SEI Investments Canada Company - MRRS Decision

Headnote

Mutual reliance review system for exemptive relief applications -- Applicant exempted from the dealer registration requirements in the Legislation in respect of trades in securities of mutual funds to Capital Accumulation Plans, subject to terms and conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 74(1).

Rules Cited

National Instrument 81-102 -- Mutual Funds.

National Instrument 81-104 - Commodity Pools.

National Instrument 81-106 -- Investment Fund Continuous Disclosure.

National Instrument 45-106 -- Prospectus and Registration Exemptions.

Published Documents Cited

Amendments to NI 45-106 -- Registration and Prospectus Exemption for Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.

August 29, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, QUEBEC, NEWFOUNDLAND AND

LABRADOR, YUKON AND NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SEI INVESTMENTS CANADA COMPANY

(the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the dealer registration requirements of the Legislation in respect of certain trading by the Filer and the officers and employees acting on the Filer's behalf in the securities of mutual funds (the Requested Relief);

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation governed by the laws of the Province of Nova Scotia. Its head office is located in Toronto, Ontario.

2. The Filer is registered as an adviser in the categories of investment counsel and portfolio manager in each of British Columbia, Alberta, Ontario and Nova Scotia, and as an adviser with an unrestricted practice in Quebec.

3. The Filer is registered as a dealer in the category of limited market dealer in Ontario. The Filer is also registered as a commodity trading manager in Ontario.

4. The Filer is the manager of 28 mutual funds that are prospectus qualified (27 of which are governed by National Instrument 81-102 - Mutual Funds and one of which is a commodity pool governed by National Instrument 81-104 - Commodity Pools) and 2 mutual funds that are distributed under exemptions from the prospectus requirements of the Legislation. The Filer may, in the future, be the manager of additional mutual funds.

5. The Filer carries on business primarily as an investment counsel and portfolio manager. In connection with this principal business, the Filer distributes securities of its mutual funds on a prospectus-exempt basis directly to accredited investors, as defined in National Instrument 45-106 -- Prospectus and Registration Exemptions (NI 45-106), who are, primarily, trusts having net assets of at least $5,000,000.

6. The Filer also carries on business as a service provider (a Service Provider) to sponsors (Plan Sponsors) of tax assisted investment or savings plans (Capital Accumulation Plans or CAPs), such as defined contribution registered pension plans, group registered retirement savings plans, group registered education savings plans or deferred profit sharing plans that permit CAP members to make investment decisions among two or more investment options offered within the Capital Accumulation Plan. A Plan Sponsor may be an employer, trustee, trade union or association.

7. As a Service Provider, the Filer may provide services to Plan Sponsors with respect to the design, establishment or operation of a Capital Accumulation Plan. The Filer also may carry out responsibilities of a Plan Sponsor that are delegated to it.

8. The Filer intends to trade in the securities of mutual funds to current or former employees of an employer, or a person who belongs, or did belong to a trade union or association or,

(a) his or her spouse;

(b) a trustee, custodian or administrator who is acting on his or her behalf, or for his or her benefit, or on behalf of, or for the benefit of, his or her spouse; or

(c) his or her holding entity or a holding entity of his or her spouse,

that has assets in a CAP, including a person that is eligible to participate in a CAP (Members) as a part of a Member's participation in a Capital Accumulation Plan.

9. The Filer intends to trade securities of mutual funds to a Capital Accumulation Plan or a Member in accordance with the conditions specified in proposed amendments to NI 45-106 related to CAPs which were published by the Canadian Securities Administrators on October 21, 2005 (the Proposed CAP Exemption).

10. By decision document dated January 16, 2006 (the January Decision), the Decision Makers in Ontario and Quebec granted a registration exemption to the Filer which was restricted to trades in mutual funds of which the Filer is or becomes the manager and portfolio manager (Proprietary Mutual Funds).

11. The January Decision is narrower than the Proposed CAP Exemption because the latter is not limited to Proprietary Mutual Funds.

12. The Filer is a Service Provider to some CAPs with investment options that are not limited to Proprietary Mutual Funds.

13. The Filer is a Service Provider in respect of a CAP with members in the Province of Newfoundland and Labrador. It is possible that in the future it may be a Service Provider in respect of CAPs with Members resident in the Yukon or Nunavut.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

1. The relevant Plan Sponsor:

(a) selects the mutual funds that Members will be able to invest in under the Capital Accumulation Plan;

(b) establishes a policy, and provides Members with a copy of the policy and any amendments to it, describing what happens if a Member does not make an investment decision;

(c) provides Members, in addition to any other information that the Plan Sponsor believes is reasonably necessary for a Member to make an investment decision within the CAP, and unless that information has previously been provided, the following information about each mutual fund the Member may invest in:

(i) the name of the mutual fund;

(ii) the name of the manager of the mutual fund and its portfolio adviser;

(iii) the fundamental investment objective of the mutual fund;

(iv) the investment strategies of the mutual fund or the types of investments the mutual fund may hold;

(v) a description of the risks associated with investing in the mutual fund;

(vi) where a Member can obtain more information about each mutual fund's portfolio holdings;

(vii) where a Member can obtain more information generally about each mutual fund, including any continuous disclosure; and

(viii) whether the mutual fund is considered foreign property for income tax purposes, and if so, a summary of the implications of that status for a Member who invested in that mutual fund;

(d) provides Members with a description and amount of any fees, expenses and penalties relating to the Capital Accumulation Plan that are borne by the Members, including:

(i) any costs that must be paid when the mutual fund is bought or sold;

(ii) costs associated with accessing or using any of the investment information, decision-making tools or investment advice provided by the Plan Sponsor;

(iii) mutual fund management fees;

(iv) mutual fund operating expenses;

(v) record keeping fees;

(vi) any costs of transferring among investment options, including penalties, book and market value adjustments and tax consequences;

(vii) account fees; and

(viii) fees for services provided by service providers,

provided that the Plan Sponsor may disclose the fees, penalties and expenses on an aggregate basis, if the plan sponsor discloses the nature of the fees, expenses and penalties, and the aggregated fees do not include fees that arise because of a choice that is specific to a particular Member;

(e) has within the past year, provided Members with performance information about each mutual fund the Members may invest in, including:

(i) the name of the mutual fund for which the performance is being reported;

(ii) the performance of the mutual fund, including historical performance for one, three, five and ten years if available;

(iii) a performance calculation that is net of investment management fees and mutual fund expenses;

(iv) the method used to calculate the mutual fund's performance return calculation, and information about where a Member could obtain a more detailed explanation of that method;

(v) the name and description of a broad-based securities market index, selected in accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure, for the Mutual Fund, and corresponding performance information for that index; and

(vi) a statement that past performance of the mutual fund is not necessarily an indication of future performance;

(f) has, within the past year, informed Members if there were any changes in the choice of mutual funds that Members could invest in and where there was a change, provided information about what Members needed to do to change their investment decision, or make a new investment;

(g) provides Members with investment decision-making tools that the Plan Sponsor reasonably believes are sufficient to assist them in making an investment decision within the Capital, Accumulation Plan;

(h) provides the information required by paragraphs (b), (c), (d) and (g) prior to the Member making an investment decision under the CAP; and

(i) if the Plan Sponsor makes investment advice from a registrant available to Members, the Plan Sponsor must provide members with information about how they can contact the registrant

2. This Decision, as it relates to the jurisdiction of a Decision Maker, will terminate upon the coming into force of a registration exemption for Capital Accumulation Plans in NI 45-106, or 60 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to make such a rule.