Mutual Reliance Review System for Exemptive Relief Applications -- Revocation of a previous MRRS Decision to the same applicant and approval of a new MRRS Decision providing relief from certain conflict disclosure requirements in connection with the distribution by an investment counsel and portfolio manager and mutual fund dealer in units of investment funds which it manages -- relief subject to certain conditions.
Corresponding order by the Commission to revoke a previous Ontario order granted to the same applicant.
Applicable Ontario Statutory Provisions:
Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 25, 74(1).
Applicable Ontario Regulations:
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., ss. 223, 226-228, 233.
Applicable Ontario Rules
National Instrument 33-105 -- Underwriting Conflicts, s. 1.1.
August 17, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, ONTARIO,
NOVA SCOTIA, AND NEWFOUNDLAND AND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
PHILLIPS, HAGER & NORTH
INVESTMENT MANAGEMENT LTD.
MRRS DECISION DOCUMENT
1 The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from Phillips, Hager & North Investment Management Ltd. (the Filer) for a decision (the Decision) under the securities legislation of the Jurisdictions (the Legislation) to:
(a) revoke a decision document issued by certain Decision Makers dated August 5, 2003 (the Original Decision), which ordered that the following conflict provisions contained in the Legislation would not apply to the Filer in connection with distributing units of mutual funds managed by the Filer (the Funds):
(i) the requirements that a registrant prepare a conflict of interest rules statement (or the equivalent) in the required form, revise the conflict statement in the event of any significant change in the information, file the statements with the applicable Decision Makers, and provide its customers and clients with copies of the statements (the Conflicts Statement Requirement);
(ii) the requirement that a registrant send or deliver to its clients a written confirmation of a securities transaction that contains certain disclosure if the security was a security of a related issuer, or in the course of a distribution, a security of a connected issuer, of the registrant (the Trade Confirmation Requirement);
(iii) the requirement that a registrant make certain disclosure to its client if the registrant acts as an adviser in respect of securities of a related issuer, or in the course of a distribution, securities of a connected issuer (the Adviser Disclosure Requirement); and
(iv) the requirement that a registrant make certain disclosure to its client and obtain the requisite specific and informed written consent of its client if a registrant acts as an adviser, exercising discretionary authority with respect to the investment portfolio or account of its client, to purchase or sell securities of a related issuer, or in the course of a distribution, securities of a connected issuer, of the registrant (the Discretionary Management Disclosure Requirement)
(collectively, the Conflict of Interest Requirements Exemption);
(b) to restate a new consolidated order in substantially the same form as the Original Decision, such that the Filer can continue to rely on the Conflict of Interest Requirements Exemption contained in the Original Decision; and
(c) to amend a representation of the Filer which had been included in the Original Decision, which would permit the Filer to rely on the Conflict of Interest Requirements Exemption if it is the manager of Funds that have "BonaVista" in their names.
Under the Mutual Reliance Review System for Exemptive Relief Applications (the MRRS):
(a) the British Columbia Securities Commission is the principal regulator for this application; and
(b) this MRRS decision document evidences the decision of each Decision Maker.
2 Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
3 This decision is based on the following facts represented by the Filer:
1. it is a company organized under the laws of British Columbia and having its head office in British Columbia;
2. it is registered as an adviser in the categories of investment counsel and portfolio manager in British Columbia (and in equivalent categories in each of the other Jurisdictions), and is also registered as a dealer in the category of mutual fund dealer in Ontario;
3. it is the manager, principal portfolio adviser and promoter of the Funds and will be the manager, principal portfolio adviser and promoter of additional Funds which may be established from time to time;
4. it is the manager of two Funds, the names of which do not include the words "Phillips, Hager & North" - the BonaVista Canadian Equity Value Fund and the BonaVista Global Balanced Fund (together, the BonaVista Funds); in the future, the Filer may also be the manager of other Funds with names that include the word "BonaVista" but do not include the words "Phillips, Hager & North";
5. BonaVista Asset Management Ltd. is a subsidiary of the Filer and is the portfolio advisor for the BonaVista Funds;
6. each of the Funds is or will be an open-end mutual fund trust established under the laws of British Columbia and the words "Phillips, Hager & North" or "BonaVista" are or will be part of the name of each Fund;
7. it manages the majority of its clients' assets on a discretionary basis via investments in the Funds, but may also utilize segregated, separate portfolios of securities for its clients;
8. under a discretionary management agreement, its discretionary account clients that invest in the Funds specifically authorize the Filer to invest in the Funds;
9. it may also act as an adviser and where required as a dealer, to clients who have not entered into discretionary management agreements with the Filer for their investments in one or more Funds;
10. all clients receive written specific disclosure of the relationship between the Filer and the Funds;
11. it does not and will not act as an adviser, dealer or underwriter in respect of securities of the Filer or of a related issuer of the Filer, or in the course of a distribution, in respect of securities of connected issuers of the Filer other than in connection with the distribution of units of the Funds and the Funds do not hold and will not hold securities of any related issuer of the Filer, or in the course of a distribution, securities of a connected issuer of the Filer, other than the securities of another Fund;
12. each of the Funds may be offered on a continuous basis and will be acquired by residents of the Jurisdictions either under a prospectus filed by the Fund or on a private placement basis.
4 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:
(a) the Original Decision is revoked;
(b) the Filer is exempt from the Conflicts Statement Requirement;
(c) the Trade Confirmation Requirement and the Adviser Disclosure Requirement do not apply to the distribution of the units of the Funds by the Filer; and
(d) the Filer is exempt from the Discretionary Management Disclosure Requirement in respect of the units of the Funds,
provided the Filer:
(i) obtains in advance a client's specific and informed consent to purchase or sell the units of the Funds;
(ii) no later than twelve months after the date on which the Filer begins to rely on this Decision and no less than annually thereafter, provides to a client in his or her account statement (i) disclosure of the securities of related and connected issuers of the Filer that were held directly by the client at any time during the preceding twelve month period; (ii) disclosure that describes the relationship of the Filer and the Funds and states that in the past year moneys held in the client's account may have been invested directly and indirectly in units of mutual funds managed by the Filer; and (iii) disclosure which informs the client that he or she may call a toll-free telephone number to request a statement of portfolio which discloses the securities of related issuers and connected issuers of the Filer that were held by the client indirectly through the Funds as at the date of the statement; and
(iii) either provides to a client no less frequently than annually a copy of the prospectus or offering memorandum, as applicable, in respect of the Funds, or advises a client no less frequently than annually that a prospectus or offering memorandum, as applicable, is available in respect of the Funds and the client may obtain a copy on request or online through the Filer's website.