Pembroke Private Wealth Management Ltd. and Pembroke Canadian All Cap Fund
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d) of National Instrument 81-102 Investment Funds to permit a mutual fund, that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in their sales communications performance data for the period when the fund was not a reporting issuer -- relief also granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure for the purposes of the relief requested from Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document, to permit the mutual fund to include in its fund facts, the past performance data for the period when the fund was not a reporting issuer.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1, to permit a mutual fund to include in annual and interim management reports of fund performance the financial highlights and past performance of the fund that are derived from the fund's annual financial statements that pertain to time periods when the fund was not a reporting issuer.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 15.3(2), 15.6(1)(a)(i), 15.6(1)(d), and 19.1.
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 2.1.
Form 81-101F3 Contents of Fund Facts Document, Item 5 of Part I.
National Instrument 81-106 Investment Fund Continuous Disclosure, s. 4.4.
Form 81-0106F1 Contents of Annual and Interim Management Report of Fund Performance, Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1), and 4.3(2) of Part B, and Items 3(1) and 4 of Part C.
March 28, 2022
[TRANSLATION]
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUEBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF PEMBROKE PRIVATE WEALTH MANAGEMENT LTD. (the Filer) AND IN THE MATTER OF THE PEMBROKE CANADIAN ALL CAP FUND (the Fund)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting units of the Fund from:
a) Sections 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d)(i) of Regulation 81-102 respecting Investment Funds, CQLR, c. V-1.1, r. 39 (Regulation 81-102) to permit the Fund to include performance data in sales communications notwithstanding that:
i) the performance data will relate to a period prior to the Fund offering its securities under a simplified prospectus; and
ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,
b) Section 2.1 of Regulation 81-101 respecting Mutual Fund Prospectus Disclosure, CQLR, c. V-1.1, r.38 (Regulation 81-101) to meet the requirements from Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3), and
c) Items 5(2), 5(3) and 5(4) and Instruction (1) of Part I of Form 81-101F3 in respect of the requirement to comply with sections 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d)(i) of Regulation 81-102 to permit the Fund to include in its fund facts the past performance data of the Fund notwithstanding that:
i) such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus; and
ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,
d) Section 4.4 of Regulation 81-106 respecting Investment Fund Continuous Disclosure, CQLR, c. V-1.1, r. 42 (Regulation 81-106) from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and
e) Items 3.1(7), 4.1(1) (in respect of the requirement to comply with section 15.3(2) of Regulation 81-102), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Fund to include, in its annual and interim management reports of fund performance (MRFPs), past performance data notwithstanding that such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus;
(collectively, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
a) the Autorité des marchés financiers is the principal regulator for this Application,
b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System, CQLR, c. V-1.1, r. 1 (Regulation 11-102) is intended to be relied upon by the Filer in the following jurisdictions: Alberta, British Columbia, Prince Edward Island, Manitoba, New Brunswick, Nova Scotia, Saskatchewan and Newfoundland and Labrador (the Notified Passport Jurisdictions and collectively with the Jurisdictions, the Jurisdictions of Canada); and
c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3 and Regulation 11-102 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 Fund is an open-ended mutual fund trust created under the laws of Ontario on January 31, 2019.
2. The Filer is a corporation incorporated under the laws of Canada having its head office in Montreal, Quebec.
3. The Filer is registered under securities legislation in Quebec, Ontario and Newfoundland and Labrador as an investment fund manager and in Quebec, Alberta, British Columbia, Prince Edward Island, Manitoba, New Brunswick, Nova Scotia, Ontario, Saskatchewan and Newfoundland and Labrador as a dealer in the category of mutual fund dealer. The Filer is the investment fund manager, promoter and trustee of the Fund.
4. Pembroke Management Ltd., a registered portfolio manager in Quebec, Alberta, British Columbia, Manitoba and Ontario, has been appointed as the portfolio manager of the Fund. Since the Fund commenced operations, Pembroke Management Ltd. has been the portfolio manager of the Fund.
5. Units of the Fund were previously only distributed to investors in the Jurisdictions of Canada on a prospectus-exempt basis in accordance with Regulation 45-106 respecting Prospectus Exemptions, CQLR, V-1.1, r. 21.
6. In order to commence distributing its units pursuant to a simplified prospectus, the Fund filed on March 2, 2022 a preliminary simplified prospectus and annual information form, as well as fund facts. Upon the issuance of a receipt for the final simplified prospectus (the Prospectus) and annual information form of the Fund, the Fund will become a reporting issuer in each of the Jurisdictions of Canada and will become subject to the requirements of Regulation 81-102 and Regulation 81-106.
7. The Filer and the Fund are not in default of securities legislation in any of the Jurisdictions of Canada.
8. Since the Fund commenced operations as a mutual fund, it has complied with its obligation to prepare and deliver audited annual and unaudited interim financial statements to all holders of its securities in accordance with Regulation 81-106.
9. Since the Fund commenced operations, it has complied with the investment restrictions and practices contained in Regulation 81-102, including not using leverage in the management of its portfolio.
10. Since the Fund commenced operations, the Fund has not paid any management fees to the Filer and such fees have been paid directly by investors in the Fund. This will continue to be the case after the Fund becomes a reporting issuer.
11. The Fund will be managed substantially similarly after it becomes a reporting issuer as it was prior to becoming a reporting issuer. As a result of the Fund becoming a reporting issuer:
a) the Fund's investment objectives will not change, other than to provide additional detail as required by Regulation 81-101;
b) the day-to-day administration of the Fund in respect of its units will not change other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which impact the portfolio management of the Fund) and to provide additional features that are available to investors of mutual funds managed by the Filer, as described in the Prospectus; and
c) the intention of the Filer is to absorb expenses of the Fund to maintain the existing management expense ratio (MER) of the Fund at approximately the same level of the Fund prior to becoming a reporting issuer. Any such expense absorption may be discontinued in the future, however the Filer does not expect any material increase in MER once the absorption stops.
12. The Filer proposes to present the performance data of the Fund in sales communications and fund facts for a period prior to it becoming a reporting issuer.
13. Without the Exemption Sought, the sales communications and fund facts pertaining to the Fund cannot include performance data that relates to a period prior to the Fund becoming a reporting issuer.
14. Without the Exemption Sought, sales communications pertaining to the Fund would not be permitted to include performance data until the Fund has distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months.
15. The Filer proposes to include in the fund facts for the Fund, past performance data in the chart required by items 5(2), 5(3) and 5(4) of Part I of Form 81-101F3 under the sub-headings "Year-by-year returns", "Best and worst 3-month returns" and "Average return" related to periods prior to the Fund becoming a reporting issuer in a jurisdiction.
16. Without the Exemption Sought, the MRFP of the Fund cannot include financial highlights and performance data that relates to a period prior to the Fund becoming a reporting issuer.
17. The past performance data and other financial data of the Fund for the time period before it became a reporting issuer is significant and meaningful information that can assist existing and prospective investors in making an informed decision whether to purchase units of the Fund.
18. The Filer submits that the Exemption Sought is not detrimental to the protection of investors.
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 Exemption Sought is granted provided that:
a) any sales communication and any fund facts that contain performance data of the Fund relating to a period prior to when the Fund was a reporting issuer discloses:
i) that the Fund was not a reporting issuer during such period;
ii) that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer; and
iii) performance data of the Fund for 10, 5, 3 and one year periods;
b) the information contained under the heading "Fund Expenses Indirectly Borne by Investors" in Part B of the simplified prospectus of the Fund based on the MER for the Fund for the financial year ended December 31, 2021 be accompanied by disclosure that:
i) the information is based on the MER of the Fund for its last completed financial year when its units were offered privately during part of such financial year; and
ii) the MER of the Fund may increase as a result of the Fund offering its units under the simplified prospectus.
c) any MRFP that includes performance data of the Fund relating to a period prior to when the Fund was a reporting issuer discloses:
i) that the Fund was not a reporting issuer during such period;
ii) that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer;
iii) that the financial statements of the Fund for such period are posted on the Fund's website and are available to investors upon request; and
iv) performance data of the Fund for 10,5, 3 and one year periods;
d) the Filer posts the financial statements of the Fund since it has commenced its operations on the Fund's website and makes those financial statements available to investors upon request.