IA Clarington Investments Inc. and Investia Financial Services Inc

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirement in section 3.2.01 of National Instrument 81-101 Mutual Fund Prospectus Disclosure to deliver a fund facts document to investors who purchase mutual fund securities of series sold under an initial sales charge pursuant to automatic switches from series that were initially sold under deferred sales charge options after a minimum holding period -- Upon the automatic switches, investors will have equal or lower combined management and administration fees -- Relief granted subject to compliance with disclosure and notification requirements.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 3.2.01 and 6.1.

[TRANSLATION]

June 14, 2022

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUEBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF IA CLARINGTON INVESTMENTS INC. (the Filer) AND INVESTIA FINANCIAL SERVICES INC. (the Representative Dealer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer on behalf of certain investment funds (the Funds), for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirement in s. 3.2.01 of Regulation 81-101 respecting Mutual Funds Prospectus Disclosure, CQLR, c.V-1.1, r. 38, (Regulation 81-101) (the Pre-sale Fund Facts Delivery Requirement) for a dealer to deliver or send the most recently filed fund facts documents (Fund Facts) in respect of purchases of mutual fund securities made pursuant to Automatic Switches (as defined below) (the Exemption Sought).

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

a) the Autorité des marchés financiers is the principal regulator for this application;

b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System, CQLR c. V-1.1, r. 1 (Regulation 11-102) is intended to be relied upon in the provinces and territories of Canada other than the Jurisdictions; and

c) the 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 Regulation 14-101 respecting Definitions, CQLR c. V-1.1, r. 3, Regulation 11-102, Regulation 81-101 and Regulation 81-102 respecting Investment Funds, CQLR, c. V-1.1, r. 39 (Regulation 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 Filer

1. The Filer is a corporation amalgamated under the laws of Canada. The Filer's head office is in Québec City, Québec.

2. The Filer is registered as an investment fund manager in Québec, Ontario and Newfoundland and Labrador, as an exempt market dealer in Québec and Ontario, and as a portfolio manager in all of the provinces of Canada.

3. The Filer is the manager of the Funds, each of which is subject to the requirements of Regulation 81-102.

4. The head office of the Representative Dealer is located in Québec City, Québec.

5. The Representative Dealer is registered as an exempt market dealer and a mutual fund dealer in all provinces and territories of Canada.

6. The Representative Dealer is an affiliate of the Filer.

7. Neither the Filer nor the Representative Dealer is in default of securities legislation in any of the provinces or territories of Canada.

The Funds

1. Each Fund is an open-end mutual fund trust or an open-end mutual fund that is a class of shares of a mutual fund corporation.

2. Each Fund is a reporting issuer under the laws of all of the provinces and territories of Canada. The securities of the Funds have been qualified for distribution pursuant to a simplified prospectus, Fund Facts and annual information form that have been prepared and filed in accordance with Regulation 81-101. The units and shares of the Funds are referred to herein collectively as "Securities" and individually as a "Security".

3. The Funds currently offer up to 45 series of Securities. These include Series A, B, B5 (Series B and B5 together are referred to as Series B), E, E4, E5, E6, EF, EF6, EFX, EFX6, EX, EX5, EX6, F, F4, F5, F6, F8, F10, FX, FX5, FX6, I, L, L5, L6, L8, L10, LX, LX5 (Series L, L5, L6, L8, L10, LX and LX5 are collectively referred to as Series L), O, P, P6, T4, T5, T6, T8, T10 (Series T4, T5, T6, T8 and T10 are collectively referred to as Series T), V, W, X, X5 (Series X and Series X5 together are referred to as Series X), Y and ETF Series. The Filer may offer additional series in the future.

4. The Series A, Series T and Series X Securities of the Funds have three different purchase options: a front end option (the "ISC Option"), a low load option ("Low Load Option") and a deferred sales charge option ("DSC Option"). Under the ISC Option, investors may have to pay a negotiated commission to their dealer at the time they purchase securities, while under the Low Load Option and DSC Option, no commission is paid by the investor at the time of purchase, but the investor will be required to pay a redemption fee if he or she redeems within a certain period of time from the date of purchase. A redemption fee will be charged if an investor redeems their investment within 3 years from the date of purchase under the Low Load Option and within 7 years from the date of purchase under the DSC Option.

5. Series B of the Funds (the "Lower Fee Series") are only offered under the ISC Option and have, or will have, lower combined management and administration fees than Series A, Series T, and Series X and any future Series A, Series T or Series X Securities.

6. Series L Securities of the Funds are offered under an advisor service charge option (the "Advisor Service Charge Option" and collectively with the Low Load Option and DSC Option, the "Deferred Sales Charge Options"). Under this option, no commission is paid by the investor at the time of purchase, but the investor's dealer pays a redemption fee on a declining scale if the investor redeems within 3 years of purchase.

7. The Securities of the Funds may be purchased through the Representative Dealer, or other dealers that may or may not be affiliated with the Filer (the Dealers).

8. Each of the Dealers will be registered as a dealer in one or more of the provinces and territories of Canada.

9. The Funds are not in default of securities legislation in any of the provinces and territories of Canada.

Automatic Switches

1. The Filer intends to start a program effective on or about June 24, 2022 (the Implementation Date), whereby investors holding Series A, Series T or Series X Securities with Deferred Sales Charge Options and that have held the Securities for the minimum amount of time as set out in the Funds' simplified prospectus, will automatically be switched into Series B of the same Fund, where Series B is available without the dealer or investor having to initiate the trade. Where there is no Series B, the investor would be switched to the ISC Option of the same series. Where there is no ISC Option for the series, an investor would be switched into the most similar series with an ISC Option. The Filer intends to also automatically switch investors who hold Series L Securities that have held the Securities for 3 years to: i) the appropriate Series B of the same Fund, where Series B is available; ii) Series A or Series X under the ISC Option of the same Fund if Series B is not available and the original Series L securities do not pay a monthly distribution; or iii) the appropriate Series T or Series X under the ISC Option where the Series L Securities pay a monthly distribution (collectively, the "Automatic Switches" and each an "Automatic Switch").

2. Subsequent to each Automatic Switch, an investor's account would continue to hold Securities in the same Funds, with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures and will continue to have the same rights as securityholders as they did prior to the Automatic Switch.

1. There are no sales charges, switch fees or other fees payable by the investor upon an Automatic Switch. In addition, based on current legislation, implementation of the Automatic Switches between series of the same Fund will have no adverse tax consequences on investors.

2. The only material difference to the investor between Series A, L, T or X Securities and the Lower Fee Series Securities or the series being switched into is that the combined management and administration fees charged may be lower than those charged for Series A, L, T or X Securities.

3. A higher trailing commission will be paid to an investor's representative upon an Automatic Switch, but as stated above the combined management and administration fees will be the same or lower.

4. The Filer exercises no discretion in carrying out the Automatic Switch program and acts only according to the redemption schedule of Series A, L, T or X Securities pursuant to the terms of the program.

Fund Facts Delivery Relief

1. An Automatic Switch will entail a redemption of the Series A, L, T or X Security after the redemption schedule has expired, immediately followed by a purchase of the applicable ISC Option Security. Each purchase of Securities done as part of an Automatic Switch will be a "distribution" under securities legislation, which triggers the Pre-Sale Fund Facts Delivery Requirement.

2. Pursuant to the Pre-Sale Fund Facts Delivery Requirement, a dealer is required to deliver the most recently filed Fund Facts of a series of a fund to an investor before the dealer accepts an instruction from the investor for the purchase of securities of that series of the fund.

3. While the Filer will initiate each trade done as part of an Automatic Switch, the Filer proposes not to deliver the Fund Facts to investors in connection with the purchase of Securities made pursuant to an Automatic Switch for the following reasons:

a) the investment of such investors will be in Securities of the same Fund with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures and will be otherwise identical, except for the Automatic Switches;

b) at no time will an investor pay combined management and administration fees at a rate higher than the rate of the combined management and administration fees of the Securities for which it initially subscribed; and

c) since Series A, L, T or X securityholders would have received a simplified prospectus or Fund Facts disclosing the higher level of fees, which applied to the series for which they initially subscribed, the investor would derive little benefit from receiving a further Fund Facts document in connection with the purchase of Securities made pursuant to an Automatic Switch.

1. The Filer will deliver, or will arrange for the delivery of, trade confirmations to investors in connection with each trade done further to an Automatic Switch. Furthermore, details of the changes in series of Securities held will be reflected in the account statements sent to investors for the quarter in which the change occurred.

2. The Filer will communicate with investors and dealers about the Automatic Switches prior to the Implementation Date.

3. A press release and material change report have been issued and filed on March 14, 2022 to announce the Automatic Switches.

4. The simplified prospectus for Series A, L, T and X Securities will disclose information about the Automatic Switches that includes the following:

a) that investors' investment will be switched to a Lower Fee Series or ISC Option Securities with the same or lower combined management and administration fees upon meeting the termination of the applicable redemption schedule in Series A, L, T or X Securities (the Minimum Period);

b) that other than possibly lower fees, there will be no other material difference between Series A, L, T and X Series and the Lower Fee Series or the ISC Option Securities;

c) the trailing commission rates payable by the Filer upon the Automatic Switch to the Lower Fee Series or the ISC Option Securities; and

d) that they will not receive the Fund Facts when they purchase Securities further to an Automatic Switch, but that

i. they may request the most recently filed Fund Facts for the relevant series by calling a specified toll-free number or by sending a request via email to a specified email address;

ii. the most recently filed Fund Facts will be sent or delivered to them at no cost;

i. the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website; and

ii. they will not have the right to withdraw from an agreement of purchase and sale in respect of a purchase of series Securities made pursuant to an Automatic Switch, but they will have the right of action for damages or rescission in the event any Fund Facts or document incorporated by reference into a simplified prospectus for the relevant series contains a misrepresentation, whether or not they request the Fund Facts.

1. In the absence of the Exemption Sought, the Automatic Switches are not capable of being implemented without compliance with the Pre-Sale Fund Facts Delivery Requirement.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

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

1. Following an Automatic Switch, the combined management and administration fees of the Lower Fee Series or ISC Option series will be the same or lower than the Deferred Sales Charge Options.

2. There are no sales charges, switch fees or other fees payable by the investor upon an Automatic Switch.

3. The Filer will send a notice to investors prior to the Implementation Date to inform them of the Automatic Switches and of the following information:

a) investors will not receive the Fund Facts following an Automatic Switch;

b) a higher trailing commission will be paid to an investor's representative upon an Automatic Switch, but the combined management and administration fees will be the same or lower;

c) the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;

d) the details of the Automatic Switches are explained in the simplified prospectus of the Funds in section "Switching Mutual Fund Series Securities of the Funds"; and

e) investors may contact their dealer's representative or the Filer for more information on the Automatic Switch.

1. For investors who switch into a different Fund under the same purchase option and redemption schedule for Series A, Series L, Series T or Series X Securities:

a) each Fund Facts for Series A, Series L, Series T and Series X Securities, filed on the earlier of the next renewal of or amendment filing, and thereafter, each subsequent renewal of, or amendment filing for, each Fund shall disclose:

i. that the Series A, Series L, Series T and Series X Securities, as applicable, will be automatically switched following the expiry of the applicable Minimum Period on the applicable switch date, to the Lower Fee Series or an ISC Option series, as the case may be, of the same Fund;

ii. that such Lower Fee Series or ISC Option Securities will have the same or lower combined administration and management fees than the corresponding Series A, Series L, Series T or Series X Securities, and will not be subject to a redemption fee;

iii. the rate of the combined management and administration fees for the Lower Fee Series or the applicable ISC Option series, if lower than the rate of the initial series purchased, and where the rate of the combined management and administration fees is the same, a note that the combined management and administration fees are the same after the Automatic Switch; and

iv. the trailing commission rates payable by the Filer in respect of the Lower Fee Series or applicable ISC Option Securities upon the Automatic Switch (collectively with items i, ii and iii, the Series A, Series L, Series T and Series X Disclosure);

a) the Fund Facts for Series A, Series L, Series T and Series X Securities, as applicable, containing the Series A, Series L, Series T and Series X Disclosure is delivered to prospective Series A, Series L, Series T and Series X Securities investors before a dealer accepts an instruction from such investors to switch into Series A, Series L, Series T and Series X Securities in accordance with the Pre-Sale Fund Facts Delivery Requirement; and

a) the Filer incorporates the Series A, Series L, Series T and Series X Disclosure, other than item (a)iii, in the simplified prospectus of the Funds.

1. For investors in Series A, Series L, Series T and Series X Securities, the Filer sends to such investors an annual reminder notice advising that they will not receive the Fund Facts upon an Automatic Switch, but that:

a) they may request the most recently filed Fund Facts for the relevant series by calling a specified toll-free number or by sending a request via email to a specified address or email address;

b) the most recently filed Fund Facts will be sent or delivered to them at no cost;

c) the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website; and

d) they will not have the right to withdraw from an agreement of purchase and sale in respect of a purchase of the Lower Fee Series or applicable ISC Option Securities made pursuant to an Automatic Switch, but they will have the right of action for damages or rescission in the event any Fund Facts or document incorporated by reference into a simplified prospectus for the Lower Fee Series or ISC Option Securities, as applicable, contains a misrepresentation, whether or not they request the Fund Facts.

1. The Filer provides to the principal regulator beginning 60 days after the date upon which the Exemption Sought is first relied upon by a Dealer, and thereafter, annually within 60 days of the calendar year end, either:

a) a current list of all such Dealers that are relying on the Exemption Sought, or;

b) an update to the list of such Dealers or confirmation that there has been no change to such list; and

1. Prior to a Dealer relying on the Exemption Sought, the Filer provides to the Dealer a disclosure statement informing the Dealer of the implications of this decision.