Guardian Capital LP et al.
Headnote
National Policy 11-203 -- relief granted from sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) of National Instrument 81-102 Mutual Funds to permit mutual funds, including mutual funds that have not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in their sales communications performance data for the period when the funds were not reporting issuers -- relief also granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure for the purposes of the relief requested from Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document, to permit the Funds to include in their respective fund facts for a certain series, the past performance data for the period when the funds were not reporting issuers.
National Policy 11-203 -- relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Form 81-106F1, Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1, to permit mutual funds, including mutual funds that have not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in annual and interim management reports of fund performance the financial highlights and past performance of the funds that are derived from the funds' annual financial statements that pertain to time periods when the funds were not a reporting issuer.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), 15.8(3)(a.1) and 19.1.
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 2.1.
Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document.
National Instrument 81-106 Mutual Fund Continuous Disclosure, ss. 4.4 and 17.1.
Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1.
December 30, 2015
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 GUARDIAN CAPITAL LP (the Filer) AND IN THE MATTER OF GUARDIAN FUNDAMENTAL GLOBAL EQUITY FUND AND GUARDIAN SHORT DURATION BOND FUND (each a Fund, and collectively, the Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Series I units of the Funds from:
(a) Section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and
(b) Items 3.1(7), 4.1(1) in respect of the requirement to comply with sections 15.3(2) and 15.3(4)(c) of National Instrument 81-102 Investment Funds (NI 81-102), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit each Fund to include in its annual and interim management reports of fund performance the past performance data of the Fund notwithstanding that:
(i) such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus; and
(ii) in the case of Guardian Fundamental Global Equity Fund, the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,
(collectively, 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 the Application, and
(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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.
Interpretation
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
This decision is based on the following facts represented by the Filer:
1. Each Fund is an open-ended mutual fund trust created under the laws of the Province of Ontario on the following dates:
Fund Name
Date of Inception
Guardian Fundamental Global Equity Fund
July 31, 2014
Guardian Short Duration Bond Fund
August 29, 2013
(individually, an Inception Date, and collectively, the Inception Dates).
2. Each Fund is governed by an amended and restated master declaration of trust dated March 14, 2011, as amended.
3. The Filer is the investment fund manager of the Funds. The head office of the Filer is located in Ontario.
4. The Filer is registered as a portfolio manager and exempt market dealer in each province of Canada and as an investment fund manager in each of Ontario, Québec and Newfoundland and Labrador. The Filer is also registered as a commodity trading counsel and commodity trading manager in Ontario.
5. Since the respective Inception Dates until April 24, 2014 with respect to Guardian Short Duration Bond Fund and until April 22, 2015 with respect to Guardian Fundamental Global Equity Fund, Series I units (Series I Units) of each Fund were distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 Prospectus Exemptions (NI 45-106) in each Jurisdiction.
6. Since the issuance of the receipt for the simplified prospectus, annual information form and funds facts (the Disclosure Documents) on April 24, 2014 with respect to Guardian Short Duration Bond Fund and on April 22, 2015 with respect to Guardian Fundamental Global Equity Fund, each Fund has distributed Series I Units to the public and each Fund also became a reporting issuer under the securities legislation of each province and territory of Canada, other than Québec (collectively, the Jurisdictions). Each Fund also offers series W units to the public pursuant to the Disclosure Documents. In addition, each Fund became subject to the requirements of NI 81-102 and NI 81-106 that apply only to investment funds that are reporting issuers.
7. The Filer and the Funds are not in default of securities legislation in any province or territory of Canada.
8 Since its Inception Date, as a "mutual fund in Ontario", each Fund has prepared and sent audited annual and unaudited interim financial statements to all holders of its securities in accordance with NI 81-106.
9. Since its Inception Date, each Fund has complied with the investment restrictions and practices contained in NI 81-102, including not using leverage in the management of its portfolio.
10. Each Fund has been managed substantially similarly after it became a reporting issuer as it was prior to becoming a reporting issuer. As a result of each Fund becoming a reporting issuer:
i. the Fund's investment objectives have not changed, other than to provide additional detail as required by National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101);
ii. Series I unitholders of each Fund continue to pay a negotiated investment advisory fee;
iii. the day-to-day administration of the Fund has not changed, other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which would have impacted the portfolio management of the Fund) and to provide additional features that are available to investors of mutual funds managed by the Filer, as described in the Disclosure Documents; and
iv. the management expense ratio of the Series I Units of each Fund has not increased by more than 0.10%, which the Filer considers to be an immaterial amount.
11. As a reporting issuer, each Fund is required under NI 81-106 to prepare and send annual and interim management reports of fund performance (individually, an MRFP and collectively, the MRFPs) to all holders of its securities on an annual and interim basis.
12. Without the Requested Relief, the MRFP of each Fund cannot include financial highlights and performance data of the Fund that relate to a period prior to its becoming a reporting issuer.
13. The Filer also proposes to present the performance data of the Series I Units of each Fund for the time period since its inception in sales communications and fund facts of each Fund. The Filer has filed a separate application for exemptive relief from certain provisions of NI 81-102 and Form 81-101F3 -- Contents of Fund Facts Document to permit each Fund, with respect to its Series I Units, to include its performance data since its inception in sales communications and fund facts (the NI 81-102 and NI 81-101 Relief).
14. The performance data and other financial data of each Fund for the time period before it became a reporting issuer is significant and meaningful information for existing and prospective investors of the Series I Units of the Fund.
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 under the Legislation is that the Requested Relief is granted provided that:
(a) any MRFP that includes performance data of Series I Units of each Fund relating to a period prior to when each Fund was a reporting issuer discloses:
(i) that the Fund was not a reporting issuer during such period;
(ii) that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer; and
(iii) that the financial statements of the Fund for such period are posted on the Fund's website and are available to investors upon request;
(b) the Filer posts the financial statements of each Fund for the past 10 years, or since the Fund's inception, whichever period is lesser, on the Fund's website and makes those financial statements available to investors upon request; and
(c) the Funds prepare sales communications and fund facts in accordance with the NI 81-102 and NI 81-101 Relief.