Dividend 15 Split Corp. II (DF) and Quadravest Capital Management Inc.

Decision

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Mutual fund corporation and its investment fund manager exempted from the dealer registration requirement for certain limited trading activities to be carried out by these parties in connection with rights offering by the mutual fund corporation -- The limited trading activities involve: i) the forwarding of a rights offering circular, and the distribution of rights to acquire securities of the mutual fund corporation, to existing holders of securities of the mutual fund corporation, and ii) the subsequent distribution of securities to holders of these rights, upon the holders' exercise of the rights, through an appropriately registered dealer.

Applicable Legislative Provisions

Securities Act, R.S.O., c. S.5, as am., ss. 25(1), 74(1).

Multilateral Instrument 11-102 Passport System, s. 4.7(1).

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 8.5.

National Instrument 45-106 Prospectus and Registration Exemptions, ss. 3.1, 3.42.

March 2, 2012

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DIVIDEND 15 SPLIT CORP. II (DF) AND
QUADRAVEST CAPITAL MANAGEMENT INC.
(the Manager, together with DF, the Filers)
DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filers from the dealer registration requirement in the Legislation in respect of certain trades (the Rights Offering Activities) to be carried out by the Manager, on behalf of DF, in connection with a proposed distribution (the Rights Offering) of rights (the Rights) to acquire units, each consisting of one class A share of DF (collectively the Class A Shares) and one preferred share of DF (collectively the Preferred Shares and, together with the Class A Shares, the Units), to be made in the Jurisdiction and each of the Passport Jurisdictions (as defined below) pursuant to a rights offering circular (the Rights Offering Circular).

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

1. the Ontario Securities Commission is the principal regulator for this application; and

2. each 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 by the Filers in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (collectively, the Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

1. DF is a mutual fund corporation incorporated under the laws of the Jurisdiction by articles of incorporation dated September 28, 2006, as amended November 3, 2006. DF is a reporting issuer in the Jurisdiction and in each of the Passport Jurisdictions. DF is not in default of the securities legislation of any jurisdiction.

2. The Manager acts as the investment fund manager for DF. The Manager is registered as an investment fund manager under the Legislation.

3. The head office of each of the Filers is located in Toronto, Ontario.

4. The authorized capital of DF consists of an unlimited number of Preferred Shares and Class A Shares and 1,000 class B shares. The Preferred Shares and Class A Shares are listed for trading on the Toronto Stock Exchange (the TSX).

5. DF is subject to certain investment restrictions that, among other things, limit the equity securities and other securities that may be acquired for its investment portfolio.

6. The investment objectives of DF are: (i) to provide holders of Preferred Shares with fixed cumulative preferential monthly cash dividends in the amount of $0.04375 per Preferred Share; (ii) to provide holders of Class A Shares with regular monthly cash distributions targeted to be $0.10 per Class A Share; and (iii) to return the original issue price of $10.00 and $15.00 to holders of Preferred Shares and Class A Shares, respectively, at the time of the redemption of such shares on December 1, 2014 or such other date as DF may terminate.

7. On November 16, 2006 and December 7, 2006, DF completed its initial public offering of Preferred Shares and Class A Shares pursuant to a prospectus dated October 25, 2006. Preferred Shares and Class A Shares are issued only on the basis that an equal number of Preferred Shares and Class A Shares will be issued and outstanding at all times.

8. DF does not engage in a continuous distribution of its securities.

9. Under the Rights Offering, each holder of Class A Shares, as at a specified record date, will be entitled to receive, for no consideration, one Right for each Class A Share held by the holder. Four Rights entitle the holder to subscribe for one Unit upon payment to DF of a subscription price, to be specified in the Rights Offering Circular, prior to the expiry of the Rights. Holders of Rights in Canada are permitted to sell or transfer their Rights instead of exercising their Rights to subscribe for Units. Holders of Rights who exercise their Rights may subscribe pro rata for additional Units pursuant to an additional subscription privilege. The term of the Rights is expected to be three months or less.

10. DF has applied to list on the TSX the Rights to be distributed under the Rights Offering and the Class A Shares and the Preferred Shares issuable upon the exercise thereof.

11. The Rights Offering Activities will consist of:

(a) the distribution of the Rights Offering Circular and the issuance of Rights to holders of Class A Shares (as at the record date specified in the Rights Offering Circular), after the Rights Offering Circular has been sent and accepted under the Legislation and the securities legislation of each of the Passport Jurisdictions; and

(b) the distribution of Units to holders of the Rights, upon the exercise of the Rights by the holders, through a registered dealer that is registered in a category that permits the registered dealer to make such a distribution.

12. DF is in the business of trading by virtue of its portfolio investing and trading activities. As a result, the capital raising activities of DF, including the Rights Offering Activities, would require each of the Filers to register as a dealer in the absence of this decision (or another available exemption from the dealer registration requirement).

13. Section 8.5 of National Instrument 45-106 -- Prospectus and Registration Exemptions (NI 45-106) provides that, after March 26, 2010, the exemptions from the dealer registration requirements set out in sections 3.1 [Rights offering] and section 3.42 [Conversion, exchange, or exercise] of NI 45-106 no longer apply.

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 DF, and the Manager acting on behalf of DF, are not subject to the dealer registration requirement in respect of the Rights Offering Activities.

"Margot C. Howard"
Commissioner
Ontario Securities Commission
 
"Mary Condon"
Vice-Chair
Ontario Securities Commission