Securities Law & Instruments

Headnote

Section 5.1 of Rule 31-506 SROMembership - Mutual Fund Dealers - mutual fund dealer exempted,subject to conditions, from the requirements of the Rule thatit file an application and prescribed fees with the Mutual FundDealers Association of Canada - mutual fund dealer will conductlimited mutual fund dealer activities only - mutual fund dealersubject to terms and conditions of registration.

Statute Cited

Securities Act, R.S.O. 1990,c. S.5, as am.

Rule Cited

Rule 31-506 SRO Membership -Mutual Fund Dealers, ss. 2.1, 3.1, 5.1.

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")

AND

ONTARIO SECURITIES COMMISSION

RULE 31-506 SRO MEMBERSHIP- MUTUAL FUND DEALERS

(the "Rule")

AND

IN THE MATTER OF

STRATEGICNOVA MUTUAL FUNDSERVICES INC.

 

DECISION

(Section 5.1 of the Rule)

UPON the Director havingreceived an application (the "Application") from StrategicNovaMutual Fund Services Inc. (the "Registrant") for adecision (the "Decision"), pursuant to section 5.1of the Rule, exempting the Registrant from the requirementsin sections 2.1 and 3.1 of the Rule, which would otherwise requirethat the Registrant be a member of the Mutual Fund Dealers Associationof Canada (the "MFDA") on and after July 2, 2002,and file with the MFDA, no later than May 23, 2001, an applicationand corresponding fees for membership;

UPON considering theApplication and the recommendation of staff of the Ontario SecuritiesCommission;

AND UPON the Registranthaving represented to the Director that:

1. the Registrant is registeredunder the Act as a mutual fund dealer;

2. an affiliate of the Registrantis the manager of a number of mutual funds that it or an affiliateof the Registrant have established, which are sold to thepublic either pursuant to a simplified prospectus or on anexempt basis, and the affiliate or another affiliate of theRegistrant will be the manager of any other funds that theaffiliate or the other affiliate of the Registrant may establishin the future;

3. the requested relief isrequired in Ontario only and no similar application has beenfiled in any other jurisdiction;

4. the securities of the mutualfunds managed by an affiliate of the Registrant are and willbe generally sold to the public through other registered dealers;

5. the Registrant's activitiesas a mutual fund dealer currently represent and will continueto represent activities that are incidental to its principalbusiness activities;

6. the Registrant has agreedto the imposition of the terms and conditions on the Registrant'sregistration as a mutual fund dealer set out in the attachedSchedule "A", which outlines the activities theRegistrant has agreed to adhere to in connection with itsapplication for this Decision;

7. any person or company thatis not currently a mutual fund client of the Registrant onthe date of this Decision, will, before they are acceptedas a mutual fund client of the Registrant, receive prominentwritten notice from the Registrant that:

The Registrant is notcurrently a member, and does not intend to become a memberof the Mutual Fund Dealers Association; consequently, clientsof the Registrant will not have available to them investorprotection benefits that would otherwise derive from membershipof the Registrant in the MFDA, including coverage underany investor protection plan for clients of members of theMFDA;

8. upon the next general mailingto its mutual fund clients and in any event before November30, 2002, the Registrant shall provide to all of its mutualfund clients the written notice referred to in paragraph 7,above;

AND UPON the Directorbeing satisfied that to do so would not be prejudicial to thepublic interest;

IT IS THE DECISION ofthe Director, pursuant to section 5.1 of the Rule, that, effectiveMay 23, 2001, the Registrant is exempt from the requirementsin sections 2.1 and 3.1 of the Rule;

PROVIDED THAT the Registrantcomplies with the terms and conditions on its registration underthe Act as a mutual fund dealer set out in the attached Schedule"A".

June 28, 2002.

"David M. Gilkes"

 

Schedule "A"

 

TERMS AND CONDITIONS OF REGISTRATION

OF

STRATEGICNOVA MUTUAL FUNDSERVICES INC.

AS A MUTUAL FUND DEALER

Definitions

1. For the purposes hereof,unless the context otherwise requires:

(a) "Act" meansthe Securities Act, R.S.O. 1990, c. S.5, as amended;

(b) "Adviser"means an adviser as defined in subsection 1(1) of the Act;

(c) "Client Name Trade"means, for the Registrant, a trade to, or on behalf of,a person or company, in securities of a mutual fund, thatis managed by the Registrant or an affiliate of the Registrant,where, immediately before the trade, the person or companyis shown on the records of the mutual fund or of an othermutual fund managed by the Registrant or an affiliate ofthe Registrant as the holder of securities of such mutualfund, and the trade consists of:

(A) a purchase, by theperson or company, through the Registrant, of securitiesof the mutual fund; or

(B) a redemption, by theperson or company, through the Registrant, of securitiesof the mutual fund;

and where, the person orcompany:

(C) is a client of theRegistrant that was not solicited by the Registrant; or

(D) was an existing clientof the Registrant on the Effective Date;

(d) "Commission"means the Ontario Securities Commission;

(e) "Effective Date"means May 23, 2001;

(f) "Employee",for the Registrant, means:

(A) an employee of theRegistrant;

(B) an employee of anaffiliated entity of the Registrant; or

(C) an individual thatis engaged to provide, on a bona fide basis, consulting,technical, management or other services to the Registrantor to an affiliated entity of the Registrant, under awritten contract between the Registrant or the affiliatedentity and the individual or a consultant company or consultantpartnership of the individual, and, in the reasonableopinion of the Registrant, the individual spends or willspend a significant amount of time and attention on theaffairs and business of the Registrant or an affiliatedentity of the Registrant;

(g) "Employee",for a Service Provider, means an employee of the ServiceProvider or an affiliated entity of the Service Provider,provided that, at the relevant time, in the reasonable opinionof the Registrant, the employee spends or will spend, asignificant amount of time and attention on the affairsand business of:

(A) the Registrant oran affiliated entity of the Registrant; or

(B) a mutual fund managedby the Registrant or an affiliated entity of the Registrant;

(h) "Employee Rule"means Commission Rule 45-503 Trades To Employees, Executivesand Consultants;

(i) "Executive",for the Registrant, means a director, officer or partnerof the Registrant or of an affiliated entity of the Registrant;

(j) "Executive",for a Service Provider, means a director, officer or partnerof the Service Provider or of an affiliated entity of theService Provider;

(k) "Exempt Trade",for the Registrant, means:

(i) a trade in securitiesof a mutual fund that is made between a person or companyand an underwriter acting as purchaser or between or amongunderwriters; or

(ii) a trade in securitiesof a mutual fund for which the Registrant would have availableto it an exemption from the registration requirementsof clause 25(1)(a) of the Act if the Registrant were nota "market intermediary" as such term is definedin section 204 of the Regulation;

(l) "Fund-on-Fund Trade",for the Registrant, means a trade that consists of:

(i) a purchase, throughthe Registrant, of securities of a mutual fund that ismade by another mutual fund;

(ii) a purchase, throughthe Registrant, of securities of a mutual fund that ismade by a counterparty, an affiliated entity of the counterpartyor an other person or company, pursuant to an agreementto purchase the securities to effect a hedge of a liabilityrelating to a contract for a specified derivative or swapmade between the counterparty and another mutual fund;or

(iii) a sale, throughthe Registrant, of securities of a mutual fund that ismade by another mutual fund where the party purchasingthe securities is:

(A) a mutual fund managedby the Registrant or an affiliated entity of the Registrant;or

(B) a counterparty,affiliated entity or other person or company that acquiredthe securities pursuant to an agreement to purchasethe securities to effect a hedge of a liability relatingto a contract for a specified derivative or swap madebetween the counterparty and another mutual fund; and

where, in each case, atleast one of the referenced mutual funds is a mutual fundthat is managed by either the Registrant or an affiliatedentity of the Registrant;

(m) "In FurtheranceTrade" means, for the Registrant, a trade by the Registrantthat consists of any act, advertisement, or solicitation,directly or indirectly in furtherance of an other tradein securities of a mutual fund, where the other trade consistsof:

(i) a purchase or saleof securities of a mutual fund that is managed by theRegistrant or an affiliated entity of the Registrant;or

(ii) a purchase or saleof securities of a mutual fund where the Registrant actsas the principal distributor of the mutual fund;

and where, in each case,the purchase or sale is made by or through an other registereddealer if the Registrant is not otherwise permitted to makethe purchase or sale pursuant to these terms and conditions;

(n) "Mutual Fund Instrument"means National Instrument 81-102 Mutual Funds, as amended;

(o) "Permitted Client",for the Registrant, means a person or company that is aclient of the Registrant, and that is, or was at the timethe person or company became a client of the Registrant:

(i) an Executive or Employeeof the Registrant;

(ii) a Related Party ofan Executive or Employee of the Registrant;

(iii) a Service Providerof the Registrant or an affiliated entity of a ServiceProvider of the Registrant;

(iv) an Executive or Employeeof a Service Provider of the Registrant; or

(v) a Related Party ofan Executive or Employee of a Service Provider of theRegistrant;

(p) "Permitted ClientTrade" means, for the Registrant, a trade to a personwho is a Permitted Client or who represents to the Registrantthat he, she or it is a person included in the definitionof Permitted Client, in securities of a mutual fund thatis managed by the Registrant or an affiliate of the Registrant,and the trade consists of a purchase or redemption, by theperson, through the Registrant, of securities of the mutualfund;

(q) "Registered Plan"means a registered pension plan, deferred profit sharingplan, registered retirement savings plan, registered retirementincome fund, registered education savings plan or otherdeferred income plan registered under the Income Tax Act(Canada);

(r) "Registrant"means StrategicNova Mutual Fund Services Inc.;

(s) "Regulation"means R.R.O. 1990, Reg. 1015, as amended, made under theAct;

(t) "Related Party",for a person, means an other person who is:

(i) the spouse of theperson;

(ii) the issue of:

(A) the person,

(B) the spouse of theperson, or

(C) the spouse of anyperson that is the issue of a person referred to insubparagraphs (A) or (B) above;

(iii) the parent, grandparentor sibling of the person, or the spouse of any of them;

(iv) the issue of anyperson referred to in paragraph (iii) above; or

(v) a Registered Planestablished by, or for the exclusive benefit of, one,some or all of the foregoing;

(vi) a trust where oneor more of the trustees is a person referred to aboveand the beneficiaries of the trust are restricted to one,some, or all of the foregoing;

(vii) a corporation whereall the issued and outstanding shares of the corporationare owned by one, some, or all of the foregoing;

(u) "securities",for a mutual fund, means shares or units of the mutual fund;

(v) "Seed Capital Trade"means a trade in securities of a mutual fund made to a personsor company referred to in any of subparagraphs 3.1(1)(a)(i)to 3.1(1)(a)(iii) of the Mutual Fund Instrument;

(w) "Service Provider",for the Registrant, means:

(i) a person or companythat provides or has provided professional, consulting,technical, management or other services to the Registrantor an affiliated entity of the Registrant;

(ii) an Adviser to a mutualfund that is managed by the Registrant or an affiliatedentity of the Registrant; or

(iii) a person or companythat provides or has provided professional, consulting,technical, management or other services to a mutual fundthat is managed by the Registrant or an affiliated entityof the Registrant.

2. For the purposes hereof,a person or company is considered to be an "affiliatedentity" of an other person or company if the person orcompany would be an affiliated entity of that other personor company for the purposes of the Employee Rule.

3. For the purposes hereof:

(a) "issue", "niece","nephew" and "sibling" includes anyperson having such relationship through adoption, whetherlegally or in fact;

(b) "parent" and"grandparent" includes a parent or grandparentthrough adoption, whether legally or in fact;

(c) "registered dealer"means a person or company that is registered under the Actas a dealer in a category that permits the person or companyto act as dealer for the subject trade; and

(d) "spouse",for an Employee or Executive, means a person who, at therelevant time, is the spouse of the Employee or Executive.

4. Any terms that are notspecifically defined above shall, unless the context otherwiserequires, have the meaning:

(a) specifically ascribedto such term in the Mutual Fund Instrument; or

(b) if no meaning is specificallyascribed to such term in the Mutual Fund Instrument, thesame meaning the term would have for the purposes of theAct.

Restricted Registration

Permitted Activities

5. The registration of theRegistrant as a mutual fund dealer under the Act shall befor the purposes only of trading by the Registrant in securitiesof a mutual fund where the trade consists of:

(a) a Client Name Trade;

(b) an Exempt Trade;

(c) a Fund-on-Fund Trade;

(d) an In Furtherance Trade;

(e) a Permitted Client Trade;or

(f) a Seed Capital Trade;

provided that, in the case ofall trades that are only referred to in clauses (a) or (e),the trades are limited and incidental to the principal businessof the Registrant.