National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Technical relief granted to mutual funds from Parts 9, 10 and 14 of NI 81-102 to facilitate the offering of exchange-traded series and conventional mutual fund series within same fund structure -- Relief permitting funds to treat exchange-traded series in a manner consistent with treatment of other ETF securities in continuous distribution in connection with their compliance with Parts 9, 10 and 14 of NI 81-102 -- Relief permitting funds to treat mutual fund series in a manner consistent with treatment of other conventional mutual fund securities in connection with their compliance with Parts 9, 10 and 14 of NI 81-102 -- National Instrument 81-102 -- Mutual Funds.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 9.1, 9.2, 9.3, 9.4, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 14.1, 19.1.
August 6, 2013
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
PURPOSE INVESTMENTS INC.
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Purpose Core Dividend Fund, Purpose Tactical Hedged Equity Fund, Purpose Monthly Income Fund, Purpose Total Return Bond Fund, Purpose Diversified Real Asset Fund (collectively, theExisting Funds), each of which is a separate class of shares of Purpose Fund Corp., and any additional funds of which the Filer will be the manager and which are structured in the same manner as the Existing Funds (the Future Funds and together with the Existing Funds, the Funds) for a decision under the securities legislation of the Jurisdiction (the Legislation) to exempt the Funds from Parts 9, 10 and 14 of National Instrument 81-102 Mutual Funds (NI 81-102) (the Requested Relief).
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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
(a) Basket means, in relation to the ETF Shares of a Fund, a group of securities or assets representing the constituents of the Fund.
(b) Designated Broker means a registered dealer that enters into an agreement with the Filer or an affiliate of the Filer on behalf of a Fund to perform certain duties in relation to the ETF Shares of the Fund.
(c) Exchange means the Toronto Stock Exchange (TSX) or another stock exchange recognized by the Ontario Securities Commission.
(d) Prescribed Number of ETF Shares means, in relation to a Fund, the number of ETF Shares of the Fund determined from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.
(e) Shareholder means a holder of one or more ETF Shares or Mutual Fund Shares of a Fund.
(f) Dealer means a registered dealer (that may or may not be a Designated Broker) that enters into a continuous distribution agreement with the Filer or an affiliate of the Filer on behalf of a Fund, pursuant to which the Dealer may subscribe for and purchase ETF Shares from the Fund.
This decision is based on the following facts represented by the Filer.
1. The Filer is a corporation incorporated under the laws of the Jurisdiction.
2. The registered office of the Filer is located at 77 King Street West, TD North Tower, 21st Floor, Toronto, Ontario.
3. The Filer is registered as an investment fund manager, portfolio manager and an exempt market dealer under the Securities Act (Ontario).
4. The manager of each Fund will be the Filer or an affiliate thereof.
5. The Filer is not in default of securities legislation in any of the Jurisdictions.
6. Each of the Funds is a separate class of shares of Purpose Fund Corp. Purpose Fund Corp. is a mutual fund corporation established under the laws of the Province of Ontario. The authorized capital of Purpose Fund Corp. includes an unlimited number of classes of non-cumulative, redeemable, non-voting shares. Each class of shares consists of four series, namely, Series A shares, Series F shares, Series I shares (collectively, the Mutual Fund Shares) and exchange-traded series (the ETF Shares). ETF Shares of each Fund will be listed on the TSX and will be available to all investors. Each class of shares is a separate investment fund having specific investment objectives and is specifically referable to a separate portfolio of investments.
7. The Funds are or will be mutual funds governed by the laws of Ontario and each Fund will be a reporting issuer under the laws of all of the Jurisdictions. Each Fund offers or will offer ETF Shares and Mutual Fund Shares. The ETF Shares operate in the same manner as other exchange-traded funds subject to NI 81-102. The Mutual Fund Shares operate in the same manner as other conventional mutual funds subject to NI 81-102.
8. Each Fund is, or will be, subject to NI 81-102, subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities.
9. The Filer has applied to list the ETF Shares of the Existing Funds on the TSX. The Filer will not file a final prospectus for any of the Funds in respect of the ETF Shares until the TSX or another recognized stock exchange has conditionally approved the listing of ETF Shares.
10. Mutual Fund Shares will not be listed and may be subscribed for or purchased directly from a Fund through qualified financial advisors or brokers.
11. ETF Shares may be subscribed for or purchased directly from a Fund by Dealers or Designated Brokers and orders may be placed for ETF Shares in the Prescribed Number of ETF Shares or an integral multiple thereof.
12. Each Fund will appoint one or more Designated Brokers to perform certain functions, which include standing in the market with a bid and ask price for ETF Shares for the purpose of maintaining liquidity for ETF Shares.
13. Each Dealer or Designated Broker that subscribes for ETF Shares will deliver, in respect of each Prescribed Number of ETF Shares to be issued, a Basket or cash in an amount sufficient so that the value of the Basket or cash delivered is equal to the NAV of the ETF Shares next determined following the receipt of the subscription order.
14. Neither the Dealers nor the Designated Brokers will receive any fees or commissions in connection with the issuance of ETF Shares to them. On the issuance of ETF Shares, an administrative fee may be charged to a Dealer or Designated Broker to offset the expenses (including any applicable TSX additional listing fees) incurred in issuing the ETF Shares.
15. Except as described above, ETF Shares may not generally be purchased directly from a Fund. Investors will generally be expected to purchase ETF Shares through the facilities of the applicable Exchange. ETF Shares may be issued directly to Shareholders upon a reinvestment of dividends or switch from the ETF Shares of one Fund to the ETF Shares of another Fund.
16. Shareholders that are not Designated Brokers or Dealers that wish to dispose of their ETF Shares will generally be able to do so by selling their ETF Shares on the applicable Exchange, through a registered dealer, subject only to customary brokerage commissions. A Shareholder that holds a Prescribed Number of ETF Shares of a Fund or an integral multiple thereof will be able to exchange such ETF Shares with the Fund for cash and/or Baskets. A Shareholder will also be able to redeem ETF Shares for cash at a redemption price equal to 95% of the closing price of the ETF Shares on the applicable Exchange on the date of redemption.
17. Parts 9, 10 and 14 of NI 81-102 do not contemplate both Mutual Fund Shares and ETF Shares being offered in a single fund structure. Accordingly, without the Requested Relief, the Filer and the Funds would not be able to technically comply with those parts of the Instrument.
18. The Requested Relief will permit the Filer and the Funds to treat the ETF Shares and the Mutual Fund Shares as if such shares were separate funds in connection with their compliance with Parts 9, 10 and 14 of NI 81-102. The Requested Relief will enable each of the ETF Shares and Mutual Fund Shares to comply with Parts 9, 10 and 14 of NI 81-102 as appropriate for the type of share being offered.
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 Requested Relief is granted provided that:
(a) with respect to its Mutual Fund Shares, each Fund complies with the provisions of Parts 9, 10 and 14 of NI 81-102 that apply to mutual funds that are not exchange-traded mutual funds; and
(b) with respect to its ETF Shares, each Fund complies with the provisions of Parts 9 and 10 of NI 81-102 that apply to exchange-traded mutual funds.