WisdomTree Asset Management Canada, Inc. et al.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager -- change of manager is not detrimental to securityholders or the public interest -- change of manager approved by the fund's securityholders at a special meeting of securityholders -- National Instrument 81-102 Investment Funds.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 5.5(1)(a), and 19.1.
January 23, 2020
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 WISDOMTREE ASSET MANAGEMENT CANADA, INC. (the Filer) AND WISDOMTREE EUROPE HEDGED EQUITY INDEX ETF WISDOMTREE U.S. QUALITY DIVIDEND GROWTH INDEX ETF WISDOMTREE INTERNATIONAL QUALITY DIVIDEND GROWTH INDEX ETF WISDOMTREE U.S. MIDCAP DIVIDEND INDEX ETF WISDOMTREE EMERGING MARKETS DIVIDEND INDEX ETF WISDOMTREE U.S. QUALITY DIVIDEND GROWTH VARIABLY HEDGED INDEX ETF WISDOMTREE INTERNATIONAL QUALITY DIVIDEND GROWTH VARIABLY HEDGED INDEX ETF WISDOMTREE YIELD ENHANCED CANADA AGGREGATE BOND INDEX ETF WISDOMTREE YIELD ENHANCED CANADA SHORT-TERM AGGREGATE BOND INDEX ETF WISDOMTREE CANADA QUALITY DIVIDEND GROWTH INDEX ETF WISDOMTREE JAPAN EQUITY INDEX ETF WISDOMTREE ICBCCS S&P CHINA 500 INDEX ETF ONE GLOBAL EQUITY ETF ONE NORTH AMERICAN CORE PLUS BOND ETF (collectively, the Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of the Funds, for a decision under the securities legislation of the Jurisdiction (the Legislation) for approval of the proposed change of manager of the Funds (the Change of Manager) from the Filer to CI Investments Inc. (CII) under paragraph 5.5(1)(a) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval 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 Filer has provided notice that subsection 4.7(1) of Multinational Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Canadian Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions (NI 14-101) and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. In addition, terms defined in NI 81-102 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 Funds
1. Each of the Funds is an exchange-traded mutual fund trust established under the laws of the Province of Ontario.
2. With the exception of ONE Global Equity ETF and ONE North American Core Plus Bond ETF, the Funds are distributed in each of the Canadian Jurisdictions pursuant to a long-form prospectus prepared in accordance with Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2) dated June 21, 2019. ONE Global Equity ETF and ONE North American Core Plus Bond ETF are distributed in each of the Canadian Jurisdictions pursuant to a long-form prospectus prepared in accordance with Form 41-101F2 dated August 13, 2019.
3. Each of the Funds is a reporting issuer under the laws of all of the Canadian Jurisdictions.
4. None of the Funds are in default of the securities legislation of any of the Canadian Jurisdictions.
The Filer
5. The Filer is the trustee and manager of each of the Funds.
6. The Filer, a corporation incorporated under the laws of the Province of Ontario, is a privately-owned company and a wholly-owned subsidiary of WisdomTree. The Filer's head office is located in Toronto, Ontario.
7. The Filer is registered as (a) an investment fund manager in Ontario, Quebec, and Newfoundland and Labrador, and (b) an exempt market dealer in each of the provinces of Canada.
8. The Filer is not in default of the securities legislation of any of the Canadian Jurisdictions.
CI and CII
9. CI Financial Corp. (CI) is an independent Canadian company offering global asset management and wealth management advisory services. Through its principal operating subsidiaries, CI offers a broad range of investment products and services.
10. CI is a reporting issuer in all of the provinces of Canada and its common shares are listed on the Toronto Stock Exchange.
11. CI's Canadian investment management business is conducted through two registered advisers, namely CII and CI Private Counsel LP. CI's securities trading business is conducted through three registered brokers or dealers, namely Assante Capital Management Ltd., Assante Financial Management Ltd. and BBS Securities Inc. CI also owns 65% of the issued and outstanding shares of Marret Asset Management Inc., 40% of the issued and outstanding shares of Lawrence Park Asset Management Ltd. and 75% of the issued and outstanding shares of WealthBar Financial Services Inc.
12. CII is a corporation incorporated under the laws of the Province of Ontario. Its head office is located in Toronto, Ontario.
13. CII is registered as (a) an investment fund manager in Ontario, Quebec, and Newfoundland and Labrador; (b) an exempt market dealer in each of the provinces and territories of Canada; (c) a commodity trading counsel in Ontario; and (d) a commodity trading manager in Ontario.
14. CII manages over 200 core mutual and pooled funds and over 40 exchange-traded funds, closed-end investment funds and limited partnerships, which are sold under various fund family names. CII also manages or administers segregated funds and acts as portfolio sub-advisor to other institutions.
15. CII is not in default of the securities legislation of any of the Canadian Jurisdictions.
The Transaction
16. On November 7, 2019, WisdomTree Investments, Inc. (WisdomTree) announced that it had entered into a definitive agreement to sell its Canadian subsidiary, the Filer, to CI. Under the terms of the agreement, CI will acquire all of the issued and outstanding shares of the Filer, thereby enabling CI to continue to operate the business of the Filer, which consists primarily of the management of the Funds (the Transaction).
17. The Transaction has been approved by the board of directors of WisdomTree and is scheduled to close in the first quarter of 2020.
18. Immediately following completion of the Transaction, it is expected that the Filer will continue to act as the manager of the Funds, although CI will change the name of the Filer and the Funds, as applicable, to reflect CI's ownership.
19. CI has advised the Filer that, after the closing of the Transaction, CI anticipates that it will cause the amalgamation of the Filer with CII, which is currently expected to occur in the first half of 2020. It is therefore anticipated that CII will become the manager of the Funds upon CI amalgamating or otherwise consolidating the Filer with CII.
20. In accordance with National Instrument 81-107Independent Review Committee for Investment Funds (NI 81-107), the Change of Manager was presented to the independent review committee of the Funds (the Funds' IRC) for its consideration and, after making reasonable inquiries, the Funds' IRC has determined that the Change of Manager would achieve a fair and reasonable result for the Funds.
21. In accordance with National Instrument 81-106 Investment Funds Continuous Disclosure, a press release describing the Transaction was issued by WisdomTree on November 7, 2019 and subsequently filed on the System for Electronic Document Analysis and Retrieval (SEDAR). In addition, a material change report was filed on SEDAR on November 15, 2019 relating to the Change of Manager.
22. Amendments to the long form prospectuses of the Funds dated June 21, 2019 and August 13, 2019 announcing the Change of Manager were filed on SEDAR on November 18, 2019.
23. Unitholders of each of the Funds approved the Change of Manager at joint special meetings of unitholders of the Funds (collectively, the Meetings, and each, a Meeting) on January 14, 2020, as required by NI 81-102.
24. The notice of the Meeting, management information circular containing the details of the Change of Manager and a form of proxy in respect of the Meetings (collectively, the Meeting Materials) were mailed on December 6, 2019. In accordance with applicable securities legislation, the Meeting Materials were filed on SEDAR following the mailing and contain all information necessary to allow unitholders of the Funds to make an informed decision about the Change of Manager.
Impact of the Change of Manager
25. The Transaction allows the Funds to benefit from the scale and resources of CI, which should facilitate growth in the Funds' portfolio assets and an overall reduction in expenses.
26. Pursuant to NI 81-107, upon the completion of the Transaction, members of the Funds' IRC will cease to be members of the Funds' IRC, and the Funds' IRC will be reconstituted with those individuals who are currently members of the independent review committee of the investment funds managed by CII, namely James M. Werry, Tom Eisenhauer, Karen Fisher, Stuart P. Hensman and James McPhedran.
27. Upon the completion of the Transaction and prior to the amalgamation or other consolidation of the Filer with CII, all of the current officers and directors of the Filer will be replaced by the existing directors and officers of CII.
28. The individuals that will be principally responsible for the investment fund management and portfolio management of the Funds upon the completion of the Transaction and the Change of Manager have the requisite integrity and experience, as required under subparagraph 5.7(1)(a)(v) of NI 81-102.
29. CII intends to manage and administer the Funds in substantially the same manner as the Filer. There is no current intention to change the investment objectives, investment strategies, or increase the fees and expenses of the Funds following the closing of the Transaction and the Change of Manager. CII does not contemplate any immediate changes to the material contracts of the Funds.
30. There is no current intention to change the trustee and auditor of the Funds following the closing of the Transaction and the Change of Manager.
31. There is no current intention to make material changes to the Filer's operations, compliance, supervision and management functions as a result of the Transaction for a reasonable period of time after the closing of the Transaction and the Change of Manager. In this regard, in the short-term, it is possible that certain services will continue to be provided by WisdomTree for a period following the completion of the Transaction.
32. Funds which currently track proprietary indices of the Filer will continue to do so pursuant to a license agreement to be entered into between WisdomTree and the Filer. It is expected that the third-party index providers will continue to license or sublicense their indices to the relevant Funds.
33. The Transaction is not expected to negatively impact the financial stability of the Filer, CI or CII, or any of their ability to fulfill their respective regulatory obligations.
34. None of the costs of the Transaction and the Change of Manager will be borne by the Funds. The costs of the Transaction and the Change of Manager will instead be borne by the Filer, CI and/or CII.
35. The Transaction and the Change of Manager are not expected to have any material impact on the business, operations or affairs of the Funds or the unitholders of the Funds.
Approval Sought
36. Under paragraph 5.5(1)(a) of NI 81-102, the approval of the securities regulatory authority or regulator is required before the manager of an investment fund is changed, unless the new manager is an affiliate of the current manager.
37. The Filer and CII are not affiliates. Therefore, the approval of the Commission is required before the Change of Manager can occur.
38. The Approval Sought will not be detrimental to the protection of investors in the Funds or prejudicial to the public interest.
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 is that the Approval Sought is granted.