Exemption granted to mutual fund management companies from prohibition containedin subsection 5.4(1) of National Instrument 81-105 Mutual Fund Sales Practices topermit the managers to pay a portion of the costs incurred by a financial plannersindustry association in organizing educational conferences, provided certain conditionsare met.
National Instrument 81 -105 Mutual Fund Sales Practices.
IN THE MATTER OF
THE MUTUAL RELIANCE SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
THE CANADIAN ASSOCIATION OF INSURANCE AND FINANCIAL ADVISORS
IN THE MATTER OF
FIDELITY INVESTMENTS CANADA LIMITED
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland,Nova Scotia, Ontario, Prince Edward Island and Saskatchewan (the "Jurisdictions") havereceived an application from the Canadian Association of Insurance and FinancialAdvisors (the "Association") on behalf of Fidelity Investments Canada Limited ("Fidelity")and on behalf a member of the organization (as defined the National Instrument) of anyother mutual fund (collectively with Fidelity, the "Mutual Fund Organizations") for adecision pursuant to section 9.1 of National Instrument 81-105 Mutual Fund SalesPractices (the "National Instrument") for an exemption from subsection 5.4(1) of theNational Instrument to permit the Mutual Fund Organizations to pay a portion of the costincurred by the Association in organizing its four regional conferences to be held in Julyand August 2000, its annual national conference to be held in September 2000 and otherconferences and seminars organized and presented by the Association or its affiliates inthe future (collectively "Association Educational Events");
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Application (the "System"), the Ontario Securities Commission is the principalregulator for this application;
AND WHEREAS the Association has on its own behalf and on behalf of the MutualFund Organizations represented to the Decision Makers that:
1. The Association is Canada's national trade association for financial intermediariesand advisors who sell life insurance and related financial products and servicessuch as investment funds. The head office of the Association is located in Toronto,Ontario. The Association serves its members and their individual, family andbusiness clients primarily by providing specialized and comprehensive programsof professional development in financial services and also by advocating policy andlegislation before government, legislators and regulators at all levels; collaboratingwith trade and industry associations in Canada and abroad; and administering acode of ethics that is binding on its 16,200 members.
2. Full members of the Association are required to hold a licence to sell life insuranceor certain other financial products that are ordinarily provided by life insurancecompanies. Approximately 63% of Association members are registered to sellmutual funds and other securities. A small minority occupy non-sales positions withfinancial institutions. The common activity of the Association's members may bedescribed as providing financial advice to Canadians, using life and healthinsurance and other financial products to achieve financial objectives.
3. The Association proposes to hold four residential regional educational conferencesin July and August 2000 (the "Association's Schools").
4. The Okanagan School will be held at Okanagan University College, Kelowna,British Columbia, from July 23 to 26, 2000. Approximately 100 students areexpected to attend, 90 percent of whom will be residents of British Columbia.Attendees will be able to earn 18.75 credit hours towards the annual continuingeducation credits required for holders of certain designations administered by theAssociation and by several provincial life insurance regulators.
5. The Atlantic School will be held at Rodd Mill River Resort, Woodstock, PrinceEdward Island, from August 13 to 15, 2000. Approximately 100 students areexpected to attend, 80 percent of whom will be residents of New Brunswick,Newfoundland, Nova Scotia and Prince Edward Island. Attendees will be able toearn 11.25 continuing education credit hours
6. The Ontario School will be held at the University of Waterloo, Waterloo, Ontario,from August 20 to 23, 2000. Approximately 300 students are expected to attend, 90percent of whom will be residents of Ontario. Attendees will be able to earn 17.5continuing education credit hours.
7. The Banff School will be held at the Banff Centre, Banff, Alberta, from August 20to 24, 2000. Approximately 250 students will attend, 75 percent of whom will beresidents of Alberta and 10 to 15 percent of whom will be residents of BritishColumbia. Attendees will be able to earn 22.5 continuing education credit hours.
8. The Association also proposes to hold a national educational conference inconjunction with its annual general meeting for 2000.
9. The Association's national conference (the "2000 Conference") is to take place inSaskatoon, Saskatchewan from September 23 to 26, 2000. Approximately 1000 to1200 members of the Association are expected to attend. The 2000 Conference willbe an educational event. Attendees will be able to earn 15 credit hours towards theannual continuing education credits required for holders of certain designationsadministered by the Association and by several provincial life insurance regulators.
10. Fidelity is a member of the organization of a mutual fund family within the meaningof the National Instrument and is registered in or may otherwise distribute mutualfunds in each of the Jurisdictions. Fidelity has agreed to pay a portion of the costsof the Association's Schools and the 2000 Conference and wishes to sponsorcertain educational or social events at the Association's Schools, 2000 Conferenceand other Association Educational Events.
11. The Association anticipates that other members of the organization of a mutual fundwill similarly offer to pay part of the costs of the Association in organizing andpresenting the 2000 Conference and other Association Educational Events.
12. Subsection 5.4(1) of the National Instrument prohibits a member of the organizationof a mutual fund from sponsoring the costs or expenses relating to a conference,seminar or course that is organized and presented by The Investment FundsInstitute of Canada ("IFIC"), the Investment Dealers Association of Canada (the"IDA") or another trade or industry association. Subsection 5.4(2) of the NationalInstrument provides an exemption to permit members of the organization of amutual fund to sponsor conferences, seminars or courses organized and presentedby IFIC, the IDA or their respective affiliates in accordance with the conditions setout therein.
13. Fidelity proposes to sponsor a portion of the costs of the Association's Schools and2000 Conference in accordance with the conditions set out in subsection 5.4(2) ofthe National Instrument that are applicable to a conference organized andpresented by IFIC or the IDA. The Association anticipates that other members of theorganization of a mutual fund will similarly propose to sponsor a portion of the costsof the 2000 Conference and other Association Educational Events in accordancewith those conditions. In particular:
a. the primary purpose of the Association's Schools, 2000 Conference andother Association Educational Events will be the provision of educationalinformation about financial planning and matters relating to mutual funds andrelated products;
b. none of the Mutual Fund Organizations in a mutual fund family will pay in theaggregate more than ten percent of the total direct costs incurred by theAssociation for the organization and presentation of the Association'sSchools, 2000 Conference or other Association Educational Events;
c. the selection of a representative of a participating dealer to attend theAssociation's schools, 2000 Conference or other Association EducationalEvents will be made exclusively by the participating dealer, uninfluenced bythe Mutual Fund Organizations; and
d. the Association's Schools, 2000 Conference and other AssociationEducational Events will be held in Canada;
AND WHEREAS pursuant to the System this Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");
AND WHEREAS the Decision Makers are satisfied that the test contained in theNational Instrument that provides the Decision Makers with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuant to the National Instrument is thatthe prohibition contained in subsection 5.4(1) prohibiting members of the organization ofa mutual fund from sponsoring the costs or expenses relating to a conference, seminar orcourse that is organized and presented by IFIC, the IDA or another trade or industryassociation, shall not apply to each Mutual Fund Organization in paying a portion of thedirect costs (as defined in the National Instrument) incurred by the Association relating tothe Association's Schools, 2000 Conference or other Association Educational Events,provided that the Mutual Fund Organization and the Association comply with the conditionsset out in subsection 5.4(2) of the National Instrument in respect of the Association'sSchools, 2000 Conference and other Association Educational Events.
PROVIDED that this Decision, as it relates to the jurisdiction of a Decision Maker,will terminate one year after the publication in final form of any legislation or rule of thatDecision Maker dealing with matters in section 5.4 of the National Instrument.
July 21st, 2000.
"J. A. Geller" "Robert W. Davis"