Item E(1) of Appendix C of OSC Rule 13-502 Fees -- exemption for pooled funds from paying an activity fee of $5,500 in connection with an application brought under subsection 147 of the Act, provided an activity fee be paid on the basis that the application be treated as an application for other regulatory relief under item E(3) of Appendix C of the Rule.
Ontario Securities Commission Rule 13-502, Fees, (2003) 26 OSCB 891.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 77(2) and ss. 78(1).
National Instrument 13-101 -- System for Electronic Document Analysis and Retrieval (SEDAR), s. 2.1(1)1.
IN THE MATTER OF
THE SECURITIES ACT (ONTARIO),
R.S.O. 1990, CHAPTER S.5 AS AMENDED (THE "ACT")
IN THE MATTER OF
MACKENZIE FINANCIAL CORPORATION
MACKENZIE ALTERNATIVE STRATEGIES FUND
(The "Existing Pooled Fund")
(Section 147 and subsection 80(b)(iii) of the Act)
UPON the application (the "Application") of Mackenzie Financial Corporation ("Mackenzie"), the manager and trustee of the Existing Pooled Fund and any other pooled fund managed by Mackenzie from time to time (collectively the "Pooled Funds"), to the Ontario Securities Commission (the "Commission") for the following:
(i) an order pursuant to Section 147 of the Act exempting Mackenzie and the Pooled Funds from: (i) the requirement to deliver comparative annual financial statements and interim financial statements (collectively, "Financial Statements") of the Pooled Funds to registered and beneficial owners who hold securities of the Pooled Funds ("Securityholders") as prescribed by Subsection 79(1) of the Act unless they have requested to receive them; and
(ii) an order pursuant to subsection 80(b)(iii) exempting Mackenzie from the requirement to file with the Commission the Financial Statements as prescribed by Subsections 77(2) and 78(1), respectively, of the Act.
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON Mackenzie having represented to the Commission as follows:
1. Mackenzie is a corporation existing under the laws of Ontario with its registered office in Toronto, Ontario. Mackenzie is, or will be, the manager and/or the manager and trustee of the Pooled Funds. Mackenzie is registered with the Commission under the Act as an advisor under the categories of Investment Counsel & Portfolio Manager and as a dealer under the category of Limited Market Dealer, as well as registered under the Commodity Futures Act (Ontario) in the categories of Commodity Trading Counsel & Commodity Trading Manager.
2. The Pooled Funds are, or will be, open-end mutual fund trusts or mutual fund corporations established under the laws of the Province of Ontario. The Pooled Funds will not be reporting issuers in any province or territory of Canada. Securities of the Pooled Funds are, or will be, distributed in each of the provinces and territories of Canada without a prospectus pursuant to exemptions from the registration and prospectus delivery requirements of applicable securities legislation.
3. All Securityholders are "accredited investors" as that term is defined in Ontario Securities Commission Rule 45-501, or its equivalent in other legislation in other provinces, or have invested the minimum amount pursuant to private placement exemption provisions.
The Requirement to Deliver Financial Statements
4. The Pooled Funds fit within the definition of "mutual fund in Ontario" in Section 1(1) of the Act and are thus required to required to deliver annually to each Securityholder, comparative financial statements within 140 days of its financial year-end, and interim financial statements within 60 days of the date to which they are made up, pursuant to Subsection 79(1) of the Act.
5. If the requested Order is granted, Mackenzie would send to Securityholders, a notice advising them that they will not receive the annual financial statements of the Pooled Funds or interim financial statements unless they request same, and providing them with a request form to send back, by fax or prepaid mail, if they wish to receive the annual financial statements or interim financial statements. The notice will advise the Securityholders how Financial Statements can be obtained (including through the Mackenzie website or by calling a toll-free number). Mackenzie would send the Financial Statements to any Securityholder who requests them in response to such notice or who subsequently requests them.
6. Securityholders will also be able to access Financial Statements of the Pooled Funds on the Mackenzie website at www.mackenziefinancial.com and through other easily accessible means, including by requesting a copy by calling Mackenzie toll-free in either English or French.
7. There would be substantial cost savings if the Pooled Funds are not required to print and mail Financial Statements to those Securityholders who do not want them.
8. The Canadian Securities Administrators have published for comment proposed National Instrument 81-106 ("NI 81-106"), which, among other things, in Section 2.11 would permit the Pooled Funds not to deliver Financial Statements to those of its Securityholders who do not request them, if the Pooled Funds initially provide each Unitholder with a request form under which the Unitholder may request, at no cost to the Unitholder, to receive the Pooled Fund's Financial Statements for the relevant periods.
9. Securityholders (and potential investors) in the Pooled Funds will be able to access the Financial Statements of the Pooled Funds on the Mackenzie website and through other easily accessible means, including calling the Mackenzie toll-free numbers in English or French. The Pooled Funds will send a copy of the annual financial statements and/or interim financial statements to any Unitholder who requests one whether in response to the request form or subsequently, regardless of their response to the request form.
The Requirement to File Financial Statements
10. As the Pooled Funds fit within the definition of "mutual fund in Ontario" in Section 1(1) of the Act, they are also subject to the requirement to file with the Commission interim financial statements under Subsection 77(2) of the Act and comparative financial statements under Subsection 78(1) of the Act.
11. Sections 89 and 92 of the General Regulation, R.R.O.1990. Reg.1015, as amended (the "Regulation"), require that the Financial Statements filed pursuant to Subsections 77(2) and 78(1) of the Act include a statement of portfolio transactions. Pursuant to Subsection 94(1) of the Regulation, a mutual fund may omit the statement of portfolio transactions required by sections 89 and 92 of the Regulation from its Financial Statements, if, among other conditions, the statement of portfolio transactions is filed with the Commission prior to or concurrently with the filing of the Financial Statements. Mackenzie and the Pooled Funds will continue to rely on Subsection 94(1) of the Regulation and will omit the statement of portfolio transactions from the Financial Statements.
12. Section 2.1(1) of National Instrument 13-101 -- System for Electronic Document Analysis and Retrieval (SEDAR) ("NI 13-101"), requires that every issuer required to file Financial Statements with the Commission must make its filing through SEDAR. The Financial Statements and the statement of portfolio transactions filed with the Commission thus become available to the general public through the SEDAR website.
13. As such, the statement of portfolio transactions will necessarily reveal key proprietary information regarding the specific strategies and positions developed by the portfolio managers of the Pooled Funds, which may detrimentally impact the Pooled Funds and their Securityholders.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
AND UPON the Commission being satisfied that to do so will not adversely affect the rule-making process with respect to proposed National Instrument 81-106;
IT IS ORDERED by the Commission pursuant to Section 147 of the Act that the Pooled Funds be exempted from the requirements in Subsection 79(1) of the Act to deliver the Financial Statements to Securityholders other than to those Securityholders that have requested to receive them, and pursuant to subsection 80(b)(iii) that Mackenzie and the Pooled Funds be exempted from the requirements in Subsections 77(2) and 78(1) of the Act to file the Financial Statements with the Commission, provided that:
(a) Mackenzie shall file on SEDAR, under the relevant financial statements category, confirmation of mailing of the request forms that have been sent to the Securityholders as described in clause (5) of the representations within 90 days of mailing the request forms;
(b) Mackenzie shall file on SEDAR, under the relevant financial statements category, information regarding the number and percentage of requests for annual financial statements or interim financial statements, as the case may be, made by the return of the request forms, on a province-by-province basis within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(c) Mackenzie shall record the number and summary of complaints received from Securityholders about not receiving the Financial Statements and shall file on SEDAR, under the relevant financial statements category, this information within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(d) Mackenzie shall, if possible, measure the number of "hits" on the annual financial statements or interim financial statements, as the case may be, of the Pooled Funds on Mackenzie's website and shall file on SEDAR, under the relevant financial statements category, this information within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(e) Mackenzie shall file on SEDAR, under the relevant financial statements category, estimates of the cost savings resulting from the granting of this Order within 90 days of mailing the request forms;
(f) This decision, as it relates to the delivery of Financial Statements, would be limited to the Pooled Funds' Financial Statements for financial years until such time as proposed NI 81-106 comes into force;
(g) Mackenzie will retain the Financial Statements indefinitely;
(h) Mackenzie will provide the Financial Statements to the Commission or any member, employee or agent of the Commission immediately upon request of the Commission or any member, employee or agent of the Commission;
(i) Mackenzie will provide a list of the Pooled Funds relying on this Order to the Investment Funds Branch of the Commission on an annual basis;
(j) Securityholders will be notified that the Pooled Funds are exempted from the requirements in Subsections 77(2) and 78(1) of the Act to file the Financial Statements with the Commission;
(k) In all other aspects, the Pooled Funds will comply with the requirements of Ontario securities law for Financial Statements; and
(l) This decision, as it relates to the filing of Financial Statements with the Commission, will terminate after the coming into force of any legislation or rule of the Commission dealing the matters regulated by Subsections 77(2) and 78(1) of the Act.
September 3, 2004.
"Paul M. Moore"
"Wendell S. Wigle"