Mutual Reliance Review System for Exemptive Relief Applications -- Plan Sponsors, CAP Members, and a named service provider exempted from the dealer registration and prospectus requirements in the Legislation in respect of trades in securities of mutual funds to Capital Accumulation Plans, subject to certain terms and conditions.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
National Instrument 81-102 -- Mutual Funds.
National Instrument 81-106 -- Investment Fund Continuous Disclosure.
National Instrument 45-106 -- Prospectus and Registration Exemptions.
Published Documents Cited
Amendments to NI 45-106 -- Registration and Prospectus Exemption for Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.
Proposed National Instrument 31-303 -- Registration Requirements.
July 31, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, QUÉBEC, NEWFOUNDLAND AND
LABRADOR, NUNAVUT AND THE YUKON
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
MORNEAU SOBECO LIMITED PARTNERSHIP (the Filer),
CON-WAY CANADA EXPRESS INC., AND
PHILLIPS HAGER & NORTH BALANCED PENSION
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 on behalf of each of the Filer, the officers and employees acting on the Filer's behalf, Con-Way Canada Express Inc. as the plan sponsor of CAPs (as defined below) and any other plan sponsors of CAPs which use the recordkeeping services and order processing services (collectively, the Administrative Services) of the Filer in respect of their CAPs (collectively, the Plan Sponsors), and Phillips Hager & North Balanced Pension Trust Fund and any other mutual funds selected for the CAPs sponsored by the Plan Sponsors (collectively, the Funds) for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from:
(a) the dealer registration requirements of the Legislation in respect of trades in the securities of the Funds to tax assisted investment or savings plans (Capital Accumulation Plans or CAPs) for which the Filer provides Administrative Services, or to a member of such a CAP (a CAP Member) as part of the CAP Member's participation in the CAP (the Dealer Registration Relief) ; and
(b) the prospectus requirements of the Legislation in respect of the distribution of securities of the Funds to Capital Accumulation Plans, or to a CAP Member as part of the CAP Member's participation in the CAP, without a prospectus (the Prospectus Relief);
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(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 limited partnership which was created under the laws of Ontario and has its head office in Toronto, Ontario.
2. The Filer is not registered as a dealer or adviser under the securities legislation of any jurisdiction.
3. The Filer provides recordkeeping and order processing services (defined previously as Administrative Services) for CAPs.
4. The Funds comprise prospectus-qualified third-party mutual funds and prospectus-exempt third-party mutual funds.
5. The Filer provides the Administrative Services to Plan Sponsors where the investment choices for the CAP Members include the Funds, whether offered by prospectus or on a private placement basis.
6. The Filer intends to trade in securities of the Funds as part of the Administrative Services that it provides or will provide to Con-Way Canada Express Inc. as the plan sponsor of the CAPs and other Plan Sponsors from time to time. Plan Sponsors for which the Filer provides Administrative Services may be employers, trustees, trade unions, or associations or a combination of them that establish a Capital Accumulation Plan. Capital Accumulation Plan or CAP is a tax assisted investment or savings plan, including a defined contribution registered pension plan, a group registered retirement savings plan, a group registered education savings plan, or a deferred profit sharing plan, established by a Plan Sponsor that permits a CAP Member to make investment decisions among two or more investment options offered within a plan.
7. The Plan Sponsor establishes the CAP for the benefit of individual CAP Members. A CAP Member may be current or former employees, or a person who belongs, or did belong, to a trade union or association, or:
(a) his or her spouse;
(b) a trustee, custodian or administrator who is acting on his or her behalf, or for his or her benefit, or on behalf of, or for the benefit of, his or her spouse; or
(c) his or her holding entity, or a holding entity of his or her spouse,
that has assets in a CAP, and includes a person that is eligible to participate in a CAP.
8. The Administrative Services that the Filer will provide for the Plan Sponsor will generally involve record keeping of CAP Member data, including facilitating the processing of transactions in Funds in respect of CAP Member accounts, providing CAP Member statements as required under pension standards legislation and/or the applicable record keeping agreement and dealing with CAP Member accounts in the event of termination, death, retirement or marriage breakdown.
9. The Administrative Services that the Filer will provide for the CAP Members include direct contact services through the Internet or its call centre and a variety of self-help tools in order to allow CAP Members to make investment decisions regarding their CAPs. In its capacity as a provider of the Administrative Services, the Filer is not involved in plan design, discretionary decision making with respect to the CAP or CAP Member accounts, selection of investments or the provision of investment advice to CAP Members. CAP Members make initial investment decisions and subsequent changes to those investment decisions, with or without the assistance of an adviser selected by the CAP Member (which is not the Filer). CAP Members transmit these instructions to the Filer and the Filer then transmits these instructions in relation to the CAP to the Trustee of the CAP and/or Funds directly. The interest in the securities of the Funds of the CAP Members may be registered in the name of the Filer (or a nominee) for the account of the relevant CAP. As a result, the Filer establishes and maintains the records of the interest of each CAP Member in each Fund.
10. The Filer, the Plan Sponsors and the Funds intend to trade to CAPs or to CAP Members in accordance with the conditions specified in proposed amendments to National Instrument 45-106 -- Prospectus and Registration Exemptions (NI 45-106) related to CAPs which were published by the Canadian Securities Administrators on October 21, 2005 and adopted in the form of a blanket exemption in each of the provinces and territories other than the Jurisdictions. Such proposal contemplates both a dealer registration exemption and a prospectus exemption.
11. As Plan Sponsors typically approach the Filer for assistance with respect to such regulatory issues, the Filer is seeking an exemption on behalf of the Filer, the Plan Sponsors and the Funds, as applicable, from the prospectus requirements under the Legislation where the Fund meets the conditions set out in this decision. The Filer will obtain on behalf of a Plan Sponsor a certificate from the manager of each such Fund certifying that such Fund meets the conditions set out in this decision.
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:
1. the Dealer Registration Relief is granted provided that:
(a) the Plan Sponsor selects the Funds that CAP Members will be able to invest in under the CAP;
(b) the Plan Sponsor establishes a policy, and provides CAP Members with a copy of the policy and any amendments to it, describing what happens if a CAP Member does not make an investment decision;
(c) in addition to any other information that the Plan Sponsor believes is reasonably necessary for a CAP Member to make an investment decision within the CAP, and unless that information has previously been provided, the Plan Sponsor provides the CAP Member with the following information about each Fund the CAP Member may invest in:
(i) the name of the Fund;
(ii) the name of the manager of the Fund and its portfolio adviser;
(iii) the fundamental investment objective of the Fund;
(iv) the investment strategies of the Fund or the types of investments the Fund may hold;
(v) a description of the risks associated with investing in the Fund;
(vi) where a CAP Member can obtain more information about each Fund's portfolio holdings; and
(vii) where a CAP Member can obtain more information generally about each Fund, including any continuous disclosure;
(d) the Plan Sponsor provides CAP Members with a description and amount of any fees, expenses and penalties relating to the CAP that are borne by CAP Members, including:
(i) any costs that must be paid when the Fund is bought or sold;
(ii) costs associated with accessing or using any of the investment information, decision-making tools or investment advice provided by the Plan Sponsor;
(iii) Fund management fees;
(iv) Fund operating expenses;
(v) record keeping fees;
(vi) any costs for transferring among investment options, including penalties, book and market value adjustments and tax consequences;
(vii) account fees; and
(viii) fees for services provided by service providers,
provided that the Plan Sponsor may disclose the fees, penalties and expenses on an aggregate basis, if the Plan Sponsor discloses the nature of the fees, expenses and penalties, and the aggregated fees do not include fees that arise because of a choice that is specific to a particular CAP Member;
(e) the Plan Sponsor has, within the past year, provided the CAP Members with performance information about each Fund the CAP Members may invest in, including:
(i) the name of the Fund for which the performance is being reported;
(ii) the performance of the Fund, including historical performance for one, three, five and 10 years if available;
(iii) a performance calculation that is net of investment management fees and Fund expenses;
(iv) the method used to calculate the Fund's performance return calculation, and information about where a CAP Member can obtain a more detailed explanation of that method;
(v) the name and description of a broad-based securities market index, selected in accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure, for the Fund, and corresponding performance information for that index; and
(vi) a statement that past performance of the Fund is not necessarily an indication of future performance;
(f) the Plan Sponsor has, within the past year, informed CAP Members if there were any changes in the choice of Funds that CAP Members could invest in and where there was a change, provided information about what CAP Members needed to do to change their investment decision, or make a new investment;
(g) the Plan Sponsor provides CAP Members with investment decision-making tools that the Plan Sponsor reasonably believes are sufficient to assist them in making an investment decision within the CAP;
(h) the Plan Sponsor must provide the information required by paragraphs (b), (c), (d) and (g) prior to the CAP Member making an investment decision under the CAP; and
(i) if the Plan Sponsor makes investment advice from a registrant (including the Filer) available to CAP Members, the Plan Sponsor must provide CAP Members with information about how they can contact the registrant;
2. the Prospectus Relief is granted provided that:
(a) the conditions set forth in paragraph 1 above are met; and
(b) the Funds comply with Part 2 of National Instrument 81-102 -- Mutual Funds;
(a) the Dealer Registration Relief will terminate upon the coming into force in NI 45-106, proposed National Instrument 31-103 -- Registration Requirements or another instrument, of a dealer registration exemption for trades in a security of a mutual fund to a CAP, or 60 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to provide such a dealer registration exemption; and
(b) the Prospectus Relief will terminate upon the coming into force in NI 45-106 of a prospectus exemption for trades in a security of a mutual fund to a CAP, or 60 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to provide such a prospectus exemption.