Mutual Reliance Review System for Exemptive Relief Applications - Section 7.1 of NI 81-105 - exemption to allow applicant's representatives to pay fees or commissions payableby clients upon redemption of third party products in connection with the purchase ofmutual funds managed by a member of the same organization as the applicant'srepresentatives.
NI 81-105 - Mutual Funds Sales Practices (1998) 21 OSCB 2713, ss. 4.2(1), 7.1, Part 8.
NATIONAL INSTRUMENT 81-105 MUTUAL FUND SALES PRACTICES
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
COUNSEL GROUP OF FUNDS INC.
MRRS DECISION DOCUMENT
WHEREAS each of the Canadian securities regulatory authorities or regulators (the"Decision Makers") in the provinces and territories of Canada , other than Quebec, hasreceived an application from Counsel Group of Funds Inc. ("Counsel ") on behalf of itselfand current and future affiliates of Counsel that are dealers and the sales representativesof those dealers ("Representatives") from time to time for a decision pursuant to section9.1 of National Instrument 81-105 Mutual Fund Sales Practices ("NI 81-105") that theprohibitions on certain rebates contained in section 7.1 of NI 81-105 shall not apply torebates paid by Representatives to clients who are switching from third party mutual fundsto mutual funds managed by Counsel;
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;
AND WHEREAS Counsel has represented to the Decision Makers that:
1. Counsel is a mutual fund management corporation whose affiliates carry onbusiness as mutual fund dealers and securities dealers in Canada. Counsel's headoffice is located in Ontario;
2. Counsel is a wholly-owned subsidiary of Investment Planning Counsel of CanadaLimited, a mutual fund dealer, and is affiliated with IPC Securities Corp., asecurities dealer, Multi Mutual Limited, a mutual fund dealer, Henry Hicks &Associates Limited, a mutual fund dealer, IPC Investment Corp., a mutual funddealer and IPC Investment Corporation (B.C.) Limited, a mutual fund dealer.
3. Counsel manages mutual funds (the "Proprietary Products"), including CounselManaged Fund, Counsel International Managed RSP Fund, Counsel World EquityPortfolio and Counsel Focus Portfolio;
4. Counsel's affiliated dealers are the principal distributors of the Proprietary Products,as well as participating dealers of other mutual funds (the "Third Party Funds") notmanaged by Counsel;
5. Representatives wish to be permitted to pay the fees or commissions payable bytheir clients who wish to switch from Third Party Funds to Proprietary Products onthe redemption of their Third Party Funds;
6. Representatives and directors of Counsel own equity interests (as defined in NI 81-105) in Investment Planning Counsel of Canada Limited.
7. Representatives are not required by Counsel or the dealers to sell ProprietaryProducts and may recommend Third Party Products to clients, without any undueinfluence or incentives from Counsel or the dealers to sell those products.
AND WHEREAS pursuant to the System this Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained inNI 81-105 that provides the Decision Maker with the jurisdiction to make the decision hasbeen met.
The Decision of the Decision Makers pursuant to section 9.1 of NI 81-105 is that theRepresentatives of the current and future affiliated mutual fund dealers and securitiesdealers of Counsel shall be exempt from the prohibitions on payment of certain clientrebates contained in section 7.1 of NI 81-105 to the extent necessary to allowRepresentatives to pay the fees and commissions payable by clients upon redemption ofThird Party Products when the clients wish to switch from Third Party Products toProprietary Products.
PROVIDED that in respect of each such payment:
1. Counsel, the relevant affiliate of Counsel and the relevant Representative, as thecase may be, complies with the informed written consent provisions of section7.1(1)(a) of NI 81-105 and the disclosure and consent provisions of Part 8 of NI 81-105;
2. Clients are advised, in advance, that any rebate proposed to be made available bya Representative in connection with the purchase of a Proprietary Product (i) willbe available to the client regardless of which mutual fund the redemption proceedsare to be invested in (to a maximum of the commission earned on the purchase),and (ii) will not be conditional on a purchase of Proprietary Products;
3. Representatives are not and shall not in the future be subject to quotas (eitherexpress or implied) in respect of the distribution of Proprietary Products and shallcontinue to be entitled to offer competing Third Party Products to their clients, andCounsel's affiliated distributors comply with section 4.2(1) of NI 81-105 and, exceptas permitted by NI 81-105, Counsel and its affiliates do not provide an incentive(either express or implied) to a Representative or any affiliated distributor torecommend Proprietary Products over Third Party Products;
4. Representatives who are shareholders either of Counsel or of the affiliateddistributors are expressly permitted by contract to sell Third Party Products withoutimproper influence from Counsel or any affiliate, and other Representatives are andwill in the future be able to offer Third Party Products without improper influencefrom Counsel or any affiliate;
5. The Representative who makes the payment is not and will not be reimburseddirectly or indirectly for such payment by Counsel or its affiliates; and
6. The Representative who makes the payment is employed by or under contract witha dealer that is an affiliate of Counsel registered in the jurisdiction in which thepayment is made.
AND PROVIDED FURTHER that this Decision Document shall cease to beoperative with respect to a Decision Maker following the entry into force of a rule of thatDecision Maker that replaces or amends section 7.1 of NI 81-105.
February 16th, 2000.
"Howard I. Wetston" "R. Stephen Paddon"