Mutual Reliance Review System for Exemptive Relief Applications - exemption from self-dealing requirements in the Act to permit mutual funds to the sell certain asset-backed commercial paper to their related bank - asset-backed commercial paper market experiencing liquidity problems - purchase price set at cost plus accrued interest - purchase price may be paid with cash payment or by in specie transfer of liquid government securities to the mutual funds.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 118(2)(b), 121.
August 21, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,
PRINCE EDWARD ISLAND, NOVA SCOTIA,
NEWFOUNDLAND AND LABRADOR, NORTHWEST
TERRITORIES, YUKON AND NUNAVUT
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
NATIONAL BANK SECURITIES INC. AND
ALTAMIRA INVESTMENT SERVICES INC.
IN THE MATTER OF
NATIONAL BANK MONEY MARKET FUND,
NATIONAL BANK TREASURY BILL PLUS FUND,
NATIONAL BANK U.S. MONEY MARKET FUND,
NATIONAL BANK CORPORATE CASH MANAGEMENT FUND,
NATIONAL BANK TREASURY MANAGEMENT FUND,
NATIONAL BANK MORTGAGE FUND,
NATIONAL BANK BOND FUND,
NATIONAL BANK MONTHLY SECURE INCOME FUND,
ALTAMIRA INCOME FUND,
ALTAMIRA SHORT TERM GLOBAL INCOME FUND,
ALTAMIRA SHORT TERM CANADIAN INCOME FUND,
ALTAMIRA PRECISION U.S. RSP INDEX FUND,
ALTAMIRA PRECISION INTERNATIONAL RSP INDEX FUND,
ALTAMIRA PRECISION EUROPEAN RSP INDEX FUND
(each, a Fund and, collectively, the Funds)
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions received an application (the Application) from the Filers on behalf of each Fund under section 19.1 of National Instrument 81-102 -- Mutual Funds (NI 81-102) for relief in each Jurisdiction (the Requested Relief) from the prohibition in section 4.2 of NI 81-102 in order to permit the sale of all or any of the asset-backed commercial paper (ABCP) issued by an issuer listed in Schedule A and owned by a Fund on the date of the Application to National Bank of Canada (the Bank).
Under the MRRS :
(i) the principal regulator for the Application is the Autorité des marchés financiers (AMF); and
(ii) this Decision Document represents the decision of each of the Decision Makers.
Defined terms contained in National Instrument 14-101 -- Definitions and in NI 81-102 have the same meaning in this MRRS Decision Document unless they are otherwise defined in this Decision Document.
This decision is based on the following facts represented by the Filers :
1. National Bank Securities Inc. (NBSI) is the manager of certain of the Funds and Altamira Investment Services Inc. (Altamira) is the manager of certain of the Funds.
2. Natcan Investment Management Inc. (Natcan) is the portfolio manager of each of the Funds.
3. National Bank Trust Inc. (NBTI) calculates the net asset value of each of the Funds.
4. NBSI, Altamira, Natcan and NBTI are all affiliates of the Bank.
5. Each of the Funds is a reporting issuer in the Jurisdictions.
6. The Bank is governed by the Bank Act (Canada).
7. Each of the Funds owns ABCP issued by one or more of the conduit issuers listed in Schedule A.
8. ABCP is short-term commercial paper with terms to maturity of between 30 days and 90 days.
9. The ABCP owned by the Funds has a remaining term to maturity as of the date of the Application of between 2 and 63 days.
10. The ABCP owned by the Funds had, when acquired, and continued to have, as of the date of the Application, an approved credit rating.
11. NBTI has determined that the appropriate method to value the ABCP owned by the Funds is cost plus accrued interest which is the valuation methodology used in respect of other commercial paper investments held by the Funds.
12. The Bank has determined that the ABCP owned by the Funds is appropriately valued at cost plus accrued interest.
13. The Filers have determined that current liquidity problems affecting the ABCP market may have an impact on the confidence of investors in the Funds and may result in unusual levels of redemption requests.
14. The Filers want to ensure that the Funds are able to meet any redemption requests received by the Funds.
15. The Filers and the Bank have agreed that, in order to ensure an appropriate level of confidence in the Funds, if Natcan determines that a sale of all or any of the ABCP held by the Funds to the Bank is in the best interests of the Funds, the Bank will acquire all, or such lesser portion as Natcan may determine, of the ABCP held by the Funds as of the date of the Application and issued by the issuers listed on Schedule A, at a price per security equal to cost plus accrued interest. Such transactions may occur during the period between the date the Requested Relief is granted and October 31 2007.
16. The Bank may acquire the ABCP by payment in cash or in specie or partially in cash and partially in specie. If all or part of the payment is in specie, the securities transferred by the Bank will have a value equal to the value (on a cost plus accrued interest basis) of the ABCP acquired by the Bank for such payment and will be treasury bills issued by the Government of Canada or another similar highly liquid "government security" as defined in NI 81-102 (Government Securities). The Government Securities will be valued by a Fund on the same basis as if the Fund had paid cash to acquire them.
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 is that the Requested Relief is granted in respect of each Fund on the condition that :
(a) Natcan determines that the sale is in the best interests of the Fund;
(b) the sale occurs during the period between the date hereof and October 31, 2007;
(c) the price per security is equal to cost plus accrued interest; and
(d) if payment is made all or partially in specie the securities transferred by the Bank have a value equal to the value (on a cost plus accrued interest basis) of the ABCP acquired by the Bank for such payment and are Government Securities.
THIRD PARTY ABCP CONDUITS
Structured Investment Trust III
Selkirk Funding Trust
Skeena Capital Trust
Structured Asset Trust
Newshore Canadian Trust
Great North Trust