Mastercard Foundation Asset Management Corporation

Headnote

Application to the Ontario Securities Commission for a ruling pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) for a ruling that the Applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The Applicant will provide advice only to a charitable foundation in Ontario and only for so long as such foundation controls the Applicant.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(3) and 74(1).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, C. S.5, AS AMENDED (THE ACT) AND IN THE MATTER OF MASTERCARD FOUNDATION ASSET MANAGEMENT CORPORATION

DECISION

UPON the application (the Application) of Mastercard Foundation Asset Management Corporation (the Applicant), a not-for-profit entity that is wholly-owned and controlled by the Mastercard Foundation (the Foundation), to the Ontario Securities Commission (the Commission) for a ruling pursuant to subsection 74(1) of the Act (the Ruling) that the Applicant be exempted from the adviser registration requirement in subsection 25(3) of the Act (the Adviser Registration Requirement);

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Applicant having represented to the Commission as follows:

Background

1. The Foundation is a registered Canadian charity and one of the largest foundations in the world with an investment portfolio having a net asset value as at December 31, 2022 of approximately U.S.$29 billion (as shown on the Foundation's audited financial statements). It works with visionary organizations to advance education and financial inclusion to enable young people in Africa and Indigenous youth in Canada to access dignified and fulfilling work.

2. Established in 2006 by Mastercard Inc. (Mastercard) when Mastercard became a public company listed on the New York Stock Exchange, the Foundation is an independent organization separate from Mastercard, having its head office in Ontario and branch offices in Kigali, Accra, Nairobi, Kampala, Lagos, Dakar, and Addis Ababa. The Foundation's policies, operations, and program decisions are determined by the Foundation's Board of Directors and leadership.

3. Shares of Mastercard were contributed to the Foundation in 2006 under the deed of gift that formed the Foundation, with the restriction that those Mastercard shares could only be sold for limited purposes. As a result, currently, the Foundation's sole assets consist of shares of Mastercard. Pursuant to an order granted by the Ontario court (upon the recommendation of the Ontario Public Guardian and Trustee), effective January 1, 2024, the Foundation will be permitted to diversify its portfolio and hold public and private investments other than shares of Mastercard.

4. On October 4, 2023, the Foundation incorporated the Applicant as a not-for-profit entity under the Canada Not-for-profit Corporations Act so that as of January 1, 2024, the Applicant may provide securities investment counsel and management services (the Advisory Services) to the Foundation for the Foundation's newly diversified portfolio on a non-profit basis.

5. The Foundation is a "permitted client" as defined in paragraph (q) of section 1.1 of NI 31-103.

6. The Foundation controls the Applicant because the Foundation is the Applicant's sole member and holds all rights to elect the Applicant's board.

7. The Applicant has its head office in Ontario. The Applicant is not in default of any requirements of securities legislation in Ontario.

8. The Applicant is not registered as an adviser under the Act and does not have available to it an adviser registration exemption on which it can rely.

9. Absent the Ruling, the Applicant would have to be registered as an adviser under the Act to provide the Advisory Services to the Foundation.

Reasons for the Ruling

10. Although the Foundation and the Applicant are separate legal entities, the provision of the Advisory Services to the Foundation by the Applicant is similar in substance to the operation of an "in-house" investment advice team made up of employees of the entity whose advice is limited to the management of the entity's own assets.

11. There is no requirement for employees of an entity to be registered as advisers under the Act if the employees provide investment advice only to their employer with respect to the portfolio assets of their employer.

12. After considering a number of factors, including governance, tax, organizational design, and charity law, the Foundation determined to proceed by way of the formation of a new entity and established the Applicant to facilitate a clear separation and segregation of functions and governance. The Applicant will not provide the Advisory Services to anyone other than the Foundation, nor hold itself out to the public as a provider of such services.

13. The Applicant will directly employ an in-house investment management team comprising individuals with the experience and proficiencies required to properly and adequately assess whether specific securities investments are appropriate for the Foundation.

14. The portfolio assets for which the Applicant will provide the Advisory Services are owned by the Foundation. There are no external stakeholders that have any direct interest as owners in the performance of such portfolio assets. Accordingly, there is no stakeholder in Ontario or elsewhere other than the Foundation that would be directly affected by the Advisory Services provided by the Applicant.

15. The Advisory Services will be provided by the Applicant in compliance with the terms of a written investment management agreement with the Foundation. The Applicant will only provide the Advisory Services to the Foundation on a cost recovery basis that is compliant with tax, regulatory, and other considerations, but is not intended to produce a profit.

16. Subsection 74(1) of the Act provides that a ruling may be made by the Commission that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, when the Commission is satisfied that to do so would not be prejudicial to the public interest.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to subsection 74(1) of the Act, that the Applicant is exempt from the Adviser Registration Requirement in respect of it acting as an adviser to the Foundation, provided that:

The Applicant provides investment counsel and portfolio management services only to the Foundation, and only as long as:

(a) there are no external stakeholders that have any direct interest as owners in the performance of the portfolio assets of the Foundation;

(b) the Foundation controls the Applicant; and

(c) the Foundation remains a "permitted client" as defined in NI 31-103.

DATED at Toronto, Ontario, this 29th day of November, 2023.

OSC File #: 2023/0486