Elliot & Page Ltd. et al. - MRRS Decision
Headnote
Investment by the RSP Fund in forward contracts issued by related counterparties, or its affiliates, exempted from therequirements of clauses 111(2)(a),111(2)(c),117(1)(a), 117(1)(d) and 118(2)(a), subject to specified conditions.
Statues Cited
Securities Act (Ontario), R.S.O. 1990 c.S.5.,as am.,111(2)(a),111(2)(c),111(3),113, 117(1)(a), 117(1)(d), 117(2),118(2)(a) and 121(2)(a).
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
ONTARIO, QUEBEC, NOVA SCOTIA
AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ELLIOTT & PAGE LIMITED
ELLIOTT & PAGE RSP AMERICAN GROWTH FUND
ELLIOTT & PAGE RSP U.S. MID-CAP FUND
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of BritishColumbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia and Newfoundland (the "Jurisdictions") hasreceived an application from Elliott & Page Limited ("EPL") on behalf of Elliott & Page RSP American Growth Fundand Elliott & Page RSP U.S. Mid-Cap Fund (individually, an "RSP Fund" and collectively, the "RSP Funds") andElliott & Page American Growth Fund and Elliott & Page U.S. Mid-Cap Fund (individually, an "Underlying Fund" andcollectively, the "Underlying Funds") for a decision pursuant to the securities legislation of the Jurisdictions (the"Legislation") that:
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holding aninvestment in a person or company who is a substantial security holder of the mutual fund, its managementcompany or distribution company shall not apply in respect of investments by the RSP Funds in the SecondForward Contract (as defined below) and/or other forward contract transactions (collectively, the "ForwardContracts") with The Manufacturers Life Insurance Company ("Manulife Financial") or its affiliates (ManulifeFinancial and/or its affiliates being hereinafter referred to as "Manulife"), as counterparty;
2. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making an investmentin an issuer in which any person or company who is a substantial security holder of the mutual fund, itsmanagement company or distribution company has a significant interest shall not apply in respect of theinvestments by the RSP Funds in the Forward Contracts;
3. the requirements contained in the Legislation requiring the management company to file a report relating toa purchase or sale of securities between the mutual fund and any related person or company or anytransaction in which, by arrangement other than an arrangement relating to insider trading in portfoliosecurities, the mutual fund is a joint participant with one or more of its related persons or companies, shallnot apply in respect of investments by the RSP Funds in the Forward Contracts; and
4. the restrictions of the Legislation prohibiting a portfolio manager from causing assets of a mutual fund to beinvested in assets of any issuer in which a responsible person, as defined in the Legislation, or anassociate of a responsible person is a director or officer unless that specific fact is disclosed to the clientand the written consent of the client to the investment is obtained before the purchase.
The Legislation outlined above in paragraphs 1 through 4 will be referred to in this Decision Document as the"Applicable Legislation".
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System") the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS EPL has represented to the Decision Makers that:
1. Each of the RSP Funds and the Underlying Funds is an open-end mutual fund trust established under thelaws of the Province of Ontario.
2. EPL is a corporation established under the laws of the Province of Ontario. EPL is the manager, principaldistributor and promoter of each of the RSP Funds and the Underlying Funds. The registered head officeof EPL is in the province of Ontario.
3. The RSP Funds and the Underlying Funds are reporting issuers and are not in default of any requirementsof the Legislation. The securities of each of the RSP Funds and the Underlying Funds are currentlyqualified for distribution pursuant to a simplified prospectus and annual information form dated August 16,2000 (collectively, the "Prospectus").
4. In connection with the creation of the RSP Funds in November 1999, applications were made and reliefobtained from the various securities authorities in Canada providing the standard form of exemptive reliefrequired in connection with the creation and public distribution of RSP mutual funds like the RSP Funds.The exemptive relief is evidenced by: (i) a letter dated November 17, 1999 from the Ontario SecuritiesCommission on behalf of each of the Jurisdictions providing the required approval under National PolicyStatement No. 39; and (ii) an MRRS Decision Document dated November 17, 1999 (collectively, the "1999Decision Documents").
5. The RSP Funds originally entered into a forward contract (the "Original Forward Contract") with a certainfinancial institution (the "Original Counterparty").
6. Manulife, a financial institution which owns 100% of EPL, may in the future be prepared to enter into aforward contract (the "Second Forward Contract") as a second counterparty (the "Second Counterparty").
7. The Prospectus (and each renewal thereof) will disclose the involvement of Manulife in acting as theSecond Counterparty or otherwise as a counterparty as well as all applicable charges in connection with aForward Contract.
8. Except for the transaction costs payable to Manulife in relation to a Forward Contract, none of the RSPFunds, the Underlying Funds, EPL or any affiliate or associate of any of the foregoing will pay any fees orcharges of any kind to any other related party in connection with a trade in a Forward Contract.
9. Except to the extent evidenced by decisions and specific approvals granted by the Decision Makers, anyinvestment by the RSP Funds in a Forward Contract have been structured to comply with the investmentrestrictions of the Legislation and National Instrument 81-102.
10. In the absence of the Decision, the Applicable Legislation prohibits each of the RSP Funds from investingin a Forward Contract.
11. In the absence of the Decision, the Applicable Legislation requires EPL to file a report on every investmentmade by the RSP Funds in a Forward Contract.
12. Each investment by the RSP Funds in a Forward Contract represents the business judgement ofresponsible persons, uninfluenced by considerations other than the best interests of the RSP Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers are satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable Legislation doesnot apply so as to prevent the RSP Funds from investing in a Forward Contract.
PROVIDED THAT IN RESPECT OF the investments by the RSP Funds in a Forward Contract, theDecision shall only apply in respect of investments in a Forward Contract that are made by the RSP Funds incompliance with the 1999 Decision Documents and the following conditions:
(a) the pricing terms offered by Manulife to the RSP Funds under a Forward Contract are at least asfavourable as: (i) the pricing terms entered into by similar mutual funds of similar size as the RSPFunds with non-related counterparties; and (ii) the pricing terms entered into by similar mutualfunds of similar size as the RSP Funds committed by Manulife;
(b) prior to the RSP Funds entering into a Forward Contract with Manulife, the independent auditors ofthe RSP Funds will review the pricing terms described in condition (a) to ensure that the pricing isat least as favourable;
(c) the review by the independent auditors will be undertaken not less frequently than on a quarterlybasis and, in addition, on every renewal or amendment to pricing terms of a Forward Contract,during the term of such contract;
(d) the RSP Funds will enter into a Forward Contract with Manulife only once confirmation offavourable pricing is received from the independent auditors of the RSP Funds; and
(e) the Prospectus (and each renewal thereof) discloses the independent auditors' role and review ofthe Forward Contracts, as well as the involvement of Manulife and its relationship to the RSPFunds.
January 8, 2001.
"J.A. Geller" "Howard I. Wetston"