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Canadian Association of Financial Planners & Fidelity Investments Canada Ltd. - MRRS Decision
Headnote
Exemption granted to mutual fund management companies from prohibition contained in subsection 5.4(1) of NationalInstrument 81-105 Mutual Fund Sales Practices to permit the managers to pay a portion of the costs incurred by afinancial planners industry association in organizing educational conferences, provided certain conditions are met.
Rules Cited
National Instrument 81-105 Mutual Fund Sales Practices.
IN THE MATTER OF
NATIONAL INSTRUMENT 8l-105
MUTUAL FUND SALES PRACTICES
AND
IN THE MATTER OF
THE MUTUAL RELIANCE SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
THE CANADIAN ASSOCIATION OF FINANCIAL PLANNERS
AND
IN THE MATTER OF
FIDELITY INVESTMENTS CANADA LIMITED
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of Alberta,British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Saskatchewan,Yukon, Nunavut and the Northwest Territories (the "Jurisdictions") have received an application from the CanadianAssociation of Financial Planners (the "Association") on behalf of Fidelity Investments Canada Limited ("Fidelity") andon behalf of a member of the organization (as defined the National Instrument) of any other mutual fund (collectively withFidelity, the "Mutual Fund Organizations") for a decision pursuant to section 9.l of National Instrument 8l-105 MutualFund Sales Practices (the "National Instrument") for an exemption from subsection 5.4(l) of the Nationa1 Instrument topermit the Mutual Fund Organizations to pay a portion of the cost incurred by the Association in organizing its annualnational conference to be held in June 2001, its Fall Conference to be held in October 2001 and other conferences andseminars organized and presented by the Association or its affiliates or its chapters in the future (collectively "AssociationEducational Events");
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemption Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Association has on its own behalf and on behalf of the Mutual Fund Organizationsrepresented to the Decision Makers that:
1. The Association is Canada's national professional association for practicing financial planners, some of whomare licensed to sell life insurance and related financial products and services such as investment funds. Thehead office of the Association is located in Toronto, Ontario. The Association serves its members and theirindividual, family and business clients primarily by providing specialized and comprehensive programs ofprofessional development in financial services and also by advocating policy and legislation before government,legislators and regulators at all levels; collaborating with trade and industry associations in Canada and abroad;and administering a code of ethics that is binding on its 3300 members.
2. Approximately 75% of Association members are licensed to sell life insurance or certain other financial productsthat are ordinarily provided by life insurance companies. Approximately 75% of Association members areregistered to sell mutual funds. Approximately 30% of Association members are licensed to sell securities.Approximately 20% of Association members are not licensed to sell any financial products. A small minorityoccupies non-sales and/or management positions with financial services organizations. The common activityof the Association's members may be described as providing financial planning advice to Canadians whereinlife and health insurance and other financial products may be used to achieve financial objectives.
3. The Association also proposes to hold a national educational conference in conjunction with its annual generalmeeting for 2001.
4. The Association's national conference (the "2001 Conference") is to take place in Montreal, Quebec from June6 to 9, 2001. Approximately 2000 members of the Association are expected to attend. The 2001 Conferencewill be an educational event. Attendees will be able to earn 15 credit hours towards the annual continuingeducation credits required by the Association of its members and required by several provincial life insuranceand securities regulators for holders of certain designations and licenses administered by such regulators.
5. The Association proposes to hold one regional educationa1 conference in October 2001 (the "Association'sFall Conference").
6. The Association's Fall Conference will be held at the Banff Springs Hotel, Banff, Alberta, from October 12 to14, 2001. Approximately 350 students will attend, 75 percent of whom will be residents of Alberta and 10 to 15percent of whom will be residents of British Columbia. Attendees will be able to earn 12 continuing educationcredi hours.
7. Fidelity is a member of the organization of a mutual fund family within the meaning of the National Instrumentand is registered in or may otherwise distribute mutual funds in each of the Jurisdictions. Fidelity has agreedto pay a portion of the costs of the Association's Fall Conference and the 2001 Conference.
8. The Association anticipates that other members of the organization of a mutual fund will similarly offer to paypart of the costs of the Association in organizing and presenting the 2001 Conference, the Association's FallConference and other Association Educational Events.
9. Subsection 5.4(l) of the National Instrument prohibits a member of the organization of a mutual fund fromsponsoring the costs or expenses relating to a conference, seminar or course that is organized and presentedby The Investment Funds Institute of Canada ("IFIC"), the Investment Dealers Association of Canada (the"IDA") or another trade or Industry association. Subsection 5.4(2) of the National Instrument provides anexemption to permit members of the organization of a mutual fund to sponsor conferences, seminars or coursesorganized and presented by IFIC, the IDA or their respective affiliates in accordance with the conditions set outtherein.
10. Fidelity proposes to sponsor a portion of the costs of the 2001 conference and the Association's FallConference and in accordance with the conditions set out in subsection 5.4(2) of the National Instrument thatare applicable to a conference organized and presented by IFIC or the IDA. The Association anticipates thatother members of the organization of a mutual fund will similarly propose to sponsor a portion of the costs ofthe 2001 Conference, the Association's Fall Conference and other Association Educational Events inaccordance with those conditions. In particular:
a. the primary purpose of the 2001 Conference, the Association's Fall Conference and other AssociationEducational Events will be the provision of educational information about financial planning andmatters relating to mutual funds and related products;
b. none of the Mutual Fund Organizations in a mutual fund family will pay in the aggregate more thanten percent of the total direct costs incurred by the Association for the organization and presentationof the 2001 Conference, the Association's Fall Conference and other Association Educational Events;
c. the selection of a representative of a participating dealer to attend the 2001 Conference, theAssociation's Fall Conference and other Association Educational Events will be made exclusively bythe participating dealer, uninfluenced by the Mutual Fund Organizations; and
d. the 2001 Conference, the Association's Fall Conference and other Association Educational Eventswill be held in Canada;
AND WHEREAS pursuant to the System this Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS the Decision Makers are satisfied that the test contained in the National Instrument thatprovides the Decision Makers with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the National Instrument is that the prohibition containedin subsection 5.4(1) prohibiting members of the organization of a mutual fund from sponsoring the costs or expensesrelating to a conference, seminar or course 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 the direct costs (as defined in theNational Instrument) incurred by the Association relating to the Association's Fall Conference, 2001 Conference or otherAssociation Educational Events, provided that the Mutual Fund Organization and the Association comply with theconditions set out in subsection 5.4(2) of the National Instrument in respect of the 2001 Conference, the Association'sFall Conference and other Association Educational Events.
PROVIDED that this Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year afterthe publication in final form of any legislation or rule of that Decision Maker which modifies the provisions of section 5.4of the National Instrument in a manner which makes the relief provided for in this Decision unnecessary or providessimilar relief on a different basis or subject to different conditions.
February 13, 2001.
"J.A. Geller" "Howard I. Weston"