Process for Exemptive Relief Applications in Multiple Jurisdictions -- Registered adviser exempted from the dealer registration requirement in respect of trades in units of investment funds, for which the adviser acts as the fund's adviser and investment manager, that are made to accounts managed by the adviser -- Exemption is subject to terms and conditions.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 74(1).
Multilateral Instrument 11-102 Passport System.
National Instrument 14-101 Definitions.
In the Matter of Scotia Cassels Investment Counsel Limited (2008) 32 OSCB 525.
October 27, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
SCOTIA ASSET MANAGEMENT L.P.
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision that the dealer registration requirement does not apply in respect of any trades, in units of the Private Client Units class (PCU) of an investment fund for which the Filer acts as the investment fund's adviser and investment fund manager (each a Scotia Fund, collectively the Scotia Funds), made by the Filer to a client account of the Filer that is a Managed Account (as defined below) (the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the application; and
(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, and Yukon (the Non-principal Jurisdictions).
Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is registered as an adviser in the appropriate categories to provide discretionary advisory services in the Jurisdiction and each of the Non-principal Jurisdictions. The Filer has a head office in Ontario.
2. The Filer is not, to its knowledge, in default of the Legislation of the Jurisdiction or the securities legislation of any Non-Principal Jurisdiction.
3. Many of the Scotia Funds are offered pursuant to a prospectus prepared and filed in accordance with National Instrument 81-101 and that are subject to National Instrument 81-102.
4. The Filer is the investment fund manager (the Manager) and trustee of each of the Scotia Funds.
5. The Filer provides discretionary portfolio management services to a client through accounts (Managed Account) pursuant to an investment management agreement entered into between the client and the Filer (Managed Account Agreement).
6. The PCU class of Scotia Funds are a no fee class sold only to clients who have entered into a Managed Account Agreement.
7. Based on the size of the assets of each client and depending on the allocation of a client's assets to a particular asset class, the Filer either manages the client's assets on a segregated account basis by investing directly in securities of various issuers, or manages clients' assets on a pooled basis by, inter alia, investing in the PCU's of Scotia Funds which are held in the client's Managed Account.
8. The PCU's were, and in the future shall be, established to assist the Filer in managing clients' assets on a pooled basis.
9. Pursuant to a Managed Account Agreement, the Filer has discretion to make investment decisions and trade securities for the client's Managed Account without requiring the client's express consent, including investing in mutual funds for which the Filer is the portfolio manager and changing those mutual funds as the Filer determines appropriate, in accordance with the mandate of the client.
10. From time to time, the Filer may determine that in lieu of holding securities of various issuers in a Managed Account, a client would be better served by being invested in the PCUs of one or more of the Scotia Funds and holding those in the Managed Account.
11. The Filer is required under the Legislation to meet "know your client", suitability, anti-money laundering and anti-terrorist financing requirements.
12. The predecessor to the Filer, Scotia Cassels Investment Counsel Limited (SCICL), was granted exemptive relief corresponding to the Requested Relief, under a passport decision document dated December 30, 2008, by the Ontario Securities Commission as principal regulator for the decision (the Original Decision).
13. SCICL was able to do under the Original Decision what the Filer can do under the Requested Relief.
14. Pursuant to an internal reorganization, to be effective on November 1, 2009, involving SCICL, the Filer and certain of their affiliates, the portfolio management activity carried on by SCICL prior to November 1, 2009 will be transferred to and carried on by the Filer as of November 1, 2009. As a result of this reorganization, SCICL will no longer be relying on the relief granted under the Original Decision and the Filer will require the Requested Relief as the Original Decision is not available to the Filer.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Requested Relief is granted for the Filer provided that:
(a) the Filer is at the time of trade, registered under the Legislation as an adviser in the category of portfolio manager; and
(b) in respect of each Managed Account, it is not created or used primarily for the purpose of qualifying for the Requested Relief.
This decision has an effective date of November 1, 2009.