Sun Life Financial Investment Services (Canada) Inc.

Decision

Headnote

Policy Statement 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirement in section 3.2.01 of Regulation 81-101 respecting Mutual Fund Prospectus Disclosure to deliver a fund facts document to investors who purchase mutual fund securities of series sold under an initial sales charge pursuant to automatic switches from series that were initially sold under deferred sales charge options after a minimum holding period -- Upon the automatic switches, investors will have equal or lower combined management and administration fees -- Relief granted subject to compliance with disclosure and notification requirements.

Applicable Legislative Provisions

Regulation 81-101 respecting Mutual Fund Prospectus Disclosure, s. 3.2.01.

September 5, 2024

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
SUN LIFE FINANCIAL INVESTMENT SERVICES (CANADA) INC.
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting it from the requirement in subsection 3.2.01 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) to deliver to a purchaser the most recently filed fund facts documents (the Fund Facts) for the applicable class or series of securities of a mutual fund before it accepts an instruction from the purchaser for the purchase of such security (the Fund Facts Delivery Requirement), in respect of any purchase of Fund securities made pursuant to an Automatic Series Switch (as defined below) by a Client (as defined below) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport decision):

(a) the Ontario Securities Commission is the principal regulator for the 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 each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon (the Other Jurisdictions and together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 81-102 Investment Funds (NI 81-102), National Instrument 14-101 Definitions and MI 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:

The Filer

1. The Filer is a corporation incorporated under the federal laws of Canada with its head office located in Waterloo, Ontario. The Filer is a wholly-owned indirect subsidiary of Sun Life Financial Inc. (Sun Life).

2. The Filer is registered as a mutual fund dealer in each of the Jurisdictions and is a mutual fund dealer member of the Canadian Investment Regulatory Organization.

3. The Filer offers full-service investment advisory services to clients (the Full-Service Channel). Additionally, through a division of the Filer called Prospr by Sun Life (Prospr), the Filer offers a hybrid advice channel that offers clients of Prospr (each a Client) advisory services through a team of advisors either electronically and by phone. Clients of Prospr do not have a dedicated advisor but rather they interact with any one of Prospr's registered advisors. If a client of the Filer's Full-Service Channel wishes to become a client of Prospr, then such client can become a Client of Prospr by entering into a new agreement with the Filer, on behalf of Prospr, for the provision of such services. The Filer's Full-Service Channel services terminate when the client becomes a Client of Prospr. Alternatively, an investor may become a Client of Prospr without having a pre-existing account with the Filer.

4. The Filer is the principal distributor (as such term is defined in NI 81-102) of Series P Securities (as defined below) of the Funds.

5. The Filer is not in default of securities legislation in any of the Jurisdictions.

The Funds and Series P Securities

6. Each Fund is, or will be, an open-end mutual fund created under the laws of one of the Jurisdictions or the laws of Canada.

7. Each Fund is, or will be, a reporting issuer under the laws of the Jurisdictions and subject to NI 81-102.

8. The Manager, a wholly-owned indirect subsidiary of Sun Life and affiliate of the Filer, is, or will be, the investment fund manager of each Fund.

9. Securities of the Funds are, or will be, qualified for distribution pursuant to a simplified prospectus and Fund Facts that have been, or will be, prepared and filed in accordance with NI 81-101.

10. Each existing Fund is not in default of securities legislation in any of the Jurisdictions.

11. Series A securities offered by a Fund are generally available for purchase by all investors, subject to certain minimum investment amounts; however, Series A securities cannot be purchased or held in accounts by investors whose dealers do not make a suitability determination. Each Fund pays or will pay a management fee to the Manager based on the net asset value of Series A securities of the Fund. The Manager pays an ongoing trailing commission to an investor's dealer in respect of the Series A securities held by the investor. Series A securities are available for purchase under a front end sales charge option, and the investor and their dealer negotiate the sales charge payable by the investor, which is paid to the investor's dealer at the time the investor purchases the Series A securities.

12. Each Fund offers or will offer a series of securities in respect of which the Filer has been or will be appointed as principal distributor (the Series P Securities).

13. Only clients of Prospr (each a Client), will be eligible to invest in or hold Series P Securities.

14. The Filer intends to make Series P Securities available for sale to Clients of Prospr on or about September 30, 2024 or such later date as determined by Prospr in consultation with the Manager (the Implementation Date).

15. The only material differences (the Series Differences) between Series A securities and Series P Securities of a Fund are, or will be, that:

(a) Series P Securities are only available for purchase by Clients of Prospr;

(b) the management fees charged in respect of Series P Securities are lower than the management fees charged in respect of Series A securities; and

(c) a lower trailing commission is paid to the Filer in respect of Series P Securities than in respect of Series A securities.

16. Series A securities and Series P Securities of a Fund are series of the same Fund, and accordingly the investment objectives and investment strategies pursued by the Fund are the same in respect of Series A securities and Series P Securities of the Fund. Additionally, the valuation methodology applied in respect of the Series A and Series P Securities is the same. Finally, the Series A and Series P Securities have the same fundamental rights attaching to the securities. The Series Differences are the only material differences between these series.

17. As set out in the simplified prospectus pursuant to which Series P Securities are or will be qualified for distribution:

(a) if a holder of Series A securities of a Fund becomes eligible to hold Series P Securities of that Fund, the Manager, pursuant to the authority granted by the constating documents of the Fund, will switch the holder's Series A securities of the Fund to Series P Securities of that Fund (the timing of which is set out in further detail below) (each an Automatic Switch (which defined term does not include an Existing Client Switch, defined below));

(b) if a holder of Series P Securities ceases to be eligible to hold such Series P Securities at any point because the holder is ceasing to be a Client of Prospr, the Manager will switch the Series P Securities to Series A securities of that Fund under the front-end sales charge option (each an Automatic Reverse Switch, and Automatic Switches and Automatic Reverse Switches are referred to herein as Automatic Series Switches).

18. An Automatic Series Switch has no adverse tax consequences on the investor under current Canadian tax legislation.

Switch Timing

19. For any Client of Prospr that holds Series A securities of a Fund as at July 30, 2024 (Existing Clients), the Manager will switch the Series A securities of a Fund held by any such Client on the Implementation Date to Series P Securities of the same Fund on the Implementation Date (an Existing Client Switch).

20. For any Client that (i) becomes a Client of Prospr after July 30, 2024 and on or before September 26, 2024 and holds Series A securities of a Fund, or (ii) acquires Series A securities of a Fund during such time (August/September Clients), the Manager will switch the Series A securities of a Fund held by any such Client on the Implementation Date to Series P Securities of the same Fund on the Implementation Date.

21. For any Client that (i) becomes a Client of Prospr after September 26, 2024 and holds Series A securities of a Fund, or (ii) is or becomes a Client of Prospr and subscribes for Series P Securities after the Implementation Date (New Clients), the Manager will switch the Series A securities of a Fund held by any such Client to Series P Securities of that Fund not later than the close of business ten days following the last calendar day of the month in which the Client became eligible to hold Series P Securities of the Fund (which, for New Clients described in (i), is the month in which the Implementation Date occurs).

Notice of Switches

Existing Clients

22. On or about July 30, 2024, the Filer sent to all Existing Clients a notice that:

(a) disclosed that the Series A securities of the Fund held by the Client will be switched to Series P Securities of that Fund on the Implementation Date; and

(b) included the Fund Facts in respect of the applicable Series P Securities of the relevant Fund for each Client.

23. Following the Existing Client Switches effected on the Implementation Date, Existing Clients will receive a notice disclosing that:

(a) if the Client is no longer a Prospr client and thus ceases to be eligible to hold such Series P Securities, the Manager will switch the Series P Securities held by the Client to Series A securities of that Fund under the front-end sales charge option, which Series A securities have a higher management fee and trailing commission than the Series P Securities;

(b) other than the Fund Facts received by the Client in connection with its original investment in the Fund, the Client will not receive any additional Fund Facts documents unless the Client specifically requests the document;

(c) the Client is entitled to receive upon request, at no cost to the purchaser, the most recently filed Fund Facts in respect of the series of the Fund it holds by calling a specified toll-free number, by sending a request by mail or e-mail to a specified address or e-mail address, or by accessing them electronically as described in the notice; and

(d) the Client will not have a right of withdrawal under securities legislation for subsequent purchases of a security of a Fund pursuant to an Automatic Series Switch, but will continue to have a right of action if there is a misrepresentation in the prospectus or any document incorporated by reference into the prospectus.

August/September Clients

24. Prior to the Implementation Date, August/September Clients will receive a notice disclosing that:

(a) if the Client holds Series A securities of a Fund on the Implementation Date, such Series A securities will be switched to Series P Securities of that Fund on the Implementation Date, which Series P Securities have a lower management fee and trailing commission than Series A securities;

(b) if the Client is no longer a Prospr client and thus ceases to be eligible to hold such Series P Securities, the Manager will switch the Series P Securities held by the Client to Series A securities of that Fund under the front-end sales charge option, which Series A securities have a higher management fee and trailing commission than the Series P Securities;

(c) other than the Fund Facts received by the Client in connection with its original investment in the Fund, the Client will not receive any additional Fund Facts documents unless the Client specifically requests the document;

(d) the Client is entitled to receive upon request, at no cost to the purchaser, the most recently filed Fund Facts in respect of the series of the Fund it holds by calling a specified toll-free number, by sending a request by mail or e-mail to a specified address or e-mail address, or by accessing them electronically as described in the notice; and

(e) the Client will not have a right of withdrawal under securities legislation for subsequent purchases of a security of a Fund pursuant to an Automatic Series Switch, but will continue to have a right of action if there is a misrepresentation in the prospectus or any document incorporated by reference into the prospectus.

New Clients

25. During the account opening process or when providing instructions to purchase Series P Securities, a New Client will receive disclosure from the Filer disclosing that:

(a) if the Client holds Series A securities of a Fund, such Series A securities will be switched to Series P Securities of that Fund, which Series P Securities have a lower management fee and trailing commission than Series A securities, not later than the close of business ten days following the last calendar day of the month in which the Client became eligible to hold Series P Securities of the Fund;

(b) if the Client is no longer a Prospr client and thus ceases to be eligible to hold such Series P Securities, the Manager will switch the Series P Securities held by the Client to Series A securities of that Fund under the front-end sales charge option, which Series A securities have a higher management fee and trailing commission than the Series P Securities;

(c) other than the Fund Facts received by the Client in connection with its original investment in the Fund, the Client will not receive any additional Fund Facts unless the Client specifically requests the document;

(d) the Client is entitled to receive upon request, at no cost to the purchaser, the most recently filed Fund Facts in respect of the series of the Fund it holds by calling a specified toll-free number, by sending a request by mail or e-mail to a specified address or e-mail address, or by accessing them electronically as described in the notice; and

(e) the Client will not have a right of withdrawal under securities legislation for subsequent purchases of a security of a Fund pursuant to an Automatic Series Switch, but will continue to have a right of action if there is a misrepresentation in the simplified prospectus or any document incorporated by reference into the simplified prospectus.

26. All Clients that directly subscribe for Series P Securities on or after the Implementation Date will receive a Fund Facts in respect of such securities in accordance with the Fund Facts Delivery Requirement.

Fund Facts Delivery Requirement

27. All Clients subject to an Existing Client Switch received a copy of the Series P Securities Fund Facts in advance of the Implementation Date.

28. Each Automatic Series Switch will entail either:

(a) a redemption of Series A securities immediately followed by a purchase of Series P Securities of the same Fund; or

(b) a redemption of Series P Securities immediately followed by a purchase of Series A securities of the same Fund.

29. Accordingly, each Automatic Series Switch will be a "distribution" under securities legislation that triggers the Fund Facts Delivery Requirement for the Filer.

30. Pursuant to the Fund Facts Delivery Requirement, a dealer is required to deliver the most recently filed Fund Facts of a series of a mutual fund to an investor before the dealer accepts an instruction from the investor for the purchase of securities of that series of the mutual fund.

31. The Filer does not propose to deliver the Series A securities or Series P Securities Fund Facts, as applicable, to Clients in connection with an Automatic Series Switch for the following reasons:

(a) Upon an Automatic Series Switch, a Client's investment will remain in respect of securities of the same Fund with the same underlying pool of assets. The only material differences between Series A securities and Series P Securities of a Fund are the Series Differences set out in paragraph 15 above. The Client would derive little benefit from receiving a further Fund Facts about the relevant Fund.

(b) With respect to an Automatic Switch, management fees charged in respect of Series P Securities of a Fund are lower than the management fees charged in respect of Series A securities of the same Fund, and accordingly, an Automatic Switch will result in a Client paying lower management fees than the fees associated with owning the Series A securities for which it initially subscribed.

(c) With respect to an Automatic Switch, all Clients holding Series A securities that are subject to an Automatic Switch will receive prior notice that their Series A Securities will be switched to Series P Securities of the same Fund under the front-end sales charge option, and that such Series P securities have a lower management fee and trailing commission than Series A Securities. The Client would derive little benefit from receiving a further communication reiterating these details.

(d) With respect to an Automatic Reverse Switch, all Clients holding Series P Securities that are subject to an Automatic Reverse Switch will receive prior notice that if they cease to be a Client of Prospr, their Series P Securities will be switched to Series A securities of the same Fund under the front-end sales charge option, and that such Series A securities have a higher management fee and trailing commission than the Series P Securities. The Client would derive little benefit from receiving a further communication reiterating these details.

32. Although the Filer does not propose to deliver a Fund Facts to investors in connection with each Automatic Series Switch, the most recently filed Fund Facts for each series of a Fund will be available on the Manager's website.

33. The Filer will deliver or will arrange for the delivery of trade confirmations to investors in connection with each Automatic Series Switch. Additionally, details of the changes in series of securities held will be reflected in the account statements sent to investors for the month in which the change occurred.

34. In the absence of the Exemption Sought, the Automatic Series Switches are not capable of being implemented without compliance with the Fund Facts Delivery Requirement.

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. Following Automatic Switch, the combined management and administration fees of the Series P Securities will be lower than the combined management and administration fees of the Series A Securities of the same Fund.

2. No sales charges, switch fees, short term trading fees or other fees will be payable in respect of an Automatic Series Switch.

3. The Filer will notify all Clients that:

a. if the Client holds Series A securities of a Fund, such Series A securities will be switched to Series P Securities of that Fund, which Series P Securities have a lower management fee and trailing commission than Series A securities;

b. if the Client is no longer a Prospr client and thus ceases to be eligible to hold such Series P Securities, the Series P Securities held by the Client will be switched to Series A securities of that Fund under the front-end sales charge option, which Series A securities have a higher management fee and trailing commission than the Series P Securities;

c. other than the Fund Facts received by the Client in connection with its original investment in a Fund, the Client will not receive any additional Fund Facts unless the Client specifically requests the document;

d. the Client is entitled to receive upon request, at no cost, the most recently filed Fund Facts in respect of the series of the Fund it holds by calling the specified toll-free number, by sending a request by mail or e-mail to the specified address or e-mail address, or by accessing them electronically as specified; and

e. the Client will not have a right of withdrawal under securities legislation for subsequent purchases of a security of a Fund pursuant to an Automatic Series Switch but will continue to have a right of action if there is a misrepresentation in the simplified prospectus or any document incorporated by reference into the simplified prospectus.

"Darren McKall"
Manager, Investment Management Division
Ontario Securities Commission

Application File #: 2024/0458

SEDAR+ File #: 6163626