Securities Law & Instruments

Headnote

Exemptive relief for a mutual fund dealer fromthe requirement to become a member of the Mutual Fund DealersAssociation.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am s.25.

Applicable Ontario Securities CommissionRule

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

IN THE MATTER OF

THE SECURITIES ACT

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

AND

ONTARIO SECURITIES COMMISSIONRULE 31-506

SRO MEMBERSHIP - MUTUAL FUNDDEALERS (the "Rule")

AND

IN THE MATTER OF

AIC INVESTMENT SERVICES INC.

 

DECISION

(Section 5.1 of the Rule)

UPON the Director having received anapplication (the "Application") from AIC InvestmentServices Inc. (the "Registrant") for a decision, pursuantto section 5.1 of the Rule, exempting the Registrant from therequirements in sections 2.1 and 3.1 of the Rule, which wouldotherwise require that the Registrant be a member of the MutualFund Dealers Association of Canada (the "MFDA") onand after July 2, 2002, and file with the MFDA, no later thanMay 23, 2001, an application and corresponding fees for membership;

UPON considering the Application andthe recommendation of staff of the Ontario Securities Commission;

AND UPON the Registrant having representedto the Director that:

1. the Registrant is registered under theAct as a dealer in the category of mutual fund dealer, limitedmarket dealer, and adviser in the category of investment counseland portfolio manager;

2. AIC Limited, ("AIC"), an affiliateof the Registrant, is the manager of the AIC Group of Funds;

3. the requested relief is required in Ontarioonly and no similar application has been filed in any otherjurisdiction;

4. the securities of the mutual funds managedby AIC are generally sold to the public through other registereddealers;

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

6. the Registrant has agreed to the impositionof the terms and conditions on the Registrant's registrationas a mutual fund dealer set out in the attached Schedule "A",which outlines the activities the Registrant has agreed toadhere to in connection with its application for this Decision;

7. upon the next general mailing to holdersof accounts held with the Registrant in its capacity as amutual fund dealer ("Account Holders") and in anyevent before September 30, 2002, the Registrant shall provide,to any Account Holder that was a client of the Registranton the date of this Decision, the prominent written noticefrom the Registrant that:

The Registrant is not currently a member,and does not intend to become a member of the Mutual FundDealers Association; consequently, clients of the Registrantwill not have available to them investor protection benefitsthat would otherwise derive from membership of the Registrantin the MFDA, including coverage under any investor protectionplan for clients of members of the MFDA;

AND UPON the Director being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS THE DECISION of the Director, pursuantto section 5.1 of the Rule, that, effective the date of thisDecision, the Registrant is exempt from the requirements insections 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", and that the Registrant does not accept new AccountHolders from the date of this Decision.

July 25, 2002.

"David M. Gilkes"

 

SCHEDULE "A"

TERMS AND CONDITIONS OF REGISTRATION

OF

AIC INVESTMENT SERVICES INC.

AS A MUTUAL FUND DEALER

Definitions

1. For the purposes hereof, unless the contextotherwise requires:

(a) "Act" means the SecuritiesAct, R.S.O. 1990, c. S.5, as amended;

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

(c) "Client Name Trade" means,for the Registrant, a trade to, or on behalf of, a personor company, in securities of a mutual fund, that is managedby the Registrant or an affiliated entity of the Registrant,where, immediately before the trade, the person or companyis shown on the records of the mutual fund or of anothermutual 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 the person or company,through the Registrant, of securities of the mutualfund; or

(B) a redemption, by the person or company,through the Registrant, of securities of the mutualfund;

and where, the person or company is eithera client of the Registrant that was not solicited by theRegistrant or was an existing client of the Registrant onthe date of this Decision;

(d) "Commission" means the OntarioSecurities Commission;

(e) "Effective Date" means thedate of this Decision;

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

(A) an employee of the Registrant;

(B) an employee of an affiliated entityof the Registrant; or

(C) an individual that is engaged toprovide, on a bona fide basis, consulting, technical,management or other services to the Registrant or toan affiliated entity of the Registrant, under a writtencontract between the Registrant or the affiliated entityand the individual or a consultant company or consultantpartnership of the individual, and, in the reasonableopinion of the Registrant, the individual spends orwill spend a significant amount of time and attentionon the affairs and business of the Registrant or anaffiliated entity of the Registrant;

(g) "Employee", for a ServiceProvider, means an employee of the Service Provider or anaffiliated entity of the Service Provider, provided that,at the relevant time, in the reasonable opinion of the Registrant,the employee spends or will spend, a significant amountof time and attention on the affairs and business of:

(A) the Registrant or an affiliatedentity of the Registrant; or

(B) a mutual fund managed by the Registrantor an affiliated entity of the Registrant;

(h) "Employee Rule" means CommissionRule 45-503 Trades To Employees, Executives and Consultants;

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

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

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

(i) a trade in securities of a mutualfund that is made between a person or company and an underwriteracting as purchaser or between or among underwriters;or

(ii) a trade in securities of a mutualfund for which the Registrant would have available toit an exemption from the registration requirements ofclause 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", forthe Registrant, means a trade that consists of:

(i) a purchase, through the Registrant,of securities of a mutual fund that is made by anothermutual fund;

(ii) a purchase, through the Registrant,of securities of a mutual fund that is made by a counterparty,an affiliated entity of the counterparty or an other personor company, pursuant to an agreement to purchase the securitiesto effect a hedge of a liability relating to a contractfor a specified derivative or swap made between the counterpartyand another mutual fund; or

(iii) a sale, through the Registrant,of securities of a mutual fund that is made by anothermutual fund where the party purchasing the securitiesis:

(A) a mutual fund managed by the Registrantor an affiliated entity of the Registrant; or

(B) a counterparty, affiliated entityor other person or company that acquired the securitiespursuant to an agreement to purchase the securitiesto effect a hedge of a liability relating to a contractfor a specified derivative or swap made between thecounterparty and another mutual fund; and

where, in each case, at least one of thereferenced mutual funds is a mutual fund that is managedby either the Registrant or an affiliated entity of theRegistrant;

(m) "In Furtherance Trade" means,for the Registrant, a trade by the Registrant that consistsof any act, advertisement, or solicitation, directly orindirectly in furtherance of an other trade in securitiesof a mutual fund, where the other trade consists of:

(i) a purchase or sale of securities ofa mutual fund that is managed by the Registrant or anaffiliated entity of the Registrant; or

(ii) a purchase or sale of securitiesof a mutual fund where the Registrant acts as the principaldistributor of the mutual fund; and

where, in each case, the purchase or saleis made by or through an other registered dealer if theRegistrant is not otherwise permitted to make the purchaseor sale pursuant to these terms and conditions;

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

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

(i) an Executive or Employee of the Registrant;

(ii) a Related Party of an Executive orEmployee of the Registrant;

(iii) a Service Provider of the Registrantor an affiliated entity of a Service Provider of the Registrant;

(iv) an Executive or Employee of a ServiceProvider of the Registrant; or

(v) a Related Party of an Executive orEmployee of a Service Provider of the Registrant;

(p) "Permitted Client Trade" means,for the Registrant, a trade to a person who is a PermittedClient or who represents to the Registrant that he or sheis a person included in the definition of Permitted Client,in securities of a mutual fund that is managed by the Registrantor an affiliated entity of the Registrant, and the tradeconsists of:

(i) a purchase, by the person, throughthe Registrant, of securities of the mutual fund; or

(ii) a redemption, by the person, throughthe Registrant, of securities of the mutual fund;

(q) "Registered Plan" means aregistered pension plan, deferred profit sharing plan, registeredretirement savings plan, registered retirement income fund,registered education savings plan or other deferred incomeplan registered under the Income Tax Act (Canada);

(r) "Registrant" means AIC InvestmentServices Inc.;

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

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

(i) the spouse of the person;

(ii) the issue of:

(A) the person,

(B) the spouse of the person, or

(C) the spouse of any person that isthe issue of a person referred to in subparagraphs (A)or (B) above;

(iii) the parent, grandparent or siblingof the person, or the spouse of any of them;

(iv) the issue of any person referredto in paragraph (iii) above; or

(v) a Registered Plan established by,or for the exclusive benefit of, one, some or all of theforegoing;

(vi) a trust where one or more of thetrustees is a person referred to above and the beneficiariesof the trust are restricted to one, some, or all of theforegoing;

(vii) a corporation where all the issuedand outstanding shares of the corporation are owned byone, some, or all of the foregoing;

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

(v) "Seed Capital Trade" meansa 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 theRegistrant, means:

(i) a person or company that providesor has provided professional, consulting, technical, managementor other services to the Registrant or an affiliated entityof the Registrant;

(ii) an Adviser to a mutual fund thatis managed by the Registrant or an affiliated entity ofthe Registrant; or

(iii) a person or company that providesor has provided professional, consulting, technical, managementor other services to a mutual fund that is managed bythe Registrant or an affiliated entity of the Registrant.

2. For the purposes hereof, a person or companyis considered to be an "affiliated entity" of another person or company if the person or company would bean affiliated entity of that other person or company for thepurposes 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 grandparent through adoption, whetherlegally or in fact;

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

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

4. Any terms that are not specifically definedabove shall, unless the context otherwise requires, have themeaning:

(a) specifically ascribed to such term inthe Mutual Fund Instrument; or

(b) if no meaning is specifically ascribedto such term in the Mutual Fund Instrument, the same meaningthe term would have for the purposes of the Act.

Restricted Registration

Permitted Activities

5. The registration of the Registrant as amutual fund dealer under the Act shall be for the purposesonly of trading by the Registrant in securities of a mutualfund 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 of all trades thatare only referred to in clauses (a) or (e), the trades are limitedand incidental to the principal business of the Registrant.