National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from self-dealing provisions in s. 4.2 of NI 81-102 to permit inter-fund trades of debt securities between mutual funds and pooled funds managed by the same manager -- inter-fund transfers will comply with conditions in s. 6.1(2) of NI 81-107 including the requirement for independent review committee approval.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 4.2(1), 4.3(1), 4.3(2), 19.1.
National Instrument 81-107 Independent Review Committee for Investment Funds, s. 6.1(2).
April 15, 2010
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
INVESCO TRIMARK LTD.
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of existing mutual funds and future mutual funds of which the Filer is the manager and to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (each, an NI 81-102 Fund and collectively, the NI 81-102 Funds) for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the NI 81-102 Funds from the prohibition in subsection 4.2(1) of NI 81-102 to permit an NI 81-102 Fund to purchase or sell debt securities from or to existing Canadian mutual funds and future Canadian mutual funds managed by the Filer to which NI 81-102 does not apply (each, a Pooled Fund and, collectively, the Pooled Funds) (each purchase or sale, an Inter-Fund Trade).
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 the all of the provinces and territories of Canada other than Ontario (the Passport Jurisdictions).
Terms defined in MI 11-102 and National Instrument 14-101 -- Definitions, NI 81-102, National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) and National Instrument 31-103 -- Registration Requirements and Exemptions have the same meaning if used in this decision, unless otherwise defined.
The decision is based on the following facts represented by the Filer:
1. The head office of the Filer is located in Toronto, Ontario.
2. The Filer is registered as an adviser in the category of portfolio manager in Ontario and in each of the Passport Jurisdictions.
3. Each of the NI 81-102 Funds and Pooled Funds (each, a Fund and collectively, the Funds) is, or will be, an open-ended mutual fund trust or mutual fund corporation that is established under the laws of the Province of Ontario.
4. The securities of each of the NI 81-102 Funds are, or will be, qualified for distribution pursuant to simplified prospectuses and annual information forms that have been, or will be, prepared and filed in accordance with the securities legislation of each of Ontario and the Passport Jurisdictions.
5. Each of the NI 81-102 Funds is, or will be, a reporting issuer in one or more of Ontario and the Passport Jurisdictions.
6. The securities of the Pooled Funds are, or will be, qualified for distribution on a private placement basis pursuant to the Legislation and will not be reporting issuers.
7. The Filer is, or will be, the manager and/or adviser of each of the Funds.
8. A Pooled Fund may be an associate or an affiliate of the Filer that is the manager, portfolio adviser or trustee of an NI 81-102 Fund.
9. The Filer and each of the Funds are not in default of securities legislation in any jurisdiction of Canada.
10. The Filer has established, or will establish, an independent review committee (IRC) in respect of each NI 81-102 Fund in accordance with the requirements of NI 81-107.
11. The Filer has established, or will establish, an IRC (which may also be the IRC in respect of the NI 81-102 Funds) in respect of each Pooled Fund. The mandate of the IRC of a Pooled Fund will include the approval of Inter-Fund Trades.
12. The IRC of the Pooled Funds was, or will be, composed by the Filer in accordance with section 3.7 of NI 81-107 and the IRC complies, or will comply, with the standard of care set out in section 3.9 of NI 81-107. Further, the IRC of the Pooled Funds will not approve Inter-Fund Trades unless it has made the determination set out in subsection 5.2(2) of NI 81-107. Inter-Fund Trades involving an NI 81-102 Fund will be referred to the relevant IRC of such NI 81-102 Fund under subsection 5.2(1) of NI 81-107.
13. At the time of an Inter-Fund Trade, the Filer will have in place policies and procedures to enable the Funds to engage in Inter-Fund Trades with other Funds.
14. Each Inter-Fund Trade will be consistent with the investment objective of the NI 81-102 Fund.
15. The Filer will refer each Inter-Fund Trade to the IRC in the manner contemplated by section 5.1 of NI 81-107 and the Filer and the IRC of the Fund will comply with section 5.4 of NI 81-107 in respect of any standing instructions an IRC provides in connection with the Inter-Fund Trade.
16. The Filer will comply with the following procedures when entering into Inter-Fund Trades between Funds:
(a) The portfolio manager will deliver the trade instructions in respect of a purchase or a sale of a security by a Fund (Fund A) to a trader on the trading desk of the Filer;
(b) The portfolio manager will deliver the trade instructions in respect of a sale or purchase of a security by a Fund (Fund B) to a trader on the trading desk of the Filer;
(c) The trader on the trading desk will execute the trade as an Inter-Fund Trade between Fund A and Fund B in accordance with the requirements of paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;
(d) The policies applicable to the trading desk will require that all orders are to be executed on a timely basis; and
(e) The trader on the trading desk will advise the portfolio manager of Fund A and Fund B of the price at which the Inter-Fund Trade occurs.
17. The Filer has determined that it would be in the best interests of the Funds to receive the Exemption Sought.
18. The Filer is unable to rely upon the exemption for inter-fund trading in debt securities codified in subsection 4.3(2) of NI 81-102 because NI 81-107 does not apply to the Pooled Funds since the Pooled Funds are not reporting issuers.
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 Exemption Sought is granted provided that:
(i) the IRC of each Fund has approved the Inter-Fund Trade in respect of the Fund in accordance with the terms of section 5.2(2) of NI 81-107; and
(ii) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.