SEI Investments Canada Company et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Plan Sponsors, CAP Members, and a named service provider exempted from the prospectus requirements in the Legislation in respect of trades in securities of mutual funds to Capital Accumulation Plans, subject to certain terms and conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

Rules Cited

National Instrument 81-102 -- Mutual Funds.

National Instrument 45-106 -- Prospectus and Registration Exemptions.

Published Documents Cited

Amendments to NI 45-106 -- Registration And Prospectus Exemption For Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.

February 29, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, QUEBEC, NEWFOUNDLAND

AND LABRADOR, YUKON AND NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SEI INVESTMENTS CANADA COMPANY (the Filer),

INLAND KENWORTH AND SEI BALANCED 60/40 FUND

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 Filer on behalf of each of the Filer, the officers and employees of the Filer acting on the Filer's behalf, Inland Kenworth, as the plan sponsor of CAPs (as defined below) and any other plan sponsors of CAPs which use the administration, investment education and investment management services (collectively, the Services) of the Filer in respect of their CAPs (collectively, the Plan Sponsors), and SEI Balanced 60/40 Fund and any other mutual funds selected for the CAPs sponsored by the Plan Sponsors (collectively, the Funds) for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the prospectus requirements of the Legislation in respect of the distribution of securities of the Funds to tax assisted investment or savings plans (Capital Accumulation Plans or CAPs) to which the Filer provides Services, or to a CAP Member (as defined below) as part of the CAP Member's participation in the CAP, without a prospectus (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 Filer:

1. The Filer is a corporation governed by the laws of the Province of Nova Scotia. Its registered office is in the Province of Nova Scotia and its head office is located in Toronto, Ontario. A corporation established under the laws of Nova Scotia is required to have a registered office in Nova Scotia, but is not required to have its head office in Nova Scotia.

2. The Filer is registered as an adviser in the categories of investment counsel and portfolio manager in each of province of Canada.

3. The Filer is registered as a dealer in the category of limited market dealer in Ontario. The Filer is also registered as a commodity trading manager in Ontario.

4. The Filer is the manager and portfolio manager of a total of 29 mutual funds which are prospectus qualified (28 of which are prospectus qualified pursuant to National Instrument 81- 102 -- Mutual Funds (NI 81-102) and one of which is a commodity pool governed by National Instrument 81-104 -- Commodity Pools) and two mutual funds that are distributed under exemptions from the prospectus requirements of the Legislation. The Filer may, in the future, be the manager and portfolio manager of additional mutual funds.

5. The Filer carries on business primarily as an investment counsel and portfolio manager. In connection with this principal business, the Filer distributes securities of its mutual funds on a prospectus-exempt basis directly to accredited investors, as defined in National Instrument 45-106 -- Prospectus and Registration Exemptions (NI 45-106), who are, primarily, trusts having net assets of at least $5,000,000.

6. The Filer also carries on business as a service provider (a Service Provider) to Plan Sponsors of Capital Accumulation Plans, such as defined contribution registered pension plans, group registered retirement savings plans, group registered education savings plans or deferred profit sharing plans established by a Plan Sponsor that permit CAP members to make investment decisions among two or more investment options offered within the Capital Accumulation Plan. A Plan Sponsor may be an employer, trustee, trade union or association.

7. As a Service Provider, the Filer may provide services to Plan Sponsors with respect to the design, establishment or operation of a Capital Accumulation Plan. These services include offering an investment line-up that is appropriate for the plan member's needs, providing investment education and communication to plan participants, and providing administration and reporting as required. The Filer also may carry out responsibilities of a Plan Sponsor that are delegated to it.

8. The Filer trades the securities of mutual funds to current or former employees of an employer, or a person who belongs, or did belong to a trade union or association or,

(a) his or her spouse;

(b) a trustee, custodian or administrator who is acting on his or her behalf, or for his or her benefit, or on behalf of, or for the benefit of, his or her spouse; or

(c) his or her holding entity or a holding entity of his or her spouse,

that has assets in a CAP, including a person that is eligible to participate in a CAP (collectively, CAP Members), as a part of a CAP Member's participation in a Capital Accumulation Plan.

9. By decision document dated August 29, 2006, the Decision Makers granted a registration exemption to the Filer in accordance with the conditions specified in proposed amendments to National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) related to CAPs which were published by the Canadian Securities Administrators on October 21, 2005 and adopted in the form of a blanket exemption in each of the provinces and territories other than the Jurisdictions (the Proposed CAP Exemption) with respect to trades in securities of mutual funds of which the Filer is or becomes the manager and portfolio manager (Proprietary Mutual Funds) and mutual funds of which the Filer is not the manager and portfolio manager (Non-Proprietary Mutual Funds).

10. The Filer distributes prospectus-qualified securities of Proprietary Mutual Funds and Non-Proprietary Mutual Funds to Capital Accumulation Plans or CAP Members. The Filer may also distribute securities of mutual funds to a CAP or a CAP Member in reliance on one or more prospectus exemptions set out in NI 45-106.

11. The Filer intends to distribute securities of Proprietary Mutual Funds and Non-Proprietary Mutual Funds without a prospectus in accordance with the Proposed CAP Exemption. Such proposal contemplates both a dealer registration exemption and a prospectus exemption.

12. As Plan Sponsors typically approach the Filer for assistance with respect to such regulatory issues, the Filer is seeking an exemption on behalf of the Filer, the officers and employees acting on the Filer's behalf, the Plan Sponsors and the Funds, as applicable, from the prospectus requirements under the Legislation where the Fund meets the conditions set out in this decision. The Filer will obtain on behalf of a Plan Sponsor a certificate from the manager of each such Fund certifying that such Fund meets the conditions set out in this decision.

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:

1. The relevant Plan Sponsor:

(a) selects the mutual funds that CAP Members will be able to invest in under the Capital Accumulation Plan;

(b) establishes a policy, and provides CAP Members with a copy of the policy and any amendments to it, describing what happens if a CAP Member does not make an investment decision;

(c) provides CAP Members, in addition to any other information that the Plan Sponsor believes is reasonably necessary for a CAP Member to make an investment decision within the CAP, and unless that information has previously been provided, the following information about each mutual fund the CAP Member may invest in:

(i) the name of the mutual fund;

(ii) the name of the manager of the mutual fund and its portfolio adviser;

(iii) the fundamental investment objective of the mutual fund;

(iv) the investment strategies of the mutual fund or the types of investments the mutual fund may hold;

(v) a description of the risks associated with investing in the mutual fund;

(vi) where a CAP Member can obtain more information about each mutual fund's portfolio holdings;

(vii) where a CAP Member can obtain more information generally about each mutual fund, including any continuous disclosure; and

(viii) whether the mutual fund is considered foreign property for income tax purposes, and if so, a summary of the implications of that status for a CAP Member who invested in that mutual fund;

(d) provides CAP Members with a description and amount of any fees, expenses and penalties relating to the Capital Accumulation Plan that are borne by the CAP Members, including:

(i) any costs that must be paid when the mutual fund is bought or sold;

(ii) costs associated with accessing or using any of the investment information, decision-making tools or investment advice provided by the Plan Sponsor;

(iii) mutual fund management fees;

(iv) mutual fund operating expenses;

(v) record keeping fees;

(vi) any costs of transferring among investment options, including penalties, book and market value adjustments and tax consequences;

(vii) account fees; and

(viii) fees for services provided by service providers,

provided that the Plan Sponsor may disclose the fees, penalties and expenses on an aggregate basis, if the Plan Sponsor discloses the nature of the fees, expenses and penalties, and the aggregated fees do not include fees that arise because of a choice that is specific to a particular CAP Member;

(e) has within the past year, provided CAP Members with performance information about each mutual fund the CAP Members may invest in, including:

(i) the name of the mutual fund for which the performance is being reported;

(ii) the performance of the mutual fund, including historical performance for one, three, five and ten years if available;

(iii) a performance calculation that is net of investment management fees and mutual fund expenses;

(iv) the method used to calculate the mutual fund's performance return calculation, and information about where a CAP Member could obtain a more detailed explanation of that method;

(v) the name and description of a broad-based securities market index, selected in accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, for the mutual fund, and corresponding performance information for that index; and

(vi) a statement that past performance of the mutual fund is not necessarily an indication of future performance;

(f) has, within the past year, informed CAP Members if there were any changes in the choice of mutual funds that CAP Members could invest in and where there was a change, provided information about what CAP Members needed to do to change their investment decision, or make a new investment;

(g) provides CAP Members with investment decision-making tools that the Plan Sponsor reasonably believes are sufficient to assist them in making an investment decision within the CAP;

(h) provides the information required by paragraphs (b), (c), (d) and (g) prior to the CAP Member making an investment decision under the CAP; and

(i) if the Plan Sponsor makes investment advice from a registrant available to CAP Members, the Plan Sponsor must provide CAP Members with information about how they can contact the registrant.

2. The relevant Proprietary Mutual Fund or Non-Proprietary Mutual Fund complies with Part 2 of NI 81-102.

3. Before the first time any Proprietary Mutual Fund or Non-Proprietary Mutual Fund relies on this Decision, the mutual fund files a notice in the form found in Appendix C of the Proposed CAP Exemption in each jurisdiction in which the mutual fund expects to distribute its securities.

4. This Decision, as it relates to the jurisdiction of a Decision Maker, will terminate upon the coming into force in NI 45-106 of a prospectus exemption for trades in a security of a mutual fund to a CAP, or 60 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to provide such a prospectus exemption.