National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from the Securities Act to permit a dealer to send or deliver 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 -- terms and conditions consistent with CSA Staff Notice 81-321 Early Use of the Fund Facts to Satisfy Prospectus Delivery Requirements
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 71(1), 147.
October 11, 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
THE GCIC LTD. (GCIC) AND
1832 ASSET MANAGEMENT L.P.
(FORMERLY SCOTIA ASSET MANAGEMENT L.P.) (1832)
IN THE MATTER OF
SCOTIA CAPITAL INC.
(the Representative Dealer)
The principal regulator in the Jurisdiction has received an application from GCIC and 1832 (each a Filer and, collectively, the Filers) for a decision under the securities legislation of the principal regulator (the Legislation) for an exemption (the Requested Relief) to permit a Dealer (as defined below) to send or deliver the Receipted Fund Facts (as defined below) 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 simplified prospectus and any amendment thereto (the Prospectus) in respect of an order or subscription to purchase securities of a Fund (as defined below) (theDelivery Requirement).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) the Ontario Securities Commission (the Commission) is the principal regulator for this Application, and
(b) the Filers have provided notice that subsections 4.7(1) and 4.7(2) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) are intended to be relied upon in each of the provinces and territories of Canada (together with the Jurisdiction, the Jurisdictions).
Unless otherwise defined herein, terms defined in National Instrument 14-101 -- Definitions, MI 11-102 and the Securities Act (Ontario) have the same meaning in this Application.
CSA Notice 81-321 means the Canadian Securities Administrators (CSA) Staff Notice 81-321 -- Early Use of the Fund Facts to Satisfy Prospectus Delivery Requirements.
CSA Notice of Amendments means the CSA Notice of Amendments to National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101), Form 81-103F3 -- Contents of Fund Facts Document (the Fund Facts Form), Companion Policy 81-101CP to NI 81-101 and consequential amendments, dated as at June 13, 2013.
Funds means mutual funds that are subject to NI 81-101 and from time to time managed by a Filer or an associate or affiliate of a Filer.
Receipted Fund Facts means the Fund Facts document pertaining to a Fund which has been filed with a prospectus of that Fund in accordance with the requirements of NI 81-101 and in the format prescribed by the Fund Facts Form, subject to exemptive relief or other approval granted, and that has been receipted by the Commission from time to time.
Right of Rescission means the right of action, under the securities legislation of the Jurisdictions, for rescission or damages against a dealer, for failure of the dealer to send or deliver the Prospectus to a purchaser of a security to whom a Prospectus was required to be sent or delivered, but was not sent or delivered in compliance with the Delivery Requirement. In Québec, such a purchaser may apply to have the transaction rescinded or the price revised, at the purchaser's option, without prejudice to the purchaser's claim for damages. Collectively, these rights are referred to as the Rights of Rescission.
Right of Withdrawal means the right, given to a purchaser under the securities legislation of the Jurisdictions, to withdraw from a purchase order for a security of a mutual fund if the dealer from which the purchaser purchases the security receives written notice evidencing the intention of the purchaser not to be bound by the purchase order within two days of receipt of the latest Prospectus sent or delivered in compliance with the Delivery Requirement. In Québec, this right is called a right to rescind. Collectively, these rights are referred to as the Rights of Withdrawal.
This decision is based on the following facts represented by the Filers:
1 GCIC is a corporation existing under the laws of Ontario with its head office in Toronto, Ontario. GCIC is registered as: (i) a portfolio manager (PM) in all of the provinces of Canada (except Newfoundland and Labrador) and in the Northwest Territories; (ii) an investment fund manager (IFM) in Ontario, Québec and Newfoundland and Labrador; and (iii) a commodity trading manager (CTM) in Ontario.
2 1832, an affiliate of GCIC, is a limited partnership established under the laws of Ontario with its head office in Toronto, Ontario. 1832 is registered as: (i) a PM in all of the provinces of Canada and in the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an IFM in Ontario, Québec and Newfoundland and Labrador; and (iv) a CTM in Ontario. Effective September 30, 2013, Scotia Asset Management L.P. changed its name to "1832 Asset Management L.P.".
3 The Representative Dealer is registered in the following categories: (i) futures commission merchant in Ontario and Manitoba; (ii) investment dealer in all of the Jurisdictions; (iii) derivatives dealer in Québec; and (iv) securities, options, managed accounts & futures contracts and futures contract options in all of the Jurisdictions (except Ontario).
4 Each of the Funds is, or will be, offered for sale on a continuous basis in one or more of the Jurisdictions pursuant to a simplified prospectus governed by NI 81-101.
5 Each Fund is or will be an open-ended mutual fund trust, corporation or limited partnership established under the laws of the Province of Ontario.
6 Each Fund is or will be a reporting issuer in one or more of the Jurisdictions.
7 Securities of each Fund are or will be distributed through the Representative Dealer and through other dealers which may or may not be affiliated with the Filer that is the manager of the Fund (each, a Dealer, and collectively, the Dealers).
8 Each Dealer is or will be registered as a mutual fund dealer or investment dealer in one or more of the Jurisdictions.
9 Neither the Filers nor the Funds are in default of securities legislation in any of the Jurisdictions.
10 Pursuant to the securities legislation in the Jurisdictions, each Dealer has an obligation to send or deliver the Prospectus to a purchaser of a security of a Fund within two days of the purchase of the security.
11 Pursuant to the CSA's point of sale disclosure project for mutual funds (the Project), the CSA has determined that it is desirable to create a summary disclosure document called the fund facts document (the Fund Facts).
12 CSA Staff Notice 81-319 -- Status Report on the Implementation of Point of Sale Disclosure for Mutual Funds (CSA Staff Notice 81-319) outlined 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 by amending NI 81-101 and related instruments, mandating a mutual fund to prepare and file a Fund Facts on the System for Electronic Document Analysis and Retrieval (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 sent or delivered to any person upon request, at no cost.
14 Stage 2 of the Project allows delivery of the Fund Facts to satisfy the current requirement under the Legislation to send or deliver the Prospectus within two days of purchasing a mutual fund. On June 13, 2013, Stage 2 of the Project was completed with the publication of the final amendments (the Amendments), which included amendments to the Fund Facts and requires delivery of the Fund Facts instead of the prospectus to satisfy the prospectus delivery requirement. The Amendments are phased in over a twelve month period.
15 Each Filer has determined that it would be desirable to apply for relief to permit Dealers to be able to choose whether to send or deliver the Prospectus or, in its place, the Receipted Fund Facts to satisfy the Delivery Requirement prior to the coming into force of that portion of Stage 2 of the Project which relates to the sending or delivery of the Fund Facts to satisfy the Delivery Requirement. CSA Notice 81-321 contemplates the possibility of such relief.
16 Investors are able to request a copy of the Prospectus, at no cost, by contacting the applicable Filer or Dealer and will continue to be able to access the Prospectus on the SEDAR website and on the website of the Filer or the Fund (as applicable).
The principal regulator is satisfied that the decision meets the test set out under the securities legislation of the principal regulator to make the decision.
The decision of the principal regulator under the securities legislation of the principal regulator is that the Requested Relief is granted provided that:
1 The Filers provide the applicable Receipted Funds Facts to Dealers for sending or delivering in lieu of the Prospectus in connection with the purchase of securities of a Fund.
2 The Receipted Fund Facts delivered pursuant to the Requested Relief discloses for a specific class or series (i) if management fees, administration fees and/or other fees are payable directly by investors to the manager of the mutual fund in respect of holding securities of that class or series of the mutual fund, the existence of such fees and, 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 manager of the mutual fund to the investor, and (ii) any requirement for an investor to participate in a fee-based arrangement with their dealer in order to be eligible to purchase the particular class or series of the mutual fund.
3 The most recently filed Prospectus of each Fund specifies under Item 3 of Part A of Form 81-101F1 -- Contents of Simplified Prospectus that the Fund Facts is incorporated by reference into the Prospectus.
4 The Receipted Fund Facts sent or delivered to an investor pursuant to the Requested Relief is not attached to or bound with any other Receipted Fund Facts except any other Receipted Fund Facts also being sent or delivered pursuant to the Requested Relief in connection with the securities being purchased by the investor.
5 The Filer and any Dealer relying on the Requested Relief will grant to an investor purchasing the securities of a Fund rights equivalent to the Rights of Withdrawal (the Equivalent Rights) upon the sending or delivery of the Receipted Fund Facts. The Rights of Withdrawal and the Rights of Rescission will no longer apply if the Receipted 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.
6 Investors in the Funds receive notice in a document other than the Receipted Fund Facts, at or before the time they receive the Receipted Fund Facts, indicating that they will have equivalent rights and protections otherwise applicable under securities law in their jurisdiction for the sending or delivery of the Receipted Fund Facts, which includes wording substantially similar to the following:
The Fund Facts for the securities you 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 buy securities of mutual funds within two business days after you receive a fund facts document, or
• cancel your 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 Prior to a Dealer relying on the Requested Relief, a 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) A form of acknowledgment (the Acknowledgement) to be signed and returned by the Dealer to the Filer or its agent.
8 Prior to a Dealer relying on the Requested Relief, the Dealer returns the Acknowledgement to the Filer or an agent of the Filer:
(a) Acknowledging receipt of a copy of the decision;
(b) Agreeing to send or deliver the Receipted Fund Facts to an investor in lieu of the Prospectus;
(c) Confirming that the Dealer will provide Equivalent Rights to the investor in connection with the sending or delivery of the Receipted Fund Facts;
(d) Acknowledging that, in the event the Receipted Fund Facts is not sent or delivered in accordance with this decision, a Prospectus must be sent or delivered and the Rights of Rescission will continue to apply to the failure to send or deliver the Prospectus;
(e) Undertaking that it will only bind one Receipted Fund Facts with another Receipted Fund Facts if each is being sent or delivered at the same time to an investor pursuant to this decision; and
(f) Confirming that it has in place written policies and procedures to ensure that there is compliance with the conditions of this decision.
9 Each Filer will cause the Funds managed by it to honour any request made by an investor to exercise the Equivalent Rights in respect of an agreement to purchase securities of a Fund managed by the Filer that a Dealer fails to honour, provided such request is made in respect of a validly exercised right.
10 Each 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, each Filer or its agent provides the Commission on a quarterly basis beginning 60 days after the date upon which the Requested Relief is first relied upon by the Filer and the Funds, and upon request, at the discretion of the Filer, either (i) a current list of all such Dealers, or (ii) an update to the list of such Dealers or confirmation that there has been no change to such list.
11 The Requested Relief terminates on the coming into force of any legislation or rule relating to the sending or delivery of the Fund Facts to satisfy the Delivery Requirement.