National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of mutual funds -- Change of manager is not detrimental to unitholders or the public interest -- Change of manager approval granted on the condition that prior approval of the funds' unitholders is obtained at a special meeting of unitholders.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.5(3), 5.7.
September 19, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
JOVIAN CAPITAL CORPORATION
IN THE MATTER OF
IA CLARINGTON INVESTMENTS INC.
IN THE MATTER OF
JOVFINANCIAL SOLUTIONS INC.
(JovFinancial or the Manager)
(Jovian, IA Clarington and the Manager are,
collectively, the Filers)
IN THE MATTER OF
(as defined below)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval of the proposed change of manager of the mutual funds managed by the Manager (the Funds) under paragraph 5.5(1)(a) of National Instrument 81-102 -- Mutual Funds (NI 81-102) (the Approval Sought):
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator); and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec, Saskatchewan, Yukon Territory, Northwest Territories and Nunavut.
Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
The Manager and the Funds
1. The Manager is a corporation incorporated under the laws of the Province of Ontario with its head office in Toronto, Ontario.
2. The Manager is registered as an investment fund manager under the securities legislation in Ontario, Québec and Newfoundland and Labrador, and is registered as an exempt market dealer in all Canadian provinces.
3. The Manager manages the Funds.
4. The Funds, other than Jov Leon Frazer Enhanced Opportunities Fund Inc. (the Jov Leon Fund), are open-end mutual fund trusts or classes of a mutual fund corporation established under the federal laws of Canada or under the laws of the Province of Ontario. The Funds, other than the Jov Leon Fund, are reporting issuers in all of the provinces and territories of Canada. The Jov Leon Fund is a labour-sponsored investment fund that is a reporting issuer only in the Province of Ontario.
5. Securities of the Funds, other than the Jov Leon Fund, are offered under simplified prospectus and an annual information form. The Jov Leon Fund is offered by long form prospectus. The Funds are subject to, among other laws and regulations, NI 81-102, National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) and National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107).
6. Neither the Manager nor any Fund is in default of applicable securities legislation in any province or territory of Canada.
7. Jovian is a corporation incorporated under the federal laws of Canada, carrying on business in the financial services industry through its operating subsidiaries.
8. Jovian is a reporting issuer in Alberta, British Columbia, Manitoba, Ontario and Saskatchewan, and its head office is located in Toronto, Ontario. Jovian is not a registrant under the securities legislation of any jurisdiction in Canada or elsewhere.
9. Jovian is the direct holding company of the Manager.
10. Jovian is not in default of applicable securities legislation in any province or territory of Canada.
The Proposed Acquisition
11. In a press release dated July 16, 2013, Jovian announced that an agreement had been reached for the acquisition of all of its issued and outstanding common shares by Industrial Alliance Insurance and Financial Services Inc. (Industrial Alliance) by way of statutory arrangement under section 192 of the Canada Business Corporations Act (the Proposed Acquisition).
12. On September 11, 2013, the Proposed Acquisition was approved by shareholders and debentureholders of Jovian at a joint special meeting.
13. The Proposed Acquisition is subject to court and regulatory approvals and is expected to close on October 1, 2013.
Industrial Alliance and IA Clarington
14. Industrial Alliance is a public life and health insurance company incorporated under the laws of Québec. It is a reporting issuer in all of the provinces of Canada with its head office located in Québec.
15. Industrial Alliance is the direct holding company of IA Clarington Investments Inc. (IA Clarington).
16. IA Clarington is a corporation existing under the federal laws of Canada. It is registered as an investment fund manager under the securities legislation in Ontario, Québec and Newfoundland and Labrador.
17. IA Clarington is the manager of 64 mutual funds known as the IA Clarington Funds, the IA Clarington Inhance Funds, the IA Clarington Target Click Funds and the Distinction Portfolios (collectively, the IA Clarington Funds).
Proposed Change of Manager
18. The Proposed Acquisition will result in Industrial Alliance acquiring indirect control over the Manager.
19. Following completion of the Proposed Acquisition, however, Industrial Alliance will seek to merge the Manager into IA Clarington, with the merged company continuing as "IA Clarington Investments Inc." (the Merged Company). It is anticipated that the merger will take place within six months following completion of the Proposed Acquisition. It is proposed that the Merged Company will become the manager of the Funds (the Change of Manager).
20. Prior to completing the Change of Manager, the Manager will seek securityholder approval of the Change of Manager at a special meeting of securityholders of the Funds (Special Meeting), which is expected to be held on or about November 29, 2013 (the Meeting Date).
21. The Proposed Acquisition and the Change of Manager are not expected to have any material impact on the Funds or on the securityholders of the Funds.
22. Specifically in respect of the Jov Leon Fund, Industrial Alliance will continue with Leon Frazer & Associates Inc. as the portfolio manager of the Jov Leon Fund following completion of the Proposed Acquisition. Industrial Alliance will also keep the existing officers and directors of the Jov Leon Fund in place.
23. Industrial Alliance has no present intention to make immediate material changes to the day-to-day operations of the Manager following completion of the Proposed Acquisition, other than the appointment of certain senior officers from within its organization. These appointments are expected to be effective immediately upon completion of the Proposed Acquisition.
24. Industrial Alliance anticipates making changes to the directors of the Manager following regulatory and securityholder approval of the Change of Manager.
25. Following regulatory and securityholder approval of the Change of Manager, Industrial Alliance also anticipates potential changes to the Funds as a result of their being part of the Industrial Alliance group, but only after careful consideration and in compliance with applicable laws. These changes are expected to include, among other items, (i) possible changes to the investment objectives of the Funds, but only upon securityholder approval, (ii) integration of the wholesale and client support system used by JovFinancial into that of IA Clarington, and (iii) possible exchangeability between the Funds and the IA Clarington Funds.
26. The Manager has determined that the Proposed Acquisition is not a conflict of interest matter pursuant to section 5.1 of NI 81-107 and that, as a result, the Proposed Acquisition will not require the approval or recommendation of the Funds' Independent Review Committee (IRC). The Manager, has, however, provided information relating to the Proposed Acquisition and Change of Manager to the IRC.
27. By operation of sections 3.10(1)(b) and 3.10(1)(c) of NI 81-107, the members of the IRC will cease to be IRC members on two separate occasions: i) following the completion of the Proposed Acquisition; and ii) following completion of the Change of Manager. Industrial Alliance intends to appoint the members of the new IRC following the completion of the Proposed Acquisition and to reappoint the same members upon completion of the Change of Manager.
28. To the extent that any changes that would constitute "material changes" within the meaning of NI 81-106 will be effected with respect to the Funds as a result of the Proposed Acquisition and the Change of Manager, appropriate amendments will be made to the prospectus of the Funds and the Filers will comply with all other material change reporting requirements as required by securities legislation.
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 Approval Sought is granted provided that:
(i) the Manager obtains prior approval of the securityholders of the Funds of the Change of Manager at the Special Meeting on the Meeting Date;
(ii) the notice of the Special Meeting and the management information circular in respect of the Special Meeting (the Circular) are mailed to the securityholders of the Funds and copies thereof are filed on SEDAR in accordance with applicable securities legislation;
(iii) the Circular contains:
(a) sufficient information regarding the business, management and operations of IA Clarington, including details of the funds it manages and its officers and board of directors;
(b) all information necessary to allow securityholders to make an informed decision about the Change of Manager and to vote on the Change of Manager; and
(iv) all other information and documents necessary to comply with the applicable proxy solicitation requirements of securities legislation for the Special Meeting are mailed to securityholders of the Funds.