Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from seed capital requirements for commodity pools in NI 81-104 -- manager permitted to redeem seed capital investment in the fund under conditions including that the fund has received subscriptions from investors totalling at least $5 million.

Applicable Legislative Provisions

National Instrument 81-104 Commodity Pools, ss. 3.2(2)(a), 10.1.

[Translation]

September 6, 2013

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
FIERA CAPITAL CORPORATION
(the Filer)

AND

IN THE MATTER OF
FIERA DIVERSIFIED STRATEGY FUND
(the Fund)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption under section 10.1 of Regulation 81-104 respecting Commodity Pools (c. V-1.1, r. 40) (Regulation 81-104) from the requirements of paragraph 3.2(2)(a) of Regulation 81-104, in order to permit the Fund to redeem units issued upon the investment made by the Filer pursuant to paragraph 3.2(1)(a) of Regulation 81-104 (the Initial Investment) (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 section 4.7(1) of Regulation 11-102 respecting Passport System (c. V-1.1, r. 1) (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, Northwest Territories, Nunavut and Yukon; and

c) the 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 Regulation 14-101 respecting Definitions (c. V-1.1, r. 3), Regulation 11-102 and Regulation 81-102 respecting Mutual Funds (c. V-1.1, r. 39) (Regulation 81-102) have the same meaning if used in this decision, unless otherwise defined.

Representations

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

The Filer

1. The Filer is a corporation incorporated under the Business Corporations Act (R.S.O. 1990, c. B.16) of Ontario.

2. The Filer's head office is located at 1501, McGill College Avenue, suite 800, Montreal, Québec, Canada, H3A 3M8.

3. The Filer is the investment fund manager, portfolio manager and promoter of the Fund.

4. The Filer is duly registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador. The Filer is also duly registered in all jurisdictions of Canada as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer. In addition, the Filer is duly registered in Québec as a derivatives portfolio manager pursuant to the Derivatives Act (c. I-14.01), in Ontario as a commodity trading manager pursuant to the Commodity Futures Act (R.S.O. 1990, c. C.20) of Ontario and in Manitoba as adviser pursuant to the Commodity Futures Act (C.C.S.M. c. C152) of Manitoba.

5. The Filer is a reporting issuer under securities legislation in British Columbia, Alberta, Ontario and Québec and its securities are listed on the Toronto Stock Exchange.

6. The Filer is not in default of securities legislation in any jurisdiction of Canada.

The Fund

7. The Fund is an open-ended investment trust established under the laws of Ontario pursuant to an amended and restated trust agreement dated May 31, 2012, as amended (the Trust Agreement). RBC Investor Services Trust acts as trustee.

8. On June 14, 2013, the Fund filed with each jurisdiction of Canada a preliminary prospectus governed by Regulation 41-101 respecting General Prospectus Requirements (c. V-1.1, r. 14) in order to proceed with an initial public offering. It is expected that the Fund will become a reporting issuer in all jurisdictions of Canada upon the issuance of a receipt for its final prospectus (the Final Prospectus).

9. The Fund is a mutual fund and upon issuance of a receipt for the Final Prospectus, it will be subject to Regulation 81-102. The Fund will also be a commodity pool, as such term is defined in section 1.1 of Regulation 81-104, since the Fund has adopted fundamental investment objectives that permit the Fund to use specified derivatives in a manner that is not permitted by Regulation 81-102.

10. The Fund's investment objective is to achieve positive returns in both rising and falling market environments with low or negative correlations to traditional forms of fixed-income and equity investments primarily through investment in exchange-traded futures and to a lesser extent investment in over-the-counter forward and swap contracts.

11. The Fund is not in default of securities legislation in any jurisdiction of Canada.

Reasons for the Exemption Sought

12. The Filer will make the Initial Investment in the Fund for a value of $50 000 before the filing of its Final Prospectus in compliance with the provisions of paragraph 3.2(1) of Regulation 81-104.

13. Paragraph 3.2(2)(a) of Regulation 81-104 states that a commodity pool may redeem, repurchase or return any amount invested in securities issued upon the investment in the commodity pools referred to in paragraph 3.2(1)(a) of Regulation 81-104 only if the securities issued under that paragraph that had an aggregate issue price of $50,000 remain outstanding and at least $50,000 invested under paragraph 3.2(1)(a) of Regulation 81-104 remains invested in the commodity pool. Therefore, without the Exemption Sought, the Fund would not be permitted to redeem the units issued to the Filer on the Initial Investment.

14. If the Fund was not a commodity pool and was governed exclusively by the provisions of Regulation 81-102, the Fund would be allowed under subsection 3.1(2) of Regulation 81-102 to redeem the units issued upon the Initial Investment and return to the Filer any amount invested in such units upon the Fund having received subscriptions aggregating not less than $500,000 from investors other than the Filer or any person referred to in paragraph 3.1(1)(a) of Regulation 81-102.

15. The Filer understands that the policy rationale behind the permanent nature of the Initial Investment set forth under section 3.2 of Regulation 81-104 is to ensure that commodity pools are being properly run for the benefit of the investors at all times.

16. In accordance with the terms of the Trust Agreement and with applicable Canadian securities legislation, the Filer shall, in the best interests of the Fund and its beneficiaries or in the interest of the fulfilment of its purpose, exercise prudence, diligence and skill, and discharge its functions loyally, honestly and in good faith.

17. The Filer, as investment fund manager, will at all times maintain excess working capital in accordance with the requirements set forth under section 12.1 of Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (c. V-1.1, r. 10).

18. Not having the Initial Investment invested in the Fund at all times will not change how the Filer manages the Fund. The Filer will manage the Fund in accordance with all applicable securities legislation and its contractual requirements.

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 Fund must not redeem the units issued upon the Initial Investment and return any amount invested in such units unless the Fund has received subscriptions aggregating not less than $5,000,000 from investors other than the Filer or any person referred to in paragraph 3.2(1)(a) of Regulation 81-104;

b) the Fund will disclose in the Final Prospectus the basis on which the Fund may redeem the units issued upon the Initial Investment; and

c) if, after the Fund has redeemed the units issued upon the Initial Investment, the total value of the units subscribed for by investors other than the persons referred to in paragraph 3.2(1)(a) of Regulation 81-104 drops below $5,000,000 for more than 30 consecutive days, the Filer shall, unless the Fund is in the process of being dissolved or terminated, reinvest $50,000 in the units of the Fund and maintain that investment until condition (a) hereinabove is again satisfied.

"Josée Deslauriers"
Senior Director, Investment Funds and Continuous Disclosure
Autorité des marchés financiers