Clifton Group Investment Management Company

Decision

Headnote

MI 11-102 -- relief granted from margin rate applicable to U.S. money market mutual funds in calculation of market risk in Form 31-103F1 -- margin rate for funds qualified for distribution in Canada is 5%, while funds qualified for distribution in U.S. is 100% -- similar regulation of money market funds -- NI 31-103.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 12.1, 15.

Multilateral Instrument 11-102 Passport System, s. 4.7.

January 17, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Principal Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE CLIFTON GROUP INVESTMENT

MANAGEMENT COMPANY

(the "Filer")

DECISION

Background

The Principal Regulator (as defined below) in the Principal Jurisdiction has received an application from the Filer for a decision under Subsection 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103") for relief from the requirement in section 12.1 of NI 31-103 that the Filer calculate its excess working capital using Form 31-103F1 (the "Form F1") only to the extent that the Filer be able to apply the same margin rate to investments in money market mutual funds qualified for sale by prospectus in the United States of America as is the case for money market mutual funds qualified for sale in a province of Canada when calculating market risk pursuant to Line 9 of the Form F1 (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator (the "OSC" or "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 province of Quebec.

Interpretation

Defined terms contained in NI 31-103 and MI 11-102 have the same meanings in this decision (the "Decision") unless they are otherwise defined in this Decision.

Representations

This Decision is based on the following facts represented by the Filer.

1. The Filer is a corporation established under the laws of the State of Minnesota in the United States of America ("U.S.") with its head office located in Minneapolis, Minnesota.

2. The Filer is registered in Ontario and Quebec as an adviser in the category of portfolio manager. The Filer is also registered as an adviser under the Commodity Futures Act (Ontario).

3. The Filer is not a reporting issuer in any jurisdiction of Canada and is not in default of securities regulation in any jurisdiction of Canada.

4. The Filer was established on May 25, 1972. The Filer provides professional portfolio management for clients and manages risk-based allocation programs through the use of futures, swaps and options. More than 80% of the Filer's revenues are generated from clients based in jurisdictions other than Canada.

5. The Filer is registered with the U.S Securities and Exchange Commission as an investment adviser under the United States Investment Advisers Act of 1940, as amended (the "1940 Act").

6. The Filer invests its cash balances in money market mutual funds qualified for sale by prospectus in the U.S., specifically money market mutual funds which are registered investment companies under the 1940 Act and which comply with Rule 2a-7 thereunder ("Rule 2a-7").

7. The Filer may not be able to invest its cash balances in money market mutual funds that are qualified for sale by prospectus in a province of Canada because such mutual funds may not be qualified for sale in the U.S. nor offered by the Filer's bank, and therefore requiring that the Filer invest its cash balances in these funds would constitute a burden not justified in the circumstances.

8. The Filer has also represented that; (a) there would be foreign exchange issues and tax implications relating to the conversion of the funds; and (b) the Filer lacks familiarity with Canadian money market mutual funds.

9. Under Schedule 1 of Form F1, an investment in the securities of a money market mutual fund qualified for sale by prospectus only in the U.S. would be subject to a margin rate of 100% of the market value of such investments for the purposes of Line 9 of Form F1. With a margin rate of 100% the Filer is not able to satisfy the applicable excess working capital requirements.

10. The margin rate required for a money market mutual fund qualified for sale by prospectus in a province of Canada is 5% of the market value of such investment, as opposed to 100% for the market value of investments in a money market mutual fund qualified for sale by prospectus in the U.S.

11. The regulatory oversight and the quality of investments held by a money market mutual fund qualified for sale by prospectus in each of the U.S. and Canada is similar. In particular Rule 2a-7 sets out requirements dealing with portfolio maturity, quality, diversification and liquidity, which are similar to requirements under National Instrument 81-102 -- Mutual Funds (NI 81-102).

Decision

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 so long as:

(a) any money market mutual fund invested in by the Filer is qualified for sale by prospectus in the U.S. as a result of being a registered investment company under the 1940 Act which complies with Rule 2a-7;

(b) the requirements for money market mutual funds under Rule 2a-7 or any successor rule or legislation are similar to the requirements for Canadian money market funds under NI 81-102 or any successor rule or legislation; and

(c) the Filer is registered with the U.S. Securities and Exchange Commission as an investment adviser under the 1940 Act.

"Marrianne Bridge"
Deputy Director
Ontario Securities Commission