Policy Statement 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from the Securities Act to permit a dealer, to send the Fund Facts instead of the simplified prospectus to satisfy current prospectus delivery requirements subject to conditions -- the right of withdrawal and right of rescission under securities legislation apply to the sending and delivery of the Fund Facts -- sunset clause on relief.
Applicable Legislative Provisions
Securities Act, ss. 71.(1) and 147.
April 18, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
DESJARDINS INVESTMENTS INC.
IN THE MATTER OF
DESJARDINS SECURITIES INC.
DESJARDINS FINANCIAL SERVICES FIRM INC.
(collectively with Desjardins Securities Inc.,
the Representative Dealers)
The securities regulatory authority or regulator in each of Québec and Ontario (Decision Makers) has received an application from the Filer for a decision under the securities legislation of Québec and Ontario (the Legislation) for exemptive relief to permit a Dealer (as defined below), to send or deliver the most recently filed fund facts document (Fund Facts) to satisfy the requirement contained in the Legislation that obligates a dealer to send or deliver, within a specified time period and in a specified manner, the prospectus, and any amendment to the prospectus (the Delivery Requirement), in respect of an application to subscribe for or purchase securities of a Fund (as defined below) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers is the principal regulator for this application;
(b) the Filer has provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Nunavut and Yukon (together with Ontario and Québec, the Jurisdictions); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in Regulation 14-101 respecting Definitions and in Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.
Right of Withdrawal means the unilateral right, given to a person under the Legislation, to withdraw from a subscription or purchase of a security of a mutual fund if the dealer receives written notice from such person evidencing the intention of the person not to be bound by the subscription or purchase within two days of receipt of the latest prospectus sent or delivered in compliance with the Delivery Requirement. In Québec, this right is set forth in section 30 of the Securities Act, R.S.Q. c. V-1.1. Collectively, these rights are referred to as the Rights of Withdrawal.
Right of Rescission means the right of action, under the Legislation, for rescission or damages against a dealer for failure to send or deliver the prospectus to a person who subscribed for or purchased a security and to whom a prospectus was required to be sent or delivered in compliance with the Delivery Requirement. In Québec, as set forth in section 214 of the Securities Act, R.S.Q. c. V-1.1, such person may, at his or her option, apply to have the transaction rescinded or the price revised, without prejudice to his or her claim for damages. Collectively, these rights are referred to as the Rights of Rescission.
This decision is based on the following facts represented by the Filer:
1. The Filer is duly registered as an investment fund manager in one or more of the Jurisdictions.
2. The Filer's head office is located at, 2 Complexe Desjardins, Montréal, (Québec) H5B 1H5.
3. The Exemption Sought relates to the existing mutual funds for which the Filer act as investment fund manager and any mutual fund subsequently established for which the Filer will act as investment fund manager (each, a Fund and collectively, the Funds).
4. Securities of the Funds are, or will be, distributed on a continuous basis in one or more Jurisdictions pursuant to a simplified prospectus (a Prospectus) governed by Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (Regulation 81-101).
5. Each Fund is, or will be, a reporting issuer in one or more of the Jurisdictions.
6. Securities of the Funds are, or will be, distributed through the Representative Dealers and through other dealers which may or may not be affiliated with the Filer (individually, a Dealer and collectively, Dealers).
7. Each Dealer is duly registered as a dealer in one or more of the Jurisdictions. Most of the Dealers are members of either (i) the Investment Industry Regulatory Organization of Canada or (ii) the Mutual Fund Dealers Association of Canada, or their successors.
8. Each of the Filer and the Funds is not in default of securities legislation in each of the Jurisdictions.
9. The Representative Dealers are not in default of securities legislation in each of the Jurisdictions.
10. Each Dealer has an obligation to send or deliver the Prospectus to the person who subscribed for or purchased a security of a Fund within the time period specified in the Legislation.
11. Pursuant to the point of sale disclosure project for mutual funds (the Project) of the Canadian Securities Administrators (the CSA), the CSA have determined that it is desirable to create a summary disclosure document called the Fund Facts.
12. CSA Staff Notice 81-319 Status Report on the Implementation of Point of Sale Disclosure for Mutual Funds outlines the CSA's decision to implement the point of sale disclosure framework in stages.
13. Stage 1 of the Project became effective on January 1, 2011 with the coming into force of the amendments to Regulation 81-101 and related regulations mandating a mutual fund to prepare and file a Fund Facts on SEDAR for each relevant class or series of the mutual fund, and having the Fund Facts posted to the mutual fund's or its manager's website and delivered to anyone upon request, at no cost.
14. Stage 2 of the Project proposes to allow delivery of the Fund Facts to satisfy the current requirement under the Legislation to send or deliver a Prospectus within two days of subscribing for or purchasing mutual fund securities.
15. The Exemption Sought follows upon CSA Staff Notice 81-321 Early Use of Fund Facts to Satisfy Prospectus Delivery Requirements issued on February 25, 2011.
16. In Québec, as set forth in paragraph 331.1(14) of the Securities Act, R.S.Q. c. V-1.1, the Autorité des marchés financiers may, by regulation, establish special disclosure schemes for securities distributions based on the nature of the securities involved or the categories of issuers, fix the new conditions for the use of such schemes and prescribe the documents that may stand in lieu of a prospectus in the circumstances and on the other conditions determined by the Autorité des marchés financiers.
17. Investors will be able to request a copy of the Prospectus, at no cost, by contacting the Filer or the applicable Dealer and will continue to be able to consult the Prospectus on the SEDAR website and on the website of the Filer or the Fund (as applicable).
18. The Prospectus of each Fund discloses that the Fund Facts of each class or series of securities is incorporated by reference in, and forms an integral part of, the Prospectus.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make their decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that the conditions set out below are met.
1. Prior to providing the Fund Facts to a Dealer to send or deliver in lieu of the Prospectus, the Filer:
(a) files a Fund Facts for the applicable class or series of securities of the Fund in compliance with the requirements of Regulation 81-101 and in the form prescribed by Form 81-101F3 Contents of Fund Facts Document;
(b) discloses in the Fund Facts for a specific class or series:
(i) management fees, administration fees and/or other fees payable directly to the Filer by investors holding securities of that class or series of the Funds, and discloses, in any Fund Facts filed after the date of this decision and no later than the next renewal of the Prospectus for such class or series, the maximum management fees, administration fees and/or other fees that may be charged by the Filer to the investor; and
(ii) any requirement for the investor to participate in a fee-based arrangement with the Dealer in order to be eligible to subscribe for or purchase the particular class or series of the Funds.
2. At the time a Fund Fact is being sent or delivered to an investor, it will not be attached to, or bound with another Fund Fact, unless each Fund Facts:
(a) relates to securities of one of the Funds that have been subscribed for or purchased by the investor; and
(b) is being sent or delivered pursuant to this decision.
3. The Dealers relying on the ability to send or deliver Fund Facts in lieu of the Fund's Prospectus, grants to an investor who subscribes for or purchases the securities of a Fund a right equivalent to the Rights of Withdrawal, which takes effect upon the reception of the Fund Facts by the investor. The Rights of Withdrawal and the Rights of Rescission will no longer apply if the Fund Facts is sent or delivered to an investor in accordance with the time period and in the manner specified for the Prospectus under the Delivery Requirement.
4. Prior to a Dealer relying on the ability to send or deliver Fund Facts in lieu of the Prospectus for the Funds, the Filer or an agent of the Filer provides to the Dealer:
(a) a copy of this decision;
(b) a disclosure statement informing the Dealer of the implications of this decision; and
(c) an acknowledgment of the matters referred to in paragraph 5 below (the Acknowledgment), to be signed and returned by the Dealer to the Filer or its agent.
5. Prior to a Dealer relying on the ability to send or deliver Fund Facts in lieu of the Prospectus for the Funds, the Dealer returns the Acknowledgement to the Filer or an agent of the Filer:
(a) acknowledging receipt of a copy of this decision;
(b) agreeing to send or deliver the Fund Facts to an investor in lieu of the Prospectus;
(c) confirming that the Dealer will provide a right equivalent to the Rights of Withdrawal attaching to the sending or delivery of the Fund Facts;
(d) acknowledging that, in the event a Fund Facts is not sent or delivered in accordance with this decision, a Prospectus must be sent or delivered and the Rights of Rescission and the Rights of Withdrawal will continue to apply;
(e) undertaking that the Dealer will only attach or bind one Fund Facts with another Fund Facts if both are being sent or delivered at the same time to an investor pursuant to this decision; and
(f) confirming that the Dealer has in place written policies and procedures to ensure that there is compliance with the conditions of this decision.
6. Investors who subscribe for or purchase securities of the Funds receive concomitantly to the Fund Facts, a separate notice indicating that, upon the sending or delivery of the Fund Facts, they will have equivalent rights and protections otherwise applicable under securities law in their jurisdiction, which notice includes wording substantially similar to the following:
The Fund Facts for the securities you subscribe for or purchase is being sent or delivered to you instead of the simplified prospectus. You will continue to have the equivalent rights and protections otherwise applicable under securities law as if you were sent or delivered the simplified prospectus. Depending on your province or territory, you may have the right to:
• withdraw from an agreement to subscribe for or buy securities of mutual funds within two business days after you receive a fund facts document, or
• cancel your subscription or purchase within 48 hours after you receive confirmation of the purchase.
For more information, see the securities law of your province or territory or ask a lawyer.
7. The Filer will cause the Funds to honour any request made by an investor to exercise a right equivalent to the Rights of Withdrawal in respect of an agreement to subscribe for or purchase securities of a Fund that a Dealer fails to honour, provided such request is made in respect of a validly exercised right.
8. The Filer or its agent keeps records of the Dealers that have returned to the Filer or its agent signed copies of the Acknowledgement and, on a confidential basis, the Filer or its agent provides the principal regulator for its Funds, on a quarterly basis beginning 60 days after the date upon which the Exemption Sought is first relied upon by the Filer and Funds, and upon request, at the discretion of the Filer, either (i) with a current list of all such Dealers, or (ii) with an update to the list of such Dealers or confirmation that there has been no change to such list.
9. The Exemption Sought terminates the earlier of (a) 6 months from any notice by the CSA that the Exemption Sought may no longer be relied upon; and (b) the coming into force of a requirement under securities legislation to send or deliver the Fund Facts to satisfy the Delivery Requirement.