Investment Management Corporation of Ontario

Decision

Headnote

The Investment Management Corporation of Ontario (IMCO), and investment pools (Investment Pools) to be managed by IMCO as pooled investment vehicles for its members (IMCO Members), exempted from the dealer registration requirement and the prospectus requirement in the Securities Act (OSA) in connection with the distribution of any units of the Investment Pool to any IMCO Member that is an “accredited investor” – IMCO and the Investment Pools also exempted from the dealer registration requirement and the prospectus requirement in the OSA, in connection with the distribution of certain management interests in the Investment Pool to IMCO or another person or company (an IMCO Subsidiary) of which all of the securities or other interest issued by that other person or company are beneficially owned by IMCO.

IMCO exempted from the adviser registration requirement in the OSA in connection with IMCO providing certain investment advisory services in respect of securities to IMCO Members or to an Investment Pool – IMCO also exempted from the adviser registration requirement in the Commodity Futures Act in connection with IMCO providing certain investment advisory services in respect of commodity futures contracts or commodity futures options to any IMCO Member or Investment Pool.

IMCO exempted from the investment fund manager registration requirement in the OSA in connection with IMCO acting as an investment fund manager for any Investment Pool that is an investment fund in respect of which the only holders of securities issued by the Investment Pool are IMCO Members, IMCO or an IMCO Subsidiary.

Investment Pools also exempted from the financial statement requirements in Part 2 of National Instrument 81-106 Investment Fund Continuous Disclosure, subject to conditions.

Applicable Legislative Provisions

Commodity Futures Act, R.S.O. 1990, c. C.20, ss. 22(1), 80.

Securities Act, R.S.O. 1990, c. S.5, ss. 1(1), 25(1), 25(3), 25(4), 53(1), 74(1).

Broader Public Sector Accountability Act, 2010, S.O. 2010, c. 25.

Municipal Act, 2001, S.O. 2001, c. 25, s. 1.

Ontario Regulation 251/16.

Pension Benefits Act, R.S.O. 1990, c. P.8, ss. 22(1), 22(2), 22(4), 22(5), 22(8).

Public Service of Ontario Act, 2006, S.O. 2006, c. 35, Sched. A.

Investment Management Corporation of Ontario Act, 2015, S.O. 2015, c.20, Sched. 19, ss. 3(2), 3(3), 9(1), 9(1)3, 9(3), 10, 10(1), 12(2), 12(4), 12(6), 12(13), 13, 14, 17(2), 17(3), 18, 21, 22, 23, 24, 25(1)(a), 9(1)2, 19(1), 19(2), 19(4), 21.

Multilateral Instrument 11-102 Passport System, s. 4.7.

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 1.1.

National Instrument 45-106 Prospectus Exemptions, s. 1.1.

National Instrument 81-102 Investment Funds, ss. 6.2, 6.3.

National Instrument 81-106 Investment Fund Continues Disclosure, ss. 1.1, 17.1, and Part 2.

May 17, 2017

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the OSA)

 

AND

 

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, c. C.20, AS AMENDED

(the CFA)

 

AND

 

IN THE MATTER OF

THE INVESTMENT MANAGEMENT CORPORATION OF ONTARIO

(IMCO)

 

COMMISSION AND DIRECTOR DECISIONS

 

Background

The Ontario Securities Commission (the OSC or Commission) has received an application from IMCO for decisions under the OSA and CFA providing for the following exemptions (collectively, the Commission Exemptions Sought):

 

A.            rulings under subsection 74(1) of the OSA:

 

(a)           exempting each Investment Pool, and IMCO acting on behalf of the Investment Pool, from the OSA dealer registration requirement in connection with trades in (i) any Units of the Investment Pool to any IMCO Member that is then an accredited investor; or (ii) any Management Interests in the Investment Pool to IMCO or an IMCO Subsidiary;

 

(b)           exempting each Investment Pool, and IMCO acting on behalf of the Investment Pool, from the OSA prospectus requirement in connection with the distribution of (i) any Units of the Investment Pool to any IMCO Member that is then an accredited investor; or (ii) any Management Interests in the Investment Pool to IMCO or an IMCO Subsidiary (the OSA Prospectus Exemption Sought);

 

(c)           exempting IMCO from the OSA adviser registration requirement in connection with IMCO providing Investment Advisory Services in respect of securities to any IMCO Member or any Investment Pool; and

 

(d)           exempting IMCO from the OSA investment fund manager registration requirement in connection with IMCO acting as an investment fund manager for any Investment Pool that is an investment fund in respect of which the only holders of securities issued by the Investment Pool are IMCO Members, IMCO or an IMCO Subsidiary; and

 

B.            an order, under section 80 of the CFA, exempting IMCO from the CFA adviser registration requirement in connection with IMCO providing Investment Advisory Services in respect of commodity futures contracts or commodity futures options to any IMCO Member or any Investment Pool (the CFA Exemption Sought).

 

The OSC has also received an application from IMCO for an order under section 17.1 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106, and together with the OSA and the CFA, the Legislation), exempting the Investment Pools from the financial statement requirements in Part 2 of NI 81-106 that apply to “mutual funds in Ontario” (the Director Exemption Sought).

Interpretation

In these decisions, the following terms shall have the following meanings unless the context otherwise requires:

 

i.              accredited investor has the same meaning as in section 1.1 of NI 45-106;

 

ii.             BPS Act means the Broader Public Sector Accountability Act, 2010 (Ontario);

 

iii.            By-Laws means the by-laws of IMCO made under the IMCO Act;

 

iv.            CCO means the officer of IMCO who is responsible for the monitoring and oversight of the Compliance System;

 

v.             CEO means the Chief Executive Officer of IMCO;

 

vi.            CFA adviser registration requirement means the requirement in subsection 22(1) of the CFA that prohibits a person or company from engaging in the business of advising others as to trading in a commodity futures contract or commodity futures option unless that person or company is registered in the appropriate category of registration under the CFA;

 

vii.           Compliance System means the system of controls and supervision established by IMCO to: (i) provide reasonable assurance that IMCO and each individual acting on its behalf is in compliance with the IMCO Legislation; and (ii) manage the risks associated with its business in accordance with prudent business practices;

 

viii.          Founding Members means the initial members of IMCO, being the Ontario Pension Board and Workplace Safety and Insurance Board, as prescribed under Ontario Regulation 251/16;

 

ix.            Government of Ontario means Her Majesty in right of Ontario and any ministry or department thereof;

 

x.             IMA means, in the case of each IMCO Member, the discretionary investment management agreement entered into between IMCO and the IMCO Member in accordance with the IMCO Act;

 

xi.            IMCO Act means the Investment Management Corporation of Ontario Act, 2015 (Ontario);

 

xii.           IMCO Regulations means regulations made under the IMCO Act;

 

xiii.          IMCO Board means the board of directors of IMCO;

 

xiv.          IMCO Legislation means the IMCO Act, any IMCO Regulations, and the By-laws;

 

xv.           IMCO Members means the Founding Members and other persons or companies referred to in paragraph 13, below, which become members of IMCO, from time to time, in accordance with the IMCO Legislation, and their holding and investment vehicles;

 

xvi.          IMCO Subsidiary means a person or company of which all of the securities or other interests issued by the person or company are beneficially owned by IMCO;

 

xvii.         Investment Advisory Services means, in the case of an IMCO Member or Investment Pool, investment management and advisory services that include advising the IMCO Member or Investment Pool as to the investing in or buying or selling of securities, or advising the IMCO Member or Investment Pool as to trading in commodity futures contracts or commodity futures options;

 

xviii.        Investment Pools means pooled investment vehicles or similar arrangements managed by IMCO for the benefit of IMCO Members and Investment Pool means any one of them;

 

xix.          Investment Pool Document means the articles, declaration of trust, limited partnership agreement or other constating or governing document in respect of an Investment Pool;

 

xx.           Management Interests has the meaning given to this term in paragraph 42, below;

 

xxi.          Minister has the same meaning as in section 1 of the IMCO Act;

 

xxii.         NI 31-103 means National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;

 

xxiii.        NI 45-106 means National Instrument 45-106 Prospectus Exemptions;

 

xxiv.        NI 81-102 means National Instrument 81-102 Investment Funds;

 

xxv.         OSA adviser registration requirement means the requirement in subsection 25(3) of the OSA that prohibits a person or company from engaging in the business of, or holding himself, herself or itself out as engaging in the business of, advising anyone with respect to investing in securities or the buying or selling of securities, unless that person or company is registered in the appropriate category of registration under the OSA;

 

xxvi.        OSA dealer registration requirement means the requirement in subsection 25(1) of the OSA that prohibits a person or company from engaging in, or holding himself, herself or itself out as engaging in, the business of trading in securities, unless that person or company is registered in the appropriate category of registration under the OSA;

 

xxvii.       OSA investment fund manager registration requirement means the requirement in subsection 25(4) of the OSA that prohibits a person or company from acting as an investment fund manager, unless that person or company is registered as an investment fund manager under the OSA;

 

xxviii.      OSA prospectus requirement means the requirement in subsection 53(1) of the OSA that prohibits a person or company from distributing a security unless a preliminary prospectus and prospectus for the security have been filed and receipts for them have been issued by the Director;

 

xxix.        PBA means the Pensions Benefits Act (Ontario);

 

xxx.         PBA Fiduciary Standard has the meaning given to it in paragraph 22 below;

xxxi.        permitted client has the same meaning as in section 1.1 of NI 31-103;

 

xxxii.       PSOA means the Public Service of Ontario Act, 2006 (Ontario);

 

xxxiii.      Special Audit Review has the meaning given to this term in paragraph 34, below; and

 

xxxiv.      Units means the units, fractionalized ownership interests or other securities issued by or in respect of an Investment Pool.

 

Representations

These decisions are based upon the following facts represented by IMCO:

IMCO Structure

1.             IMCO is a non-share capital corporation established under the IMCO Act.

 

2.             IMCO is not, and will not become, a reporting issuer under the OSA or under the securities legislation of any other province or territory of Canada.

 

3.             IMCO is not in default of any requirement of the OSA or the regulations made thereunder.

 

4.             IMCO is not in default of any requirement of the CFA or the regulations made thereunder.

 

5.             IMCO has been formed as part of an initiative of the Government of Ontario to enhance investment returns and efficiencies for pension, insurance, endowment and other funds in Ontario’s broader public sector through asset pooling. A key policy driver for IMCO is to make high-quality investment management available to smaller organizations that do not have in-house expertise or financial resources to obtain such advisory services on their own, thereby increasing their risk-adjusted investment returns.

 

6.             Subsection 3(2) of the IMCO Act provides that IMCO will operate on the basis of a not-for-profit, cost-recovery model.

 

7.             The IMCO Act establishes the criteria for membership in IMCO as well as detailed provisions regarding corporate governance and transparency requirements for IMCO.

 

8.             Subsection 9(3) of the IMCO Act, in combination with Ontario Regulation 251/16, provides that the Ontario Pension Board and Workplace Safety and Insurance Board are the Founding Members.

 

9.             Subsections 9(1) and paragraph 25(1)(a) of the IMCO Act provide that certain other entities in Ontario’s broader public sector may be eligible to become IMCO Members.

 

10.          Paragraph 9(1)2 of the IMCO Act provides that IMCO will be required to enter into an IMA with each IMCO Member. The IMA of each IMCO Member will be approved in accordance with the IMCO Member’s internal governance requirements.

 

11.          The IMA of each IMCO Member will require the IMCO Member to certify that it is an accredited investor and to identify which category of the definition of accredited investor in section 1.1 of NI 45-106 applies to the IMCO Member. In addition, IMCO will implement reasonable measures for IMCO to periodically confirm each IMCO Member’s status as an accredited investor and the category of the definition of accredited investor in section 1.1 of NI 45-106 that applies to the IMCO Member.

 

12.          IMCO will manage certain assets of IMCO Members in segregated accounts or under co-ownership arrangements whereby the corresponding IMCO Members will own a direct or indirect interest in the invested assets. In addition, IMCO or the IMCO Members will allocate certain of the respective assets of the IMCO Members to the Investment Pools, and IMCO will manage the assets of the Investment Pools.

 

IMCO Members

 

13.          Paragraphs 9(1)3 and 25(1)(a) of the IMCO Act prescribe the following categories of persons and companies as qualifying for membership in IMCO: (i) a Crown agency, (ii) a corporation, with or without share capital, that is not a Crown agency but is owned, operated or controlled by the Crown, (iii) a board, commission, authority or unincorporated body of the Crown, (iv) a university in Ontario, including its affiliated and federated colleges, that receives operating grants from the Government of Ontario, (v) a municipality as defined in Section 1 of the Municipal Act, 2001, and (vi) any other body as may be prescribed by the Lieutenant Governor in Council.

 

14.          IMCO will not provide investment management or advisory services to any persons or companies other than the IMCO Members and the Investment Pools.

 

15.          Entities that qualify for IMCO membership are all government agencies or other organizations in Ontario’s broader public sector that are generally subject to Ontario legislation and policies that are designed to ensure accountability, transparency and integrity in the public sector. For example:

 

(a)           the Founding Members and many other IMCO Members will be subject to their own governing legislation and the PBA, which creates a legislative framework appropriate to the unique nature of the IMCO Member, and provides the basis for appropriate accountability and transparency;

 

(b)           the PSOA, which applies to all “public servants” in Ontario including elected officials and employees of the government and public bodies, provides a framework for the leadership and management of the public service of Ontario, including by setting out rights and duties of public servants concerning ethical conduct and establishing procedures for the disclosure and investigation of wrongdoing in the public service of Ontario; and

 

(c)           the BPS Act applies to a broad range of government agencies and broader public sector organizations and prescribes standards in the areas of: compensation, expenses, perquisites, business documents and procurements for agencies of the Government of Ontario, designated broader public sector organizations, such as hospitals, universities, colleges, school boards and publicly-funded organizations that receive a minimum of $10 million dollars annually in funding from the Government of Ontario, and certain other entities.

 

16.          To comply with the governance and financial reporting requirements set out in their governing statutes or in the BPS Act and the directives made thereunder, IMCO Members must have relatively sophisticated governance structures and financial and business expertise.

 

17.          Each IMCO Member will be an accredited investor. IMCO also expects that most IMCO Members will be permitted clients.

 

18.          The website of IMCO will identify all IMCO Members from time to time.

 

Duty of Loyalty and Standard of Care

 

19.          Subsection 3(3) of the IMCO Act requires IMCO, in providing investment management services and investment advisory services to IMCO Members, to act in the best interest of the IMCO Members.

 

20.          Under subsections 19(1) and 19(2) of the IMCO Act, the directors, officers, employees and agents of IMCO are required, in the investment of the assets of IMCO Members, to exercise the care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of another person, and to apply all relevant knowledge and skills which they possess or, by reason of their profession, business or calling, they ought to possess. In addition, subsection 19(4) of the IMCO Act provides that no provision in a contract, the By-laws or a resolution relieves a director or officer of IMCO from the duty to act in accordance with the IMCO Act and IMCO Regulations or relieves him or her from liability for breach of the IMCO Act or IMCO Regulations.

 

21.          Subsection 12(6) of the IMCO Act imposes proficiency requirements on IMCO’s directors by requiring each director to “have experience and expertise in investment management, risk management, finance, corporate governance, accounting, law or in such other areas of expertise as the board of directors may determine from time to time”.

 

22.          Subsections 22(1), (2) and (4) of the PBA (collectively, the PBA Fiduciary Standard) provide that:

 

(a)           the administrator of a pension plan shall exercise the care, diligence and skill in the administration and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another person;

 

(b)           the administrator of a pension plan shall use in the administration of the pension plan and in the administration and investment of the pension fund all relevant knowledge and skill that the administrator possesses or, by reason of the administrator’s profession, business or calling, ought to possess; and

 

(c)           an administrator or, if the administrator is a pension committee or a board of trustees, a member of the committee or board that is the administrator of a pension plan shall not knowingly permit the administrator’s interest to conflict with the administrator’s duties and powers in respect of the pension fund.

 

Subsections 22(5) and (8) of the PBA provide that a plan administrator may employ one or more agents to carry out the administration and investment of the pension plan, and that any such agent is also subject to the PBA Fiduciary Standard. When investing the assets of IMCO Members that are pension plans, IMCO is subject to the PBA Fiduciary Standard.

 

Governance of IMCO

 

23.          The IMCO Legislation collectively establishes a framework for robust governance and compliance systems for the IMCO Board and senior management that establish requirements for: the disclosure of information to IMCO Members, the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by IMCO personnel, and accountability to IMCO Members and the Minister.

 

24.          Under subsection 12(2) of the IMCO Act, the IMCO Board is to consist of at least seven and not more than 11 directors. Currently, pursuant to subsections 17(2) and 17(3) of the IMCO Act, the IMCO Board comprises four appointees of the Founding Members and three appointees of the Minister. In the future, pursuant to subsection 12(6) and section 13 of the IMCO Act, most directors (between six and eight directors) will be elected by the IMCO Members from candidates selected in accordance with a skills/needs matrix by a nominating committee which is established in accordance with the By-laws. In addition, pursuant to subsections 12(4), 12(6) and 12(13) of the IMCO Act, the Minister will appoint between one and three directors to the IMCO Board, including the Chair of the IMCO Board, subject to skills/needs requirements.

 

25.          Pursuant to Section 18 of the IMCO Act, the IMCO Board is authorized to appoint and review the performance of the CEO on an ongoing basis, and the CEO is responsible for selecting IMCO’s senior management team, including all investment professionals.

 

26.          Section 14 of the IMCO Act generally permits the IMCO Board to delegate its powers and duties to any committee, director or officer of IMCO. The IMCO Board is not, however, permitted to delegate any of the following powers:

 

(a)           approval of IMCO’s budget, including its budget for capital expenditures and staffing;

 

(b)           approval of the business plan and financial statements of IMCO;

 

(c)           appointment, supervision and setting of compensation of the CEO;

 

(d)           filling a vacancy in a committee of the IMCO Board; and

 

(e)           making, amending or repeal of By-laws and submitting them to IMCO Members for confirmation under section 21 of the IMCO Act.

 

27.          Section 10 of the IMCO Act requires IMCO to hold an annual meeting of IMCO Members. The By-laws provide that business to be conducted at the annual meeting includes considering IMCO’s audited financial statements, electing directors, confirming the appointment of the auditor and other proper business.

 

28.          The By-laws require the IMCO Board to call a special meeting of IMCO Members for any purpose connected to IMCO’s affairs upon request by: (i) for the three years ending July 1, 2019, a Founding Member; and (ii) at any time, IMCO Members that, taken in aggregate, are the owners of assets managed by IMCO representing at least five per cent of IMCO’s assets under management (calculated pursuant to the By-laws).

 

29.          A quorum for any meeting of IMCO Members will be determined in accordance with the By-laws.

 

By-laws and Policies and Procedures

 

30.          Section 21 of the IMCO Act authorizes the IMCO Board to make, amend or repeal any By-law governing its proceedings and generally for the conduct and management of IMCO’s activities and affairs that are consistent with the IMCO Act and IMCO Regulations. Prior to the Board approving any proposed By-law, amendment or repeal, it must be provided to the IMCO Members for a meeting to be held for the IMCO Members to confirm, reject or amend the by-law, amendment or repeal.

 

31.          In connection with its investment management activities for the IMCO Members, the IMCO Board will approve policies and procedures that are necessary for IMCO to comply with the PBA Fiduciary Standard and the IMA of each Member, including in relation to the following matters:

 

(a)           policies and procedures that establish IMCO’s Compliance System;

 

(b)           nomination, subject to final approval by the Board, of a CCO who: (i) has direct access to the IMCO Board at such time as the CCO considers necessary or advisable in view of his or her responsibilities; and (ii) presents annual reports to the IMCO Board regarding compliance by IMCO with the Compliance System;

 

(c)           maintenance of books and records that accurately reflect IMCO’s business activities, financial affairs and transactions on behalf of IMCO Members and demonstrates the extent of IMCO’s compliance with the IMCO Legislation;

 

(d)           identification and response to potential conflicts of interest which may arise in the course of IMCO’s activities, including restrictions on personal trading, prohibitions against insider trading and front running, restrictions on the use of “soft dollars,” fairness in the allocation of investment opportunities among IMCO Members and the Investment Pools, restrictions on outside business activities, restrictions on the acceptance of gifts from service providers, etc.;

 

(e)           prevention of any investments by an Investment Pool, or otherwise by IMCO on behalf of an IMCO Member, which contravenes the specific investment restrictions applicable to the Investment Pool (or one or more of the IMCO Member investors in an Investment Pool), or the IMCO Member, which restrictions will be set out in the relevant IMA(s);

 

(f)            a know-your-client (known as KYC) policy to ensure collection of such information as is necessary to verify the identity of each IMCO Member and to understand its financial objectives and risk tolerance;

 

(g)           if considered necessary by either or both of the CEO and CCO, an escalation process for handling concerns or complaints expressed by an IMCO Member to any representative of IMCO, which process may be included in the IMA between IMCO and the IMCO Member;

 

(h)           a due diligence process for vetting and monitoring any sub-advisers selected by IMCO to manage a portion of any assets under management by IMCO; and

 

(i)            a due diligence process for the selection of custodians and brokers, which will be completed prior to a custodian or broker holding or having access to the assets of any IMCO Member or any Investment Pool, and will include appropriate assurances that such assets are segregated in accordance with industry best practices.

 

All of the foregoing policies and procedures will be available to IMCO Members and prospective IMCO Members for review. IMCO will provide notice to all IMCO Members of the adoption of any material amendments to these policies and procedures or the adoption of any new policies and procedures.

 

32.          The due diligence process for selecting custodians will ensure that the custodian of assets of IMCO Members, including assets of the Investment Pools, satisfy minimum custodial qualification requirements set out in Section 6.2 or 6.3 of NI 81-102.

 

33.          The By-laws will provide strong governance protection for IMCO Members. In addition to governance protections provided through the By-Laws, IMCO Members may seek additional protections under the terms of their IMA or other related agreements; provided, however, that these additional protections are also consistent with the policies adopted pursuant to the By-Laws.

 

34.          The By-laws provide IMCO Members with the right to appoint, by special resolution and at the expense of IMCO, any person to enquire into and report to the IMCO Members on any aspect of IMCO’s business and affairs (a “Special Audit Review”). The results of any Special Audit Review will be shared with the IMCO Board.

 

Funding of IMCO

 

35.          The Founding Members entered into a funding agreement with IMCO in order to provide IMCO with its initial working capital. Following the expiry of the initial funding agreement, IMCO will be funded through a cost allocation and recovery model to be established by IMCO and governed by IMCO Legislation and agreements with IMCO Members. These mechanisms will fund the ongoing operation of IMCO at a level which ensures that IMCO is adequately capitalized at all times.

 

36.          The IMCO Board and the Founding Members will ensure that adequate insurance or other protection is maintained which is appropriate for IMCO and its assets under management.

 

IMCO Reporting and Recordkeeping

 

37.          Subsection 10(1) and sections 22 and 23 of the IMCO Act require IMCO to produce audited annual financial statements and an annual report, and to hold an annual meeting of IMCO Members. This financial reporting and meeting process provides IMCO Members with transparency into IMCO’s financial affairs.

 

38.          Section 23 of the IMCO Act requires the Board to submit an annual report on IMCO’s activities and affairs to the Minister within 120 days after the end of each fiscal year, and that the report include the audited financial statements of IMCO. Section 24 of the IMCO Act provides that, upon the Minister’s request, IMCO shall promptly make its records available for inspection. These provisions will enable the Minister to review and exercise oversight with respect to the finances and affairs of IMCO.

 

The Investment Pools

 

39.          Each Investment Pool is expected to be focused on one or more specific investment strategies, including public securities (equities and fixed income), real estate, infrastructure, private equity and alternative strategies. The Investment Pools are expected to issue Units in exchange for the cash or other assets allocated from the account of an IMCO Member to the Investment Pool, and these Units will represent the IMCO Member’s proportionate interest in respect of the Investment Pool.

 

40.          Certain of the Investment Pools will be an “investment fund” (as that term is defined in subsection 1(1) of the OSA) and certain of these Investment Pools will also be a “mutual fund in Ontario” (as that term is defined in subsection 1(1) of the OSA) and, as such, a “mutual fund in the jurisdiction” (as that term is defined in section 1.1 of NI 81-106).

 

41.          No Investment Pool is yet established. No Investment Pool will be a reporting issuer under the OSA or under the securities legislation of any other province or territory of Canada.

 

42.          Each Investment Pool will be governed by an Investment Pool Document. Such Investment Pool Document will provide that Units of the Investment Pool will be distributed exclusively to IMCO Members except for general partner, managing member or equivalent interests (“Management Interests”) in certain Investment Pools which may be distributed to IMCO or an IMCO Subsidiary in connection with the management of the Investment Pools. Units can only be beneficially owned by IMCO Members and Management Interests can only be beneficially owned by IMCO or an IMCO Subsidiary.

 

Individuals Acting on Behalf of IMCO

 

43.          Individuals that act on behalf of IMCO in accordance with an exemption from the OSA adviser registration requirement, the OSA dealer registration requirement, or the CFA adviser registration requirement that is made available to IMCO under the Commission Exemptions Sought will rely upon the same exemption for their compliance with the corresponding registration requirements that would otherwise apply to them under the OSA or the CFA.

 

44.          IMCO will not use section 4.7 of Multilateral Instrument 11-102 Passport System to extend the Commission Exemptions Sought or the Director Exemption Sought to other provinces and territories of Canada.

 

Decisions of Commission

 

The Commission is satisfied that granting the Commission Exemptions Sought on the terms set out in these Commission Decisions would not be prejudicial to the public interest.

The decision of the Commission under the OSA is that the Commission Exemptions Sought are granted, provided that the OSA Prospectus Exemption Sought shall not be available in respect of any distribution of Units of an Investment Pool to an IMCO Member unless the IMA or the relevant subscription agreement of that IMCO Member:

 

(a)           discloses how and under what circumstances the IMCO Member may terminate the IMA or withdraw its assets from being managed by IMCO, including the Units of any Investment Pools in which such IMCO Member is invested;

 

(b)           contains disclosure that, if any materials relating to an Investment Pool (which constitute an “offering memorandum” under Ontario securities legislation) contain a misrepresentation, the IMCO Member will not have a remedy under Ontario securities legislation; and

 

(c)           includes a risk disclosure statement disclosing risk factors relating to the Investment Pools.

The decision of the Commission under the CFA is that the CFA Exemption Sought is granted.

Dated this 17th day of May, 2017.

“Grant Vingoe”

Commissioner

Ontario Securities Commission

“Monica Kowal”

Commissioner

Ontario Securities Commission

Decision of the Director

The Director is satisfied that granting the Director Exemption Sought on the terms set out in this Director Decision would not be prejudicial to the public interest.

The decision of the Director under NI 81-106 is that the Director Exemption Sought is granted, provided that each IMCO Member continues to provide, and that each IMCO Member confirms in writing to IMCO that it will continue to provide, all required financial, performance or other reporting to its beneficiaries.

Dated this 17th day of May, 2017.

“Darren McKall”

Manager, Investment Funds and Structured Products

Ontario Securities Commission