Exemptions for pooled funds from subsections 111 and 117 of the Securities Act (Ontario) to permit a fund of fund structure.
Securities Act, R.S.O. 1990, Reg. 1015, as am., sections 111(2)(b), 111(2)(c), 111(3), 117(1)(a), and 117(1)(d).
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990 c.S.5 AS AMENDED
IN THE MATTER OF
J.C. CLARK LTD.
IN THE MATTER OF
THE J.C. CLARK PRESERVATION TRUST,
THE J.C. CLARK LOYALIST PRESERVATION TRUST,
THE J.C. CLARK COMMONWEALTH PATRIOT TRUST,
THE J.C. CLARK COMMONWEALTH LOYALIST TRUST,
AND THE J.C. CLARK STATISTICAL ARBITRAGE FUND
(Sections 113 and 117(2))
WHEREAS the Ontario Securities Commission (the Commission) has received an application filed by J.C. Clark Ltd. (the Applicant), on its own behalf and on behalf of the J.C. Clark Preservation Trust, the J.C. Clark Loyalist Preservation Trust, the J.C. Clark Commonwealth Patriot Trust, the J.C. Clark Commonwealth Loyalist Trust, and the J.C. Clark Statistical Arbitrage Fund (the J.C. Clark Funds, individually, a J.C. Clark Fund) for an order pursuant to Sections 113 and 117(2) of the Securities Act (Ontario) (the Act) which will, subject to certain conditions,
(a) exempt the J.C. Clark Funds and any other fund managed by the Applicant (the Top Fund) from the restriction in section 111(2)(b) and section 111(3) of the Act prohibiting a mutual fund from knowingly making and holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder (the Substantial Security Holder Restriction);
(b) exempt a Top Fund from the restriction in section 111(2)(c) and section 111(3) of the Act prohibiting a mutual fund from knowingly making and holding an investment in an issuer in which any officer or director of the mutual fund, its management company, or distribution company or any associate of them has a significant interest or any person or company in which is a substantial security holder of the mutual fund, its management company, or distribution company has a significant interest (the Significant Interest Restriction);
(c) exempt the Applicant from the requirement in sections 117(1)(a) and 117(1)(d) of the Act requiring a management company to file a report of every transaction of purchase or sale of securities between a mutual fund it manages and any related person or company and any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, a mutual fund is a joint participant with one or more of its related persons or companies, in respect of each mutual fund to which the management company provides services or advice, within thirty days after the end of the month in which it occurs (the Reporting Requirement).
AND WHEREAS the Commission has considered the application and the recommendation of staff of the Commission;
AND WHEREAS the Applicant having represented to the Commission as follows:
1. The Applicant is the manager and trustee of the J.C. Clark Funds;
2. There are currently five J.C. Clark Funds: the J.C. Clark Preservation Trust, the J.C. Clark Loyalist Preservation Trust, the J.C. Clark Commonwealth Patriot Trust, the J.C. Clark Commonwealth Loyalist Trust, and the J.C. Clark Statistical Arbitrage Fund.
3. As soon as practical following receipt of this relief, the Applicant intends to establish an open ended mutual fund trust which will qualify as a Top Fund and whose investment objectives will permit such fund to invest in units of the J.C. Clark Funds (in this circumstance, the Underlying Funds).
4. Each J.C. Clark Fund is an open-ended mutual fund trust established under the laws of Ontario and governed by a declaration of trust.
5. The head office of the Applicant is located in Ontario.
6. J.C. Clark Funds are offered for sale to purchasers who are eligible to purchase securities on an exempt basis under and subject to applicable securities legislation.
7. The investment objectives and strategies of each J.C. Clark Fund permits such fund to invest its assets in securities of funds managed by the Applicant.
8. As manager of the J.C. Clark Funds, the Applicant determines the different asset classes that each J.C. Clark Fund should either be invested in or have exposure to, in order to achieve the fund's investment objectives.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS HEREBY ORDERED pursuant to Sections 113 and 117(2) of the Act that the Substantial Security Holder Restriction, the Significant Interest Restriction, and the Reporting Requirement shall not apply to the investments made by the Top Funds in units of the Underlying Funds, provided that:
a) investments by a Top Fund in an Underlying Fund will not result in the duplication of management fees;
b) the Underlying Funds will not charge an incentive fee to the Top Fund;
c) no sales fees or redemption fees are payable by the Top Fund in relation to its purchases or redemptions of securities of the Underlying Funds;
d) the investment by a Top Fund in securities of the Underlying Funds is compatible with the Top Funds' investment objectives;
e) the offering memorandum of a Top Fund will disclose: (i) the investment objectives and strategies of the Underlying Funds; (ii) the risks associated with investments in the Underlying Funds; and (iii) the intent of the Top Fund to invest in Underlying Funds.
f) the offering memoranda of the Underlying Funds will be incorporated by reference into the offering memorandum of the Top Fund;
g) the Top Fund and the Underlying Funds are managed by the Applicant;
h) the Top Fund will not vote any securities of the Underlying Fund;
i) securities of both the Top Funds and the Underlying Funds are offered for sale on a "private placement" basis only to purchasers who are eligible to purchase securities on an exempt basis under and subject to compliance with applicable securities law; and
j) an Underlying Fund will not hold securities of other J.C. Clark Funds.
February 3, 2004.