresentation (a Misrepresentation Right), whether or not they request the Fund Facts; and
(f) that they will continue to have the right to terminate the Investment Plan at any time before a scheduled investment date.
2. Investors who become Participants and invest in any Funds on or after June 13, 2014 will be sent or delivered the most recently filed Fund Facts and a one-time notice advising the Participants:
(a) that they will not receive the Fund Facts when they subsequently purchase securities of the applicable Fund under the Investment Plan unless they request the Fund Facts at the time they initially invest in an Investment Plan or subsequently request the Fund Facts by calling a specified toll-free number or by sending a request via mail or e-mail to a specified address or email address;
(b) that the most recently filed Fund Facts will be sent or delivered to any Participant that requests it at no cost to the Participant;
(c) that the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(d) that they will not have a Withdrawal Right in respect of a purchase made pursuant to an Investment Plan, other than in respect of the initial purchase and sale, but they will have a Misrepresentation Right, whether or not they request the Fund Facts; and
(e) that they have the right to terminate an Investment Plan at any time before a scheduled investment date.
3. Following either 1 or 2 above, Participants will be advised annually in writing as to how they can request the Fund Facts and that they have a Misrepresentation Right.
The decision, as it relates to a Jurisdiction, will terminate on the effective date following any applicable transition period for any legislation or rule dealing with the Proposed Exception.
SCHEDULE A
LIST OF FUND MANAGERS AND DATE OF EXISTING PAC RELIEF
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Name of Fund Manager (Filer) |
Location of Head Office |
Date of Existing PAC Relief |
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1. |
AGF Investments Inc. (formerly AGF Funds Inc.) |
Toronto, Ontario |
March 12, 2004 |
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2. |
BMO Investments Inc. |
Toronto, Ontario |
March 12, 2004 |
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3. |
CI Investments Inc. (formerly CI Mutual Funds Inc.) |
Toronto, Ontario |
March 12, 2004 |
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4. |
Canadian Imperial Bank of Commerce CIBC Asset Management Inc. |
Toronto, Ontario |
March 12, 2004 |
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5. |
Counsel Portfolio Services Inc. (formerly Counsel Group of Funds Inc.) |
Mississauga, Ontario |
March 12, 2004 |
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6. |
Fidelity Investments Canada ULC (formerly Fidelity Investments Canada Limited) |
Toronto, Ontario |
March 12, 2004 |
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7. |
Franklin Templeton Investments Corp. |
Toronto, Ontario |
March 12, 2004 |
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8. |
IA Clarington Investments Inc.{1} |
Quebec City, Quebec |
May 19, 2004 |
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9. |
Invesco Canada Ltd. (formerly AIM Funds Management Inc.) |
Toronto, Ontario |
March 12, 2004 |
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10 |
Mackenzie Financial Corporation |
Toronto, Ontario |
March 12, 2004 |
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11. |
Manulife Asset Management Limited (formerly Elliot & Page Limited) |
Toronto, Ontario |
July 13, 2010 |
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12. |
National Bank Investments Inc. (formerly, National Bank Securities Inc.){1} |
Montreal, Québec |
March 12, 2004 |
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13. |
Northwest & Ethical Investments L.P. (formed by a transaction combining the fund management activities of Northwest Mutual Funds Inc. and Ethical Funds Inc.) |
Toronto, Ontario |
March 12, 2004 |
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14. |
Portland Investment Counsel Inc. (an affiliate of AIC Limited) |
Burlington, Ontario |
September 16, 2004 |
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15. |
RBC Global Asset Management Inc. (formed by an amalgamation of RBC Asset Management Inc. and Phillips, Hager & North Investment Management Ltd.) |
Toronto, Ontario |
August 5, 2003 |
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16. |
Sentry Investments Inc. (an affiliate of Sentry Select Capital Corp.) |
Toronto, Ontario |
August 8, 2007 |
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17. |
Standard Life Mutual Funds Ltd.{1} |
Montreal, Québec |
March 12, 2004 |
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18. |
1832 Asset Management LP (a successor to the mutual fund manager businesses of Scotia Capital Inc., Scotia Securities Inc. and Dynamic Mutual Funds Ltd.) |
Toronto, Ontario |
March 12, 2004 |
{1} This manager is a Québec-based Filer and has requested the OSC act as principal regulator for the purposes of this application.
Assante Capital Management Ltd. is a representative dealer for this application. Its head office is located in Toronto, Ontario and therefore the OSC is its principal regulator.