Mawer Investment Management Ltd.

Decision

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from s. 4.2(1) of NI 81-102 to permit inter-fund trades between public mutual funds and pooled funds -- inter-fund trades will comply with conditions in subsection 6.1(2) of NI 81-107 including IRC approval -- relief subject to pricing and transparency conditions.

Applicable Legislative Provisions

National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4).

National Instrument 81-102 Mutual Funds, s. 4.2(1).

Citation: Mawer Investment Management Ltd., Re, 2012 ABASC 97

March 13, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

MAWER INVESTMENT MANAGEMENT LTD.

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the restriction in section 4.2 of National Instrument 81-102 Mutual Funds (NI 81-102) to permit the purchase or sale of debt securities (each purchase or sale, an Inter-Fund Trade) between an NI 81-102 Fund (as defined below) and a Pooled Fund (as defined below) (the Exemption Sought).

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

(a) the Alberta Securities Commission is the principal regulator for this application;

(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 all of the provinces and territories of Canada; and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, NI 81-102 and National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meanings if used in this decision, unless otherwise defined herein.

The following terms have the following meanings:

NI 81-102 Funds means the existing mutual funds and future mutual funds to which NI 81-102 applies, of which the Filer, or an affiliate of the Filer, is the investment fund manager and/or portfolio adviser.

Pooled Funds means the existing and future investment funds of which the Filer, or an affiliate of the Filer, is the investment fund manager and/or portfolio adviser, the securities of which are distributed pursuant to exemptions from the prospectus requirement.

Funds means collectively, the NI 81-102 Funds and the Pooled Funds.

Certain other defined terms have the meanings given to them below under Representations.

Representations

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

The Filer

1. The Filer is a corporation organized under the laws of Alberta, with its head office in Calgary, Alberta.

2. The Filer is registered in:

(a) Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia and Northwest Territories as an adviser in the category of portfolio manager;

(b) Alberta as an investment fund manager; and

(c) Alberta, British Columbia, Saskatchewan, Manitoba and Ontario as a mutual fund dealer.

The Filer is not a member of the Mutual Fund Dealers Association of Canada.

3. The Filer, or an affiliate of the Filer, is, or will be, the investment fund manager and/or the portfolio adviser of each of the NI 81-102 Funds and the Pooled Funds (defined above as the Funds).

4. The Filer is not a reporting issuer in any jurisdiction of Canada.

5. The NI 81-102 Funds are reporting issuers and as a result the Filer has established an independent review committee (IRC) under NI 81-107 with respect to each of the NI 81-102 Funds.

6. The Filer, or an affiliate of the Filer, as investment fund manager of a Pooled Fund, will either expand the mandate of the IRC of the NI 81-102 Funds to include the review and approval of the Inter-Fund Trades on behalf of each Pooled Fund, or establish a new IRC for some or all of the Pooled Funds.

7. None of the Filer, an affiliate of the Filer, the NI 81-102 Funds or the Pooled Funds are in default of securities legislation in any jurisdiction of Canada.

The Pooled Funds

8. Each Pooled Fund is, or will be, an investment fund established under the laws of Alberta or another jurisdiction of Canada.

9. The Filer, or an affiliate of the Filer, is, or will be, the investment fund manager and/or portfolio adviser of each of the Pooled Funds.

10. The Pooled Funds are not, and will not be, reporting issuers in any jurisdiction of Canada.

11. Securities of the Pooled Funds are, or will be, distributed in some or all of the jurisdictions of Canada pursuant to exemptions from the prospectus requirement in those jurisdictions.

The NI 81-102 Funds

12. Each NI 81-102 Fund is, or will be, an investment fund established under the laws of Alberta or another jurisdiction of Canada.

13. The Filer, or an affiliate of the Filer, is, or will be, the investment fund manager and/or portfolio adviser of each of the NI 81-102 Funds.

14. The NI 81-102 Funds are, and will be, reporting issuers in some or all of the jurisdictions of Canada.

15. Securities of the NI 81-102 Funds are, or will be, distributed pursuant to a simplified prospectus and annual information form in some or all of the jurisdictions of Canada.

Inter-Fund Trades

16. As the portfolio adviser, the Filer may desire to cause an NI 81-102 Fund to engage in an Inter-Fund Trade with a Pooled Fund.

17. When the Filer, or an affiliate of the Filer, engages in an Inter-Fund Trade, it will generally follow the following procedures or other procedures approved by the applicable IRC:

(a) the portfolio adviser of the Filer, or an affiliate of the Filer, will request the approval of the chief compliance officer of the Filer, or an affiliate of the Filer, or his or her designated alternate, or of another designated individual, to execute a purchase or a sale of a security by a Fund as an Inter-Fund Trade;

(b) upon receipt of the required approval, the portfolio adviser of the Filer, or an affiliate of the Filer, will either place the trade directly or deliver the trade instructions to a trader on a trading desk of the Filer, or an affiliate of the Filer;

(c) upon receipt of the approved trade instructions, the trader on the trading desk will have the discretion to execute the trade as an Inter-Fund Trade 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 of the Filer, or an affiliate of the Filer, will require that all orders are to be executed on a timely basis; and

(e) the trader will advise the Filer of the price at which the Inter-Fund Trade occurred.

18. The Inter-Fund Trades of debt securities will be executed through a registered dealer or otherwise be subject to market integrity requirements as defined in subsection 6.1(1) of NI 81-107

19. At the time of an Inter-Fund Trade, the Filer will have in place policies and procedures to enable the Funds to engage in the Inter-Fund Trades.

20. As noted above, the Filer, or an affiliate of the Filer, as investment fund manager of a Pooled Fund, will either expand the mandate of the IRC of the NI 81-102 Funds to include the review and approval of the Inter-Fund Trades on behalf of each Pooled Fund, or establish a new IRC for some or all of the Pooled Funds. In any event, in its review of the Inter-Fund Trades on behalf of a Pooled Fund, the applicable IRC will comply with the standard of care set out in section 3.9 of NI 81-107. The IRC will not approve an Inter-Fund Trade on behalf of a Pooled Fund unless the IRC has made the determination set out in section 5.2(2) of NI 81-107.

21. The Inter-Fund Trades involving a Fund will be referred to the IRC under subsection 5.2(1) of NI 81-107 and the Filer, as investment fund manager and/or portfolio adviser of such Fund, will comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade.

22. Section 4.3(2) of NI 81-102 states that the restriction in section 4.2 of NI 81-102 does not apply with respect to a purchase or sale of a class of debt securities by a mutual fund from or to, another mutual fund managed by the same manager or an affiliate of the manager, if, at the time of the transaction, among other things, the mutual fund is purchasing from, or selling to, another mutual fund to which NI 81-107 applies and the transaction complies with section 6.1(2) of NI 81-107. The Filer is unable to rely on the exemption from section 4.2(1) of NI 81-102 for Inter-Fund Trades in debt securities codified in subsection 4.3(2) of NI 81-102 because the Pooled Funds are not subject to NI 81-107.

23. As the Filer, or its affiliate, is, or will be, the investment fund manager of a Fund, the Fund may be considered an "associate" of the Filer, or its affiliate, within the meaning of the applicable provisions of the Legislation; accordingly, absent the granting of the Exemption Sought, the Filer, or its affiliate, would be restricted from engaging in the Inter-Fund Trades.

24. The Filer is of the view that where the portfolio securities of the selling Fund are compatible with the investment objectives and strategies of the purchasing Fund, it may be in the best interests of the applicable Funds to engage in Inter-Fund Trades involving the sale of portfolio securities from the selling Fund to the purchasing Fund. The Filer will only engage in Inter-Fund Trades between Funds if, in its view, engaging in an Inter-Fund trade as opposed to similar open-market trades is in the best interests of each of the parties to the trade.

25. Due to the various investment objectives and investment strategies utilized by the Funds, it may be appropriate for different investment portfolios to acquire or dispose of the same securities through the same trading system; the Filer has determined that there are benefits to be achieved from expanding the potential counterparties to include other Funds; these benefits include lower trading costs, reduced market disruption and quicker execution, as well as simpler and more reliable compliance procedures.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Inter-Fund Trade is consistent with the investment objective of each of the Funds involved in the trade;

(b) the Filer refers the Inter-Fund Trade to the IRC in the manner contemplated by section 5.1 of NI 81-107 and the Filer and the applicable IRC comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade;

(c) the IRC of each Fund has approved the Inter-Fund Trade in respect of that Fund in accordance with the terms of subsection 5.2(2) of NI 81-107; and

(d) the Inter-Fund Trade of debt securities complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.

"Blaine Young"
Associate Director, Corporate Finance