MRRS exemption from subsection 2.1(1)(a) of National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) granted to the extent necessary to permit a member of the organization of certain mutual funds to provide dealer with a list of specific sales representatives that it wishes to directly invite to its educational conferences -- filer unable to rely upon exemption provided in s. 5.2 of NI 81-105 for educational conferences -- filer exempted from s. 5.2(b) - exemption also granted from subsection 2.2(1) to the extent necessary to permit sales representatives of participating dealers to accept direct invites to educational conferences.
Exemption subject to conditions including that member of organization of mutual funds must obtain the written consent of a representative's participating dealer each time prior to directly inviting representative to a conference and that exemption provided will terminate in two years.
National Instrument 81-105 Mutual Fund Sales Practices, ss. 2.1(1)(a), 2.2(1), 5.2(b), 9.1.
Companion Policy 81-105CP to National Instrument 81-105 Mutual Fund Sales Practices, s. 7.3(2).
May 18, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,
QUEBEC, NEW BRUNSWICK, NOVA SCOTIA,
PRINCE EDWARD ISLAND, NEWFOUNDLAND AND
LABRADOR, YUKON, NORTHWEST TERRITORIES
AND NUNAVUT (the Jurisdictions)
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS \
IN THE MATTER OF
DIMENSIONAL FUND ADVISORS CANADA INC.
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer under the securities legislation of the Jurisdictions (the Legislation) for an exemption from:
(a) the restrictions on providing non-monetary benefits to participating dealers and their representatives in sections 2.1(1)(b) and 2.2(1) of NI 81-105 Mutual Fund Sales Practices (NI 81-105) to the extent necessary to permit the Filer to directly invite the sales representatives of participating dealers that may distribute mutual funds managed by the Filer and that are members of the Investment Dealers Association of Canada (IDA), the Mutual Fund Dealers Association of Canada (MFDA), or are dealers that are duly registered in Quebec (collectively, the Participating Dealers) to the Filer's education conferences; and
(b) the requirement contained in section 5.2(b) of NI 81-105 that the selection of the representatives of a dealer to attend a conference or seminar be made exclusively by the dealer, uninfluenced by any member of the organization of the mutual fund to the extent necessary to permit the Filer to directly invite a Participating Dealer's sales representatives to the Filer's education conferences.
(collectively, the Requested Relief)
Under the System:
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
This decision is based on the following facts represented by the Filer:
1. The Filer is a registered portfolio manager under the Securities Act (British Columbia). Its head office is in British Columbia.
2. The Filer is the Canadian subsidiary of Dimensional Fund Advisors LP, formerly Dimensional Fund Advisors Inc. ("DFA U.S."). DFA U.S. was founded in 1981. DFA U.S. first offered investment management services only to institutional clients. It started offering funds to retail investors in the U.S. in 1990 and, through the Filer, in 2003 in Canada.
3. The Filer is or will be the manager, portfolio manager and promoter of the Dimensional Funds (existing and future) (the Funds). The securities of the Funds are offered or may be offered by simplified prospectus in all the Jurisdictions. The Filer has retained (or will retain) DFA U.S. or other affiliates to act as sub-adviser(s) for the Funds.
4. Each of the Filer, DFA U.S. and other affiliates of the Filer (collectively, the Dimensional Group) is and will be a member of the organization of each of the Funds as defined in section 1.1 of NI 81-105.
5. The Funds are only available to retail investors through sales representatives authorized by the Filer (Approved Representatives).
6. Approved Representatives and the Filer conduct due diligence on each other that includes the following steps:
(a) The Filer will give the representative applying for approval materials about the Dimensional Group and the research behind its investment philosophy.
(b) The Filer's Regional Managers and the representative will meet (in person or by phone) to review and discuss the materials provided by the Filer.
(c) If the Filer and the representative want to take the next step in the due diligence process, the Filer will invite the representative to attend an introductory conference (Introductory Conference) to learn about the Dimensional Group's approach to investing. The Filer will only invite representatives to an Introductory Conference who have completed the preliminary stages of the due diligence process.
(d) The Filer will obtain the Participating Dealer's written consent prior to directly inviting the representative to attend the Introductory Conference.
(e) The Filer will authorize the representative as an Approved Representative.
(f) The Filer will enter into a distribution agreement with the representative's Participating Dealer.
(g) The Filer will request that an Approved Representative provide its clients with written disclosure explaining the Approved Representative's relationship with the Filer.
7. The Filer and other members of the Dimensional Group will also organize and present regular seminars and educational conferences (Educational Seminars) for Approved Representatives. Only Approved Representatives will be invited to attend Educational Seminars. The Filer will obtain the Participating Dealer's written consent prior to directly inviting an Approved Representative to an Educational Seminar.
8. The Filer's Introductory Conferences and Educational Seminars will be held exclusively for educational purposes. Except as exempted in this Decision, the Filer's Introductory Conferences and Educational Seminars will comply in all respects with NI 81-105 including the requirements that: (1) restrict the location of an Introductory Conference or Educational Seminar to Canada; the continental United States of America, or a location where a portfolio adviser of the Funds carries on business, if the primary purposes of the Introductory Conference or Educational Seminar is the provision of educational information about the investments or activities of the Funds carried on by that portfolio adviser; and (2) prohibit a member of the organization of the Funds from paying any travel, accommodation or personal incidental expenses associated with the attendance of a representative at an Introductory Conference or an Educational Seminar.
9. The Filer does not provide incentives, agree to provide incentives, or imply that it will provide incentives to Approved Representatives or to potential Approved Representatives going through the mutual due diligence process with the Filer.
10. The Decision Makers previously issued an MRRS Decision Document to the Filer dated May 24, 2006 (the Original Decision) under NI 81-105 (NI 81-105). The Original Decision granted the same relief to the Filer that it seeks in this application. The Original Decision provided that the exemptions granted to the Filer terminate one year from the date of the Original Decision. This Decision will replace the Original Decision.
11. The Filer obtained an exemption from NI 81-105 in British Columbia on March 20, 2006.
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted for so long as:
1. The Filer explains to a representative that they must attend an Introductory Conference in order to become an Approved Representative and may attend Educational Seminars after they become Approved Representatives.
2. The Filer explains to the representative that the Filer must obtain the written consent of the representative's Participating Dealer prior to directly inviting the representative to an Introductory Conference or Educational Seminar.
3. The Filer explains that the representative's Participating Dealer will decide whether the representative can attend an Introductory Conference or Educational Seminar.
4. The Filer obtains the written consent from the person in charge of compliance for the representative at the Participating Dealer prior to directly inviting the representative to each Introductory Conference or Educational Seminar.
5. The Filer requests that an Approved Representative provide its clients with written disclosure explaining the Approved Representative's relationship with the Filer.
It is the further decision of the Decision Makers under the Legislation that the Requested Relief terminates two years from the date of this Decision.
"Harold P. Hands"
"Lawrence E. Ritchie"