University of Toronto Asset Management Corporation
Headnote
Ontario Securities Commission Rule 13-502 Fees (OSC Rule 13-502) establishes a fee regime where the participation fee for a registered firm is based on the firm's revenues attributable to its capital markets activity in Ontario. The registrant's corporate structure does not allow it to adequately meet the requirements of OSC Rule 13-502. The registrant is seeking a decision granting relief from the requirement to calculate the participation fee that it pays to the Ontario Securities Commission in the manner prescribed by Part 3 of OSC Rule 13-502.
Applicable Legislative Provisions
OSC Rule 13-502 Fees, Part III Form 13-502F4.
December 18, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
UNIVERSITY OF TORONTO
ASSET MANAGEMENT CORPORATION
(the Filer)
DECISION
Background
The Ontario Securities Commission (the OSC) has received an application from the Filer (the Application) for a decision under the securities legislation of Ontario (the Legislation) for an exemption under section 6.1 of OSC Rule 13-502 Fees (the Fees Rule):
(a) from the requirements of Part 3 of the Fees Rule such that the amount of costs and expenses that are recovered from the University of Toronto (the UofT) and as shown on the Filer's audited financial statements as "Recoveries from University of Toronto" (the Cost Recovery Amount) be used as the starting point in line 1 titled "Gross revenue for relevant fiscal year" of Part III Advisers, Other Dealers, and Unregistered Capital Markets Participants of Form 13-502 F4 Capital Markets Participation Fee Calculation (Form 13-502F4); and
(b) from the requirement in section 4.1 of the Fees Rule to pay a fee for its filing of this exemption application (together with (a), the Exemption Sought).
Interpretation
Terms defined in National Instrument 14-101 Definitions 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 Filer is a corporation without share capital that was incorporated by letters patent on April 25, 2000 by The Governing Council of the UofT under the Corporations Act (Ontario).
2. The Filer is registered as a portfolio manager and as an investment fund manager in Ontario.
3. Various agreements, including a service agreement, delegation of authority and an investment management agreement, govern the economic and business relationship between the Filer and the UofT.
4. As a registered firm in Ontario, the Filer must pay, for each of its financial years, the participation fee shown in Appendix B of the Fees Rule that applies to it according to the Filer's specified Ontario revenues as calculated under Part III of Form 13-502 F4.
5. The Filer acts as the portfolio manager on behalf of certain assets for the UofT including endowments, pension funds and scholarship funds (collectively, the UofT funds), including acting as portfolio manager and investment fund manager of certain pooled funds (the pooled funds) that are only distributed to the UofT funds.
6. The Filer does not provide any services or perform any registerable activity on behalf of any other parties other than the UofT funds.
7. The Filer does not charge a management fee for acting as the portfolio manager or as investment fund manager on behalf of the UofT and the funds. The Filer therefore does not report any gross revenues on its audited financial statements for its reference fiscal year.
8. In accordance with an agreement between the UofT and the Filer, the UofT has agreed to pay the Cost Recovery Amount to the Filer. As a result, the Filer will never generate any gross revenues, nor any profit or loss.
9. Upon a review of the structure of the Filer, staff of the OSC (OSC Staff) expressed concern that given the fact that the Filer does not earn any revenue for acting as the portfolio manager or as the investment fund manager for the UofT and the UofT funds, the Filer's calculation of its participation fee required by Form 13-502F4 does not reflect the Filer's capital market activity in Ontario.
10. In order for the Filer to accurately capture its capital market activity in Ontario, the Filer will calculate its capital markets participation fee using the Cost Recovery Amount as the starting point in line 1 titled "Gross revenue for relevant fiscal year" of Part III of Form 13-502F4.
11. The Cost Recovery Amount will, therefore, subject to any deductions, represent the "Revenue subject to participation fee" reported in line 8 of Part III of Form 13-502F4 for the Filer's reference fiscal year.
12. The Ontario percentage for the Filer's reference fiscal year reported in line 9 of Form 13-502F4 will be 100% to reflect the fact that 100% of the Filer's "Revenue subject to participation fee" reported in line 8 of Form 13-502F4 is attributable to capital markets activities in Ontario.
Decision
The OSC is satisfied that the decision meets the test set out in the Legislation for the OSC to make the decision.
The decision of the OSC under the Legislation is that the Exemption Sought is granted.
This Decision shall expire on the sooner of:
a) Any change to how the Filer is compensated for its activities as portfolio manager and as investment fund manager for the UofT funds and the pooled funds.
b) 90 days after any material changes in the Filer's business and operations.
c) Immediately preceding a change in the Fees Rule that would require a change to the manner in which the Filer's participation fee is calculated.