Canoe Financial LP

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from certain disclosure and consent requirements of section 8.2 of National Instrument 81-105 Mutual Fund Sales Practices -- some units issued by Filer to be purchased by sales representatives of participating dealers pursuant to private placement -- NI 81-105 triggers certain disclosure and consent requirements relating to 'equity interests' held by sales representatives, including requirement to continuously update disclosure and consent -- compliance with updating requirements can be administratively burdensome with limited additional benefit to investors -- disclosure and consent requirements in NI 81-105 modified to allow disclosure of aggregate holdings up to a stated maximum percentage to reduce the need for continuous updates but still provide key disclosure to investors -- participating dealers wishing to rely on the exemption must agree to abide by terms and conditions of decision document, including requirement for written policies and procedures for compliance with modified disclosure requirements -- fund manager must keep records of participating dealers relying on the exemption and provide the principal regulator with an updated list on a quarterly basis of those participating dealers relying on this decision.

Applicable Legislative Provisions

National Instrument 81-105 Mutual Fund Sales Practices, ss. 8.2, 9.1.

May 25, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

CANOE FINANCIAL LP

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer under the securities legislation of the Jurisdictions (the Legislation) for an exemption pursuant to section 9.1 of National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) for the following:

a) an exemption from the prospectus disclosure requirements found in subsections 8.2(1) and (2) of NI 81-105 on its own behalf, as the manager of the Funds (as defined below); and

b) an exemption from the point of sale and consent requirements found in subsections 8.2(3) and (4) of NI 81-105, on behalf of entities that are registered as mutual fund dealers or investment dealers and are not affiliated with the Filer, and their dealing or sales representatives who may from time to time own or acquire securities issued by the Filer, in any of the Jurisdictions

(the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the provinces and territories of Canada other than Ontario; and

(c) this 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 National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

Dealer means, as of any date, a dealer that distributes securities of the Funds.

Existing Funds means the publicly offered mutual funds currently in existence as of the date of this decision managed by the Filer.

Funds means the Existing Funds and any other mutual fund managed by the Filer in the future.

Private Placements means one or more offerings of the Filer's Class C Units pursuant to applicable prospectus exemptions.

Representative means, as of any date, a sales representative of a Dealer who beneficially owns a Class C Unit of the Filer.

Representations

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

1. The Filer is a limited partnership established under the laws of Alberta, with its registered head office located in Calgary, Alberta. The general partner of the Filer is Canoe Financial Corp., a corporation incorporated under the laws of Alberta.

2. The Filer is registered as an investment fund manager, portfolio manager and exempt market dealer in each of the provinces and territories of Canada and is also registered as a derivatives portfolio manager in Québec.

3. The Filer is the manager and portfolio manager of the Existing Funds and may, in the future, be the manager of other Funds. Accordingly, the Filer is or will be a "member of the organization" of the Funds within the meaning of NI 81-105.

4. Neither the Filer nor the Existing Funds is in default of the securities legislation of any province or territory of Canada.

5. The Existing Funds are currently qualified for sale in each of the provinces and territories of Canada pursuant to an amended and restated simplified prospectus and annual information form dated 19 January 2012. The Funds are, or will be, distributed through dealers in the provinces and territories of Canada and as a result, such dealers are or will be "participating dealers" of the Funds within the meaning of NI 81-105.

6. Currently, the Filer has authorized capital consisting of four classes of units, of which 79,992,000 Class A Common LP Units (Class A Units), one Class B Common LP Unit (Class B Unit) and one Class D GP Unit (Class D Unit) are issued and outstanding:

(a) approximately 93.8% of the Class A Units are owned by Kai Commercial Trust, a privately held commercial trust, and the remainder of the Class A Units are held by senior management of the Filer. Holders of Class A Units are entitled to notice of, and to vote at, meetings of unitholders of the Filer;

(b) the General Partner owns the one Class B Unit, but the beneficial interest in the Class B Unit is held by senior management of the Filer. Holders of Class B Units are entitled to notice of, and to vote at, meetings of unitholders of the Filer; and

(c) the one Class D Unit is owned by the General Partner. The Class D unitholder is entitled to 0.01% of the net revenue of the Filer, to a maximum of $1,000. Holders of Class D Units have no voting rights.

7. The Filer intends to issue Class C Preferred LP Units (Class C Units), the value of which will be based on the value of the Filer's open-end mutual fund business. Holders of Class C Units will not ordinarily be entitled to notice of, or to vote at, meetings of unitholders of the Filer but will be entitled to a distribution and such other terms as may be fixed by the General Partner at the time they are issued.

8. Currently, the Filer intends to offer no more than 20 Class C Units for sale pursuant to the Private Placements, under an offering memorandum which provides information about the Filer's business to prospective investors.

9. Each Class C Unit will be entitled to participate as to 0.375% in the value of the Filer's open-end mutual fund business. As a result of the current limit on the number of Class C Units offered for sale, the Class C Units will represent no more than 7.5% of the value of the Filer's open-end mutual fund business.

10. The Filer intends to offer the Class C Units to certain individual Representatives of Dealers who distribute the Funds.

11. No Representative will own more than 1% of the outstanding equity interests of the Filer and no more than 20% of the outstanding equity interests of the Filer may be held collectively by Representatives. However, depending upon the number of Class C Units issued and outstanding from time to time, one Representative may own more than 5% of the Class C Units outstanding at a point in time.

12. Since the Filer does not have its units listed on a Canadian stock exchange, any purchase of a Class C Unit by a Representative would represent an "equity interest" in the Filer within the meaning of NI 81-105. Accordingly, absent the Exemption Sought, section 8.2 of NI 81-105 would require that:

(a) the simplified prospectus of the Funds disclose the aggregate amount of Class C Units held by all Representatives of each Dealer and all associates of those Representatives;

(b) for each trade of a security of a Fund, the Dealer acting in respect of the trade must deliver a document (the Disclosure Document) to the purchaser that discloses:

(i) the aggregate amount of Class C Units held by all its Representatives and associates of those Representatives; and

(ii) the aggregate amount of Class C Units held by the particular Representative acting on the trade and associates of that Representative; and

(c) in addition to the Disclosure Document described above, the Dealer must obtain the purchaser's consent to the trade prior to the completion of the trade and after the purchaser has received the Disclosure Document,

(collectively, the Equity Disclosure and Consent Requirements).

13. Section 8.2 of NI 81-105 would also require that the above disclosure and consents be updated if there are any changes in the equity interests in the Filer previously disclosed.

14. The Equity Disclosure and Consent Requirements could require the Filer to amend the simplified prospectus of the Funds each time a Representative purchases a single Class C Unit of the Filer, which can be costly and difficult to track.

15. For the Dealers, so long as one of its Representatives acquires a single Class C Unit of the Filer, the Dealer will have to ensure that all of its Representatives (including those that have not purchased Class C Units), located in each province and territory of Canada, have Disclosure Documents with precise, up to date information on equity interests in the Filer held by those Representatives, to be provided to purchasers and must ensure that they have obtained purchaser consents, prior to acting on any trade in securities of the Funds. The Disclosure Document and the consents would then have to be updated for each subsequent trade in securities of the Funds, in the event that any Representative purchases a single Class C Unit of the Filer.

16. The Filer anticipates that following the completion of each Private Placement, notwithstanding that Representatives may have purchased Class C Units of the Filer:

(a) each Dealer and each Representative will be free to choose which mutual fund to recommend to its clients and will consider recommending the Funds to their clients in the same manner as they consider recommending mutual funds that are not managed by the Filer; and

(b) each such Dealer and Representative will comply with its respective obligations to recommend to their clients the mutual funds that such Dealer and Representative believe would be suitable for such clients and in accordance with the investment objectives of such clients.

17. Following the completion of each Private Placement:

(a) the Filer will provide to each Dealer the compensation described in the simplified prospectus of the Funds in the same manner as the Filer provides compensation for any other participating dealer selling securities of the Funds whose sales representatives have not purchased Class C Units; and

(b) except as permitted by NI 81-105, neither the Filer nor any other member of the organization of the Funds will provide any incentive (whether express or implied) to any Representative or Dealer to encourage such Representative or Dealer to recommend to its clients the Funds rather than competing mutual funds that are not managed by the Filer.

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.

1. The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) in substitution of the equity disclosure requirements of subsection 8.2(1) NI 81-105 that applies to the simplified prospectuses of the Funds, the Funds will include the following disclosure in their simplified prospectuses that describes, as of a date that is within 30 days of the date of the simplified prospectus:

(i) that no more than 20% of the outstanding equity interests of the Filer may be held by Dealers and Representatives;

(ii) the names of any Dealers, the aggregate amount held by each Dealer's Representatives and the fact that up-to-date information can be obtained from the Filer's website, which will be updated on a monthly basis, as Class C Units of the Filer are issued;

(iii) that no Representative, together with his or her associates, will hold more than 1 percent of the outstanding equity interests of the Filer;

(iv) that a unitholder of the Filer that is a Representative may stand to benefit from the inflow of client money to the Funds; and

(v) that if an investor's sales representative, or the branch manager or other supervisor of the investor's sales representative, is a Representative, then that investor will receive a disclosure statement describing the equity interest held by that Representative before he or she invests in the Funds and that he or she must consent to the trade in securities of the Funds;

(b) the Filer updates its website to provide the aggregate percentage of equity interests held by Representatives of each Dealer and the names of the applicable Dealers will be updated if new Representatives or additional Dealers acquire an equity interest in the Filer, or if there is a change in the aggregate percentages previously disclosed;

(c) in substitution of the point of sale disclosure and consent requirements of subsections 8.2(3), 8.2(4) and (5) of NI 81-105 that would otherwise apply to Dealers and Representatives:

(i) each Dealer will deliver to a client of a Representative, prior to completing a trade in a security of a Fund, a disclosure document which states:

A. that all its Representatives and their associates hold, in the aggregate, no more than a maximum percentage of the equity interests of the Filer;

B. that the Representative acting on the trade and the associates of such Representative hold, in the aggregate, a maximum of 1 percent of the equity interests of the Filer; and

C. that the client may go to the Filer's website or call a specified toll-free number, which will be disclosed in such disclosure document, to obtain additional information about the holdings of the Dealer and its Representatives in the Filer;

(ii) each Dealer will disclose pursuant to (c)(i)(A) above, the number determined by the Dealer that reasonably and accurately represents the maximum amount that it expects its Representatives will from time to time hold in the Filer;

(iii) each Dealer will, following the delivery of the disclosure document described above, comply with the requirements of section 8.2(4) of NI 81-105 unless section 8.2(5) of NI 81-105 applies in respect of that trade; and

(iv) in the event a Representative assumes a position of authority or supervision over other sales representatives of the Dealer, before completing a trade in a security of a Fund that is acted on by one of those other sales representatives, the Dealer and the other sales representatives will comply with the requirements of (c)(i), (ii) and (iii) above, to disclose the amount held by the specific Representative in that position of authority;

(d) the Dealer will not be required to comply with the requirements described in condition (c) if the Dealer has already delivered the disclosure document and obtained the purchaser's consent on a previous trade and the Dealer is satisfied that the equity interests held by its Representatives at the time of the trade have not increased above the amounts disclosed in the previously delivered disclosure document;

(e) prior to a Dealer relying on this Decision, the Filer will provide such Dealer with a copy of this Decision together with an explanation to the Dealer of the operation of the Decision and the actions required on the part of the Dealer;

(f) any Dealer wishing to rely on this Decision will:

(i) send a written consent to the Filer agreeing to comply with the conditions of this decision as they relate to the Dealer and any Representative (the Written Consent); and

(ii) have in place written policies and procedures to ensure that there is compliance with the conditions of this Decision; and

(g) the Filer will:

(i) keep records of the Dealers from which it has received a Written Consent;

(ii) forward an updated list of all Dealers from which it has received a Written Consent to the principal regulator on a quarterly basis within 10 business days of the end of each quarter; and

(iii) include in either the simplified prospectus or the annual information form of the Funds a list of the Dealers from which it has received a Written Consent as of a date that is within 30 days of the date of the simplified prospectus or annual information form.

2. This Decision will expire on the date on which the requirements in section 8.2 of NI 81-105 are amended, revoked or replaced.