National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the reporting requirements of clause 117(1)(c) of the Securities Act (Ontario) provided that certain disclosure is made in the management reports of fund performance for each mutual fund and that certain records of portfolio transactions are kept.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 117(1)(c), 117(2).
National Instrument 81-106 Investment Fund Continuous Disclosure.
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) that the provisions of the Legislation requiring a management company to file a report within thirty days after each month end relating to every purchase or sale effected by a mutual fund through any related person or company with respect to which the related person or company received a fee either from the mutual fund or from the other party to the transaction or both (the Reporting Requirement) shall not apply to purchases and sales effected by the Funds (as defined below) through any Related Party (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 this 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, New Brunswick, Nova Scotia and Newfoundland and Labrador (the Non-principal Jurisdictions).
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Funds means those Scotia Mutual Funds and Pinnacle Program Funds managed by the Filer, together with such other current and future funds managed by the Filer and in respect of which the Filer acts as portfolio manager from time to time.
Nl 81-106 means National Instrument 81-106 Investment Fund Continuous Disclosure.
Related Party means SCI, SSI or other brokers or dealers that are subsidiaries or affiliates of The Bank of Nova Scotia.
SCI means Scotia Capital Inc.
SSI means Scotia Securities Inc.
This decision is based on the following facts represented by the Filer:
1. The Filer is an Ontario limited liability partnership, which is wholly-owned, directly or indirectly, by The Bank of Nova Scotia. The Filer is registered as a portfolio manager (or equivalent) under the securities legislation of the Jurisdiction and each of the Non-principal Jurisdictions. It is also registered as a commodity trading manager and exempt market dealer in Ontario.
2. Each of SSI and SCI is a corporation existing under the laws of Ontario.
3. SCI is registered as an investment dealer under the securities legislation in the Jurisdiction and each of the Non-principal Jurisdictions. SCI is an affiliate of the Filer.
4. SSI is registered as a mutual fund dealer under the securities legislation in each of the jurisdictions of Canada. SSI is an affiliate of the Filer.
5. The Funds are or will be mutual funds that are reporting issuers in each province and territory of Canada.
6. Each Related Party is a "related person or company" to the Funds within the meaning of the Legislation because each Related Party and each of SSI and SCI is a subsidiary or affiliate of The Bank of Nova Scotia.
7. The Filer is the portfolio manager of the Funds and accordingly is a "management company" or equivalent under the Legislation. From time to time, the Filer may hire sub-advisors to the Funds.
8. The Filer has discretion to allocate the brokerage transactions of the Funds in any manner that it believes to be in the Funds' best interests. As disclosed in the annual information forms of the existing Funds; the Filer may allocate brokerage business of the Funds to a Related Party, provided that such transactions are made on terms and conditions comparable to those offered by unrelated brokers and dealers.
9. The purchase or sale of securities effected through a Related Party reflects the business judgement of the Filer uninfluenced by considerations other than the best interests of the Funds. In allocating brokerage transactions, consideration is given to commission rates and to research, execution and other services offered.
10. The introduction of NI 81-106 on June 1, 2005 resulted in the Funds having to disclose in their interim and annual management reports of fund performance (MRFPs) any transactions involving Related Parties, and the Filer having to make essentially the same disclosure within 30 days at the end of any month in which a transaction with a Related Party occurs.
11. Pursuant to NI 81-106, the Funds prepare and file interim and annual MRFPs that disclose any transactions involving a Related Party, including the identity of the Related Party, its relationship to the Fund, the purpose of the transaction, the measurement basis used to determine the recorded amount and any ongoing commitments to the Related Party. A discussion of portfolio transactions with a Related Party must include the dollar amount of commission, spread or any other fee that a Fund paid to any Related Party in connection with the transaction.
12. In the absence of the Requested Relief, the Reporting Requirement requires the Filer to prepare a report of any purchase or sale of securities by a Fund that is effected through a Related Party and file it with the principal regulator within 30 days of the end of the month in which the transaction occurs. This report discloses the issuer of the securities, the class or designation of the securities, the amount or number of securities, the consideration, the name of the Related Party, the name of the person or company that paid the fee to the Related Party and the amount of the fee received.
13. The predecessor to the Filer, Scotia Cassels Investment Counsel Limited (SCICL), was granted identical relief in the Jurisdiction and the Non-principal Jurisdictions, under a MRRS Decision Document dated February 13, 2008, by the Ontario Securities Commission as principal regulator for the decision (the Original Decision).
14. Pursuant to an internal reorganization effective 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 continue to be carried on by the Filer as of November 1, 2009. As a result of this reorganization, SCICL will, as of November 1, 2009, 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.
15. The Filer is, to the best of its knowledge, not in default of the securities legislation in any jurisdiction of Canada.
16. It is costly and time consuming to provide the information required by the Reporting Requirement on a monthly and segregated basis for each Fund.
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 provided that:
(a) the annual and interim MRFPs for each Fund disclose
(i) the name of the Related Party,
(ii) the amount of fees paid to each Related Party, and
(iii) the person or company who paid the fees, if they were not paid by the Fund; and
(b) the records of portfolio transactions maintained by each Fund include, separately for every portfolio transaction effected by the Fund through a Related Party,
(i) the name of the Related Party,
(ii) the amount of fees paid to the Related Party, and
(iii) the person or company who paid the fees.
This decision is effective November 1, 2009.