Cowan Asset Management Limited and the Fund

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Related issuer relief conditional on IRC approval and purchases occurring on an exchange.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(a), 111(2)(c)(i), 111(2)(c)(ii), 111(4) and 113.

November 22, 2019

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 COWAN ASSET MANAGEMENT LIMITED (the Filer) AND IN THE MATTER OF THE FUND (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of Cowan Absolute Return Fund (the Fund), a pooled fund established and managed by the Filer to which National Instrument 81-102 Investment Funds (NI 81-102) does not apply, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

1. exempting the Fund from the requirements in the Legislation (the Relevant Provisions) that prohibit the Fund from making an investment, or holding an investment in an issuer in which a Related Party has a significant interest to allow the Fund to make and/or hold an investment in an issuer in which a Related Party has a significant interest (the Requested Relief).

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 Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Nova Scotia (collectively, with Ontario, the Jurisdictions).

Interpretation

Terms defined in the Legislation and National Instrument 14-101 Definitions have the same meaning if used in this Decision, unless otherwise defined.

IRC means independent review committee.

NI 81-107 means National Instrument 81-107 Independent Review Committee for Investment Funds.

Related Person means an officer or director of an investment fund, its management company or distribution company or an associate of any of them.

Related Party means a Related Person or a Related Shareholder.

Related Shareholder means any person or company who is a substantial security holder of an investment fund, its management company or its distribution company.

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

The Filer

1. The Filer is a corporation incorporated under the laws of Ontario.

2. The head office of the Filer is located in Cambridge, Ontario.

3. The Filer is registered as an investment fund manager in Ontario, a portfolio manager in Ontario and Nova Scotia and an exempt market dealer in Ontario and Nova Scotia.

4. The Filer is a wholly-owned subsidiary of Princeton Holdings Limited (Princeton).

5. The Filer is, and will continue to be, the investment fund manager and portfolio manager of the Fund. CIBC Mellon Trust Company is the trustee of the Fund.

6. Other than as described in Representation 15, neither the Filer nor the Fund is in default of securities legislation in any of the Jurisdictions.

Princeton

7. Princeton is a corporation incorporated under the laws of Ontario.

8. Princeton owns 100% of the issued and outstanding shares of the Filer and, pursuant to section 110(2)(b) of the Legislation, is a substantial security holder of the Filer.

9. Princeton beneficially owns more than 10% of the issued and outstanding common shares of Ceres Global Ag. Corp (the Ceres Shares) which ownership position, pursuant to section 110(2)(a)(i) of the Legislation, represents a significant interest in Ceres Shares. Princeton acquired its significant interest (Significant Interest) in Ceres Shares as of October 31, 2014.

The Fund

10. The Fund is an open-ended investment trust established under the laws of Ontario pursuant to a pooled fund trust agreement dated December 9, 2013. The Fund is a mutual fund in accordance with the definition of same in the Legislation.

11. Securities of the Fund have been and will be, distributed on a private placement basis pursuant to available prospectus exemptions in Ontario. The Fund is not a reporting issuer and NI 81-102 does not apply to the Fund.

Investment in Ceres Shares

12. The Fund beneficially owns 499,000 Ceres Shares. 377,150 of the Ceres Shares beneficially owned by the Fund were purchased on an exchange after Princeton acquired a significant interest in Ceres Shares (the Relevant Shares).

13. The Fund currently holds the Relevant Shares and therefore the Relevant Shares are equity securities of an issuer in which a Related Shareholder of the Filer has a significant interest. Further, a director of the Filer, as manager of the Fund, currently has a significant interest in Ceres Global Ag. Corp.

14. Section 6.2 of NI 81-107 provides an exemption from the Relevant Provisions to investment funds that are reporting issuers provided that any purchase of a related security is made on an exchange and approved by the fund's IRC in accordance with s. 5.2(2) of NI 81-107. The Filer, on behalf of the Fund, however, cannot avail itself of the exemption in 6.2 of NI 81-107 in this instance because the Fund is not a reporting issuer. Accordingly, pursuant to the Relevant Provisions in the Legislation, the Fund cannot continue to hold the Relevant Shares, nor purchase additional Ceres Shares, without the Requested Relief.

15. The Fund is not in default of securities legislation in any of the Jurisdictions, except with respect to its purchase and holding of the Relevant Shares in contravention of the Relevant Provisions. The Filer was not aware of the Relevant Provisions when it made the investment decision to acquire Ceres Shares on behalf of Princeton and the Fund, when Princeton acquired its Significant Interest in Ceres Shares on October 31, 2014 and when the Relevant Shares were acquired on behalf of the Fund. As soon as the Relevant Provisions came to the Filer's attention, the Filer initiated the process of rectifying the Fund's deficiency, resulting in the Filer's application on behalf of the Fund for the Requested Relief to permit the Fund to continue to hold the Relevant Shares and purchase additional Ceres Shares. As part of this process, the Filer has taken steps to establish an IRC for the Fund and to strengthen its internal control systems to ensure future compliance with applicable laws and regulations.

16. The Filer believes that it is in the best interest of the Fund and its investors for the Fund to continue to hold the Relevant Shares and, if appropriate, to acquire additional Ceres Shares until such time as the Filer considers it appropriate to dispose of the Ceres Shares based on market conditions and its investment thesis regarding the value of Ceres Shares.

17. The Filer will ensure that any purchase of Ceres Shares and the continued holding of Ceres Shares is consistent with the investment objectives of the Fund.

18. Not allowing the Fund to hold the Relevant Shares could be prejudicial to the Fund because the Fund could be required to dispose of the Relevant Shares in adverse market conditions, and the Fund would not have the opportunity to realize the fair value of the Relevant Shares.

19. Any decision by the Filer to purchase Ceres Shares on behalf of the Fund would be made in the best interest of the Fund, free from any influence by Princeton and in accordance with the Filer's policy for the fair allocation of investment opportunities.

20. The Filer will establish an IRC for the Fund. The IRC will be composed in accordance with section 3.7 of NI 81-107 and will be subject to, and have the protections of, each of the provisions set out in section 3.9 of NI 81-107, as if the Fund were subject to NI 81-107. The mandate of the IRC will be to review: (i) any purchase of Ceres Shares by the Fund, to ensure compliance with Section 5.2(2) of NI 81-107, as if the Fund were subject to NI 81-107; and (ii) to review other matters referred to the IRC by the Filer in accordance with Section 5.1 of NI 81-107, as if the Fund were subject to NI 81-107.

21. If the IRC becomes aware of an instance where the Filer, as manager of the Fund, did not comply with the terms of this decision or a condition imposed by the securities legislation or the IRC in its approval, the IRC will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction where the Fund is organized.

Decision

The principal regulator in the Jurisdiction is satisfied that the decision satisfies the test set out in the Legislation for the principal regulator to make the decision.

(a) The decision of the principal regulator under the Legislation is that the Requested Relief is granted to permit the Filer to purchase and hold Ceres Shares on behalf of the Fund provided that:

(i) the purchase or holding of Ceres Shares is consistent with, or necessary to meet, the investment objectives of the Fund;

(ii) at the time of any purchase of Ceres Shares, the IRC of the Fund has approved the transaction in accordance with subsection 5.2(2) of NI 81-107;

(iii) the Filer, as the investment fund manager of the Fund, complies with section 5.1 of NI 81-107 and the Filer and the IRC comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(iv) any Ceres Shares purchased or sold by the Fund shall be made in the secondary market on an exchange on which the Ceres Shares are listed and traded; and

(v) no later than the time the Fund files its annual financial statements, and no later than the 90th day after the end of each financial year of the Fund, the Filer files with the securities regulatory authority or regulator the particulars of any investments made in reliance on the Requested Relief.

"Lawrence Haber"	"Cecilia Williams"
Commissioner	Commissioner
Ontario Securities Commission	Ontario Securities Commission