Webb Asset Management Canada Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Exemption to permit an entity to serve as custodian or sub-custodian -- Relief was necessary because the filer's financial statements are not publicly disclosed -- National Instrument 81-102.

Rules Cited

National Instrument 81-102 -- Mutual Funds, ss. 6.2(3)(a), 19.1.

December 21, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

YUKON TERRITORY, NORTHWEST TERRITORIES

AND NUNAVUT

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

WEBB ASSET MANAGEMENT CANADA INC. (WEBB)

AND NBCN INC. (NBCN)

(the "Filers")

AND

IN THE MATTER OF

WEBB ENHANCED GROWTH FUND AND

WEBB ENHANCED INCOME FUND

(the "Funds")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the "Legislation") for an exemption from subparagraph 3(a) of section 6.2 of National Instrument 81-102 Mutual Funds ("NI 81-102") that would enable the Funds and other mutual funds subject to NI 81-102 that may in the future wish to engage NBCN to serve as custodian or sub-custodian (the "Additional Funds") to enter into arrangements with NBCN to act as custodian or sub-custodian, as applicable pursuant to Part 6 of NI 81-102 (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

1. NBCN is incorporated under the laws of Canada and is an indirect subsidiary of the National Bank of Canada, a bank listed in Schedule 1 of the Bank Act (Canada). NBCN is a member of the Investment Dealers Association of Canada and is registered as a broker and an investment dealer (or equivalent) with the securities regulatory authorities in each province and territory of Canada. NBCN's head office is in Toronto, Ontario. The financial results of NBCN are consolidated with those of the National Bank of Canada and as such are not reported separately to the public.

2. NBCN is subject to regulatory oversight and regulatory capital requirements and accordingly files with the applicable regulators audited financial statements on a regular basis. NBCN's most recent audited financial statements for the financial year ended October 31, 2007 indicate shareholders' equity in excess of $10 million.

3. The Funds are open-ended mutual fund trusts established under the laws of Ontario pursuant to a declaration of trust. Webb is the manager of the Funds (the "Manager"). Webb and the Funds have their head office located in Toronto, Ontario. The Funds filed a preliminary simplified prospectus and annual information form dated November 9, 2007 under SEDAR Project No. 1179614 in each of the provinces and territories of Canada, except Quebec. Upon receipts being issued for the final simplified prospectus and annual information form, the Fund will be a reporting issuer in all the provinces and territories of Canada, except Québec.

4. The Manager wishes to appoint NBCN as a custodian of the Funds to hold portfolio assets of the Funds. NBCN has the systems and resources required to act as a custodian or sub-custodian for mutual funds. NBCN will be appointed as a custodian or sub-custodian of the Fund pursuant to an agreement that complies with NI 81-102.

5. NBCN does not meet the requirements of subparagraph 3(a) of section 6.2 of NI 81-102, as it does not have audited financial statements that have been made public. Otherwise NBCN meets all other requirements of NI 81-102 in order to act as a custodian or sub-custodian of mutual funds under NI 81-102.

6. NBCN wishes to have the flexibility to agree to act as a custodian or a sub-custodian for any Additional Funds, without having to make separate applications for relief.

7. NBCN will give the Funds a copy of its audited summary statement of consolidated financial position in respect of the financial year ended October 31, 2006 and will continue to give to the Funds and the Additional Funds (including their custodians, as applicable) such audited financial summary upon request to allow those entities to continue to conclude that NBCN is qualified under NI 81-102 to act as a custodian or sub-custodian, as the case may be.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) the relief terminates 10 days following the date that:

(i) a Schedule I Bank ceases to own or control NBCN directly or indirectly; or

(ii) the shareholders' equity of NBCN declines below $10 million;

(b) the custodian or sub-custodian agreement, as applicable, between the Funds or any Additional Funds and NBCN includes a provision requiring NBCN to provide a copy of its audited summary statement of consolidated financial position in respect of its most recently completed financial year to the Funds or any Additional Funds (including their custodians, as applicable) upon request; and

(c) the compliance report required by subsection 6.7(2) of NI 81-102 to be delivered on behalf of the Funds or any Additional Funds, as applicable, includes a statement that:

(i) NBCN is acting as custodian or sub-custodian of the Funds or any Additional Funds, as applicable, pursuant to the decision of the Canadian Securities Administrators; and

(ii) the circumstances described in clause (a) above do not exist as at the date of the compliance report.