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1832 Asset Management L.P.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from s. 13.5(2)(b) of NI 31-103 to permit inter-fund and In specie transfers between mutual funds, closed end funds, pooled funds and managed accounts -- inter-fund trades will comply with conditions in subsection 6.1(2) of NI 81-107 including IRC approval or client consent -- trades involving exchange-traded securities are permitted to occur at last sale price as defined in the Universal Market Integrity Rules -- relief also subject to pricing and transparency conditions -- inter-fund trades will comply with conditions in s. 6.1(2) of NI 81-107.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5, 15.1.
National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4).
October 31, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
1832 ASSET MANAGEMENT L.P.
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):
(a) granting an exemption from the prohibitions in section 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 -- Registration Requirements and Exemptions (NI 31-103) which prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of an associate of a responsible person, or from or to the investment portfolio of an investment fund for which a responsible person acts as an adviser, in order to permit:
(i) a Public Fund (as defined below) to purchase securities from or sell securities to any Public Fund or any Pooled Fund (as defined below);
(ii) a Pooled Fund to purchase securities from or sell securities to another Pooled Fund or a Public Fund;
(iii) a Managed Account (as defined below) to purchase securities from or sell securities to a Pooled Fund or a Public Fund;
(iv) the transactions listed in (i) to (iii) (each anInter-Fund Trade) to be executed at the last sale price, as defined in the Market Integrity Rules of the Investment Industry Regulatory Organization of Canada, prior to the execution of the trade (the Last Sale Price) in lieu of the closing sale price (the Closing Sale Price) contemplated by the definition of "current market price of the security" in section 6.1(1)(a)(i) of NI 81-107 (as defined below) on that trading day, where the securities involved in the Inter-Fund Trade are exchange-traded securities (which term shall include Canadian and foreign exchange-traded securities);
((i), (ii), (iii) and (iv) are collectively the Inter-Fund Trading Relief) and
(v) In specie subscriptions and redemptions by:
(A) Managed Accounts in the Public Funds and Pooled Funds; and
(B) Pooled Funds in the Public Funds and Pooled Funds
(collectively, the In specie Transfer Relief)
(b) to revoke and replace the Current Relief (as defined below) and the GCIC Relief (as defined below) (the Revocation Relief)
(the Inter-Fund Trading Relief, In specie Transfer Relief and Revocation Relief are collectively the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(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 each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).
Interpretation
Terms defined in MI 11-102, National Instrument 14-101 Definitions, NI 81-102 (as defined below) and NI 81-107 have the same meaning if used in this decision, unless otherwise defined.
Closed-End Fund means collectively, the Existing Closed-End Funds and the Future Closed-End Funds;
Existing NI 81-102 Fund means each NI 81-102 Fund, being a mutual fund that is a reporting issuer and subject to NI 81-102 of which the Filer or an affiliate of the Filer acts as manager and/or portfolio adviser;
Existing Fund means collectively, the Existing Public Funds and the Existing Pooled Funds;
Existing Managed Account means each existing fully managed account managed by the Filer or an affiliate of the Filer for a client that is not a responsible person;
Existing Pooled Fund means each existing Pooled Fund, being an investment fund that is not a reporting issuer of which the Filer or an affiliate of the Filer acts as manager and/or portfolio adviser;
Existing Closed-End Fund means each existing Closed-End Fund, being an investment fund that is a reporting issuer and is not a mutual fund and not subject to NI 81-102 of which the Filer or an affiliate of the Filer acts as manager and/or portfolio adviser;
Existing Public Fund means each Existing NI 81-102 Fund or Existing Closed-End Fund;
Filer, means the Filer or an affiliate of the Filer, for purposes of paragraphs 5, 7, 11, 12, 14, 15, 18, 19, 20, 21, 22, 23, 24, 26, 27 and 28 of the representations, and in the decision.
Funds means collectively, the Public Funds and the Pooled Funds;
Future Funds means collectively, the Future Public Funds and the Future Pooled Funds;
Future Closed-End Fund means each Closed-End Fund, being an investment fund that is a reporting issuer and is not a mutual fund and not subject to NI 81-102 of which the Filer or an affiliate of the Filer will act as manager and/or portfolio adviser in the future;
Future Managed Account means each fully managed account that will be managed by the Filer or an affiliate of the Filer for a client that is not a responsible person in the future;
Future Pooled Fund means each Pooled Fund, being an investment fund that is not a reporting issuer of which the Filer or an affiliate of the Filer will act as manager and/or portfolio adviser in the future;
Future Public Fund means each Future NI 81-102 Fund and/or Future Closed-End Fund of which the Filer or an affiliate of the Filer will act as manager or portfolio adviser in the future;
Inter-Fund Trading Prohibition means section 13.5(2)(b) of NI 31-103;
In specie Transfer means causing a Managed Account or a Pooled Fund to deliver securities to a Pooled Fund or Public Fund in respect of the purchase of securities of the Pooled Fund or Public Fund by the Managed Account or Pooled Fund, or to receive securities from the investment portfolio of a Pooled Fund or Public Fund in respect of a redemption of securities of the Pooled Fund or Public Fund by the Managed Account or Pooled Fund;
Last Sale Price has the same meaning as in the Universal Market Integrity Rules;
Managed Accounts means the Existing Managed Accounts and the Future Managed Accounts;
Managed Account Agreements means the investment management agreements between clients and the Filer or an affiliate of the Filer;
NI 81-102 means National Instrument 81-102 Mutual Funds;
NI 81-102 Funds means the Public Funds that are subject to NI 81-102 and are reporting issuers;
NI 81-107 means National Instrument 81-107 Independent Review Committee for Investment Funds;
Pooled Funds means, collectively, the Existing Pooled Funds and the Future Pooled Funds;
Public Funds means, collectively, the Existing Public Funds and the Future Public Funds; and
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is an Ontario limited partnership, which is wholly-owned, indirectly, by The Bank of Nova Scotia (BNS). The general partner of the Filer is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned directly by BNS with its head office in Ontario. The head office of the Filer is in Toronto, Ontario.
2. The Filer is registered as (i) a portfolio manager 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 investment fund manager in Ontario, Quebec, and Newfoundland and Labrador; and (iv) a commodity trading manager in Ontario.
3. Each of the Public Funds and Pooled Funds is or will be established under the laws of the Province of Ontario or of Canada as investment funds that are (a) open-ended mutual fund trusts, (b) open-ended mutual fund corporations, or (c) closed-ended limited partnerships and/or closed-ended trusts.
4. Each of the NI 81-102 Funds is or will be subject to the provisions of NI 81-102. The securities of each of the NI 81-102 Funds and the other Public Funds (being the closed-ended limited partnerships and/or closed-ended trusts) are or will be qualified for distribution pursuant to simplified prospectuses and annual information forms or long form prospectuses, as the case may be, that have been prepared or will be prepared and filed in accordance with the securities legislation of each of the Jurisdictions. The securities of the Pooled Funds are or will be qualified for distribution on a private placement basis pursuant to an offering memorandum.
5. The investment management agreement or the documentation in respect of a Managed Account does or will contain the authorization of the client for the Filer to purchase securities from, or to sell securities to, another Fund.
6. Each of the Public Funds is or will be a reporting issuer in each of the Jurisdictions. The Pooled Funds will not be reporting issuers.
7. The Filer is, or will be, the manager, trustee (where applicable), principal distributor and registrar of the Funds. The Filer and/or sub-advisors, including a related sub-advisor, may be the portfolio manager(s) of the Funds.
8. Certain of the Public Funds and Pooled Funds are "associates" of the Filer.
9. The Filer and each of the Public Funds and the Pooled Funds are not in default of securities legislation in any of the Jurisdictions.
10. The Filer is currently compliant with and acting in reliance on NI 81-107 and has established independent review committees (each, an IRC) for the Existing Public Funds and the Existing Pooled Funds.
11. The Filer will establish IRCs for the Future Public Funds and for the Future Pooled Funds all in accordance with the requirements of NI 81-107.
12. The mandate of the IRC of a Pooled Fund, among other things, will include approving Inter-Fund Trades between the Pooled Fund and another Pooled Fund, an NI 81-102 Fund, a Public Fund and/or a Managed Account. The IRC of the Pooled Funds will be composed by the Filer in accordance with the requirements of section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. Further the IRC of the Pooled Funds will not approve Inter-Fund Trades between a Pooled Fund, another Pooled Fund, a NI 81-102 Fund or other Public Fund and/or a Managed Account unless it has made the determination set out in section 5.2(2) of NI 81-107.
13. Purchases and sales of securities involving NI 81-102 Funds or other Public Funds will be referred to the IRC of NI 81-102 Funds or Public Funds, as the case may be, under section 5.2(1) of NI 81-107 and will be subject to the requirements of section 5.2(2) of NI 81-107.
14. The Filer has established policies and procedures to enable the Public Funds and the Pooled Funds to engage in Inter-Fund Trades.
15. When the Filer engages in an Inter-Fund Trade which involves the purchase and sale of securities between Funds, it will generally follow the following procedures or other procedures approved by the applicable IRC:
(a) the Filer will deliver the trade instructions in respect of a purchase or sale of a security by a Fund (Fund A) to a trader on a trading desk with a registered dealer;
(b) the Filer will deliver the trade instructions in respect of a purchase or sale of a security by another Fund (Fund B) to a trader on a trading desk with a registered dealer;
(c) the trader on the trading desk will be required to execute the trade on a timely basis as an Inter-Fund Trade between Fund A of the relevant Fund on the one hand, and Fund B of the other Fund on the other hand, at the Last Sale Price of the security prior to execution of the trade or at the Closing Sale Price, as instructed by the portfolio manager, as the case may be; and
(d) the trader on the trading desk will advise the portfolio manager for Fund A and Fund B of the price at which the Inter-Fund Trade occurred.
16. The Filer wishes to be able to permit any Fund to engage in Inter-Fund Trades with another Fund or with a Managed Account. Different sections of NI 31-103, NI 81-102 and NI 81-107 impose different prohibitions and exceptions on different types of Funds with respect to Inter-Fund Trades. The Filer may desire to cause:
(a) an NI 81-102 Fund to engage in an Inter-Fund Trade with (i) another NI 81-102 Fund, (ii) a Closed-end Fund or (iii) a Pooled Fund;
(b) a Closed-end Fund to engage in an Inter-Fund Trade with (i) another Closed-end Fund, (ii) an NI 81-102 Fund or (iii) a Pooled Fund;
(c) a Pooled Fund to engage in an Inter-Fund Trade with (i) another Pooled Fund, (ii) a Closed-end Fund or (iii) an NI 81-102 Fund; and
(d) a Managed Account to engage in an Inter-Fund Trade with (i) an NI 81- 102 Fund, (ii) a Closed-end Fund or (iii) a Pooled Fund.
17. The Filer has determined that it would be in the interests of the NI 81-102 Funds, the Public Funds, the Pooled Funds and the Managed Accounts to receive the Inter-Fund Trading Relief.
18. The Filer is able to rely upon the exemption in section 6.1(4) of NI 81-107 which grants Inter-Fund Trading Relief only in connection with Inter-Fund Trades between Public Funds. An exemption for Inter-Fund Trades involving Pooled Funds and Managed Accounts is not provided for in section 6.1(4) of NI 81-107. Inter-Fund Trades involving only Public Funds will be conducted in accordance with the exemption codified under section 6.1(4) of NI 81-107.
19. The Filer considers that it would be in the bests interests of the Funds if an Inter-Fund Trade could be made at the last sale price, as defined in the Universal Market Integrity Rules (UMIR) created by the Investment Industry Regulatory Organization of Canada (as defined above, the Last Sale Price), prior to the execution of the trade since this will result in the trade being done at the price which is closest to the price at the time the decision to make the trade is made.
20. The Filer provides discretionary portfolio management services to clients pursuant to Managed Account Agreements. Based on the value of the assets of the clients and depending on the allocation of a client's assets to a particular asset class, the Filer either manages the client's assets on a segregated account basis or on a pooled basis.
21. Pursuant to its Managed Account Agreements with its clients, the Filer has full authority to provide its portfolio management services, including investing clients in mutual funds for which the Filer is the portfolio manager and for changing those funds as the Filer determines in accordance with the mandate of the clients.
22. The Filer may wish to or otherwise be required to deliver securities held in a Managed Account or a Pooled Fund to a Pooled Fund or Public Fund in respect of a purchase of units or shares of the Pooled Fund or Public Fund (Fund Securities), and may wish to or otherwise be required to receive securities from a Pooled Fund or Public Fund in respect of a redemption of Pooled Fund or Public Fund Securities by a Managed Account or a Pooled Fund.
23. As the Filer will be the trustee of the Pooled Funds or Public Funds which are organized as trusts, each such Pooled Fund or Public Fund will be an 'associate' of the Filer and accordingly, absent the grant of the In specie Transfer Relief, the Filer would be precluded by the provisions of section 13.5(2)(b)(ii) of NI 31-103 from effecting the In-Specie Transfers. As the Filer is a registered adviser which is or will be the manager and portfolio manager of the Pooled Funds or Public Funds and is or will be the portfolio manager of the Managed Accounts, absent the grant of the In specie Transfer Relief, the Filer would be precluded by the provisions of section 13.5(2)(b)(iii) of NI 31-103 from effecting the In specie Transfers.
24. Effecting In specie Transfers of securities between the Managed Accounts and Pooled Funds, and the Pooled Funds or Public Funds will allow the Filer to manage each asset class more effectively and reduce transaction costs for the Managed Account or Pooled Fund client and the Pooled Fund or Public Fund. For example, In specie Transfers reduce market impact costs, which can be detrimental to the Managed Accounts or Pooled Fund clients and/or Pooled Funds or Public Fund(s). In specie Transfers also allow a portfolio manager to retain within its control institutional-size blocks of securities that otherwise would need to be broken and re-assembled.
25. The only cost which will be incurred by a Pooled Fund or Public Fund or Managed Account for an In specie Transfer is a nominal administrative charge levied by the custodian of the Pooled Fund or Public Fund in recording the trades and any commission charged by the dealer executing the trade.
26. The Filer will obtain the prior specific written consent of the relevant Managed Account client before it engages in any In specie Transfers in connection with the purchase or redemption of securities of the Pooled Funds or Public Funds for the Managed Account.
27. The Filer, as manager of the Pooled Funds or Public Funds, will value the securities transferred under an In specie Transfer on the same valuation day on which the purchase price or redemption price of the Fund Securities of a Pooled Fund or Public Fund is determined. With respect to the purchase of Fund Securities of a Pooled Fund or Public Fund, the securities transferred to a Pooled Fund or Public Fund under an In specie Transfer in satisfaction of the purchase price of those Fund Securities will be valued as if the securities were portfolio assets of the Pooled Fund or Public Fund, as contemplated by section 9.4(2)(b)(iii) of NI 81-102. With respect to the redemption of Fund Securities of a Pooled Fund or Public Fund, the securities transferred to a Managed Account in satisfaction of the redemption price of those Fund Securities will have a value equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price of the Fund Securities of the Pooled Fund or Public Fund, as contemplated by section 10.4(3)(b) of NI 81-102.
28. In specie Transfers will be subject to (i) compliance with the written policies and procedures of the Filer respecting In specie Transfers that are consistent with applicable securities legislation, and (ii) the oversight of the Filer's Compliance Department, to ensure that the transaction represents the business judgment of the Filer acting in its discretionary capacity with respect to the Pooled Fund or Public Fund and the Managed Account, uninfluenced by considerations other than the best interests of the Pooled Fund or Public Fund and Managed Account. The results of the oversight and review by the Filer's Compliance Department will be submitted in the form of a report to the Filer's board of directors on a quarterly basis.
29. The valuation of any illiquid securities which would be the subject of an In-Specie Transfer will be carried out according to the Filer's policies and procedures for the fair valuation of portfolio securities, including illiquid securities (FV Procedures). The Filer's internal valuation team (Valuation Team) monitors and determines fair value according to the applicable FV Procedures and a valuation committee, consisting of senior employees, must review and approve or reject any valuation recommendations provided by the Valuation Team. The FV Procedures have received the positive recommendation of the NI 81-102 Fund's IRC. Any valuation of private securities, including illiquid securities are subject to review by the Funds' auditors. If any illiquid securities are the subject of In-Specie Transfer, the illiquid securities would be transferred on a pro rata basis. The Funds generally invest in liquid securities. The Filer will not cause any Fund to engage in an In specie Transfer, if illiquid securities represent more than an immaterial portion of the portfolio of the applicable Fund or Managed Account.
30. The Application has been submitted by the Filer in connection with a proposed internal reorganization of BNS's asset management business (the Reorganization).
31. The Reorganization is structured as an internal consolidation of the asset management business currently conducted by certain affiliated BNS entities, namely, GCIC Ltd. (GCIC), WaterStreet Family Capital Counsel Inc. and CPA Securities Inc. -- each of which is wholly-owned directly or indirectly by BNS -- into the Filer. Under the Reorganization, the asset management business conducted by GCIC at the time of the Reorganization will be transferred to the Filer. The closing date of the Reorganization is November 1, 2013 (the Completion Date).
32. If the Reorganization is completed as contemplated, GCIC will cease to carry on registrable business and will have its various registrations under the Legislation revoked. Thereafter, the business of GCIC will be carried on by the Filer as a separate division of the Filer.
33. The Reorganization does not involve an amalgamation.
34. Under an Order dated September 19, 2008, the Principal Regulator granted GCIC relief that is substantially the same as the Inter-Fund Trading Relief (the GCIC Relief). However, the GCIC Relief gave relief from section 118(2)(b) of the Securities Act (Ontario) (the Act) and section 115(6) of the Regulation to the Act, which provisions have been repealed and replaced by sections 13.5(2)(b)(ii) and (iii) of NI 31-103.
35. Under an Order dated October 30, 2009, the Principal Regulator granted the Filer relief from sections 13.5(2)(b)(ii) and (iii) of NI 31-103 to permit In specie subscriptions and redemptions of mutual funds by separately managed accounts where the Filer is also the portfolio manager of the mutual funds (the Current Relief).
36. The Current Relief is given to the funds named in the Current Relief and any other investment funds "established in the future" for which the Filer is the manager and portfolio manager and accordingly may not extend to the Funds in existence and managed by GCIC at the date of the Current Relief following the Reorganization.
37. Unlike the Current Relief, the GCIC Relief does not permit In specie purchases and redemptions. The GCIC Relief is in respect of portfolio trades between all different combinations of public funds (both NI 81-102 Funds and Closed-End Funds), pooled funds and managed accounts. The Filer also seeks relief to permit In specie purchases and redemptions in connection with investments by the Pooled Funds in the Public Funds and in other Pooled Funds.
38. Furthermore, the Filer is not able to rely on the GCIC Relief following the Reorganization since the terms of that relief do not permit it to flow through to the Filer.
39. Accordingly, as of the Completion Date, the Filer is seeking the Revocation Relief and to replace the Current Relief and the GCIC Relief with the Inter-Fund Trading Relief and the In specie Transfer Relief.
Decision
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:
(a) the Revocation Relief is granted; and
(b) the Inter-Fund Trading Relief is granted provided that the following conditions are satisfied for the Inter-Fund Trades:
(i) the Inter-Fund Trade is consistent with the investment objective of the Public Fund, the Pooled Fund or the Managed Account;
(ii) 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 IRC of the Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions an IRC provides in connection with the Inter-Fund Trade;
(iii) in the case of an Inter-Fund Trade between Funds:
(A) the IRC of each Fund has approved the Inter-Fund Trade in respect of the Fund in accordance with the terms of section 5.2(2) of NI 81-107; and
(B) the Inter-Fund Trade complies with paragraphs (c) to (g) of section 6.1(2) of NI 81-107 except that for purposes of paragraph (e) of section 6.1(2) of NI 81-107 in respect of exchange-traded securities, the current market price of the securities may be the Last Sale Price.
(iv) in the case of an Inter-Fund Trade between a Managed Account and a Fund:
(A) the IRC of the Fund approved the Inter-Fund Trade in respect of such Fund in accordance with the terms of section 5.2(2) of NI 81-107;
(B) the investment management agreement or other documentation in respect of the Managed Account authorizes the transaction; and
(C) the Inter-Fund Trade complies with paragraphs (c) to (g) of section 6.1(2) of NI 81-107 except that for purposes of paragraph (e) of section 6.1(2) in respect of exchange-traded securities, the current market price of the security may be the Last Sale Price.
(c) theIn specie Trading Relief is granted provided that:
(i) if the transaction is the purchase of Fund Securities of a Public Fund or a Pooled Fund by a Managed Account:
(A) in respect of the In-Specie Trading Relief as it applies to purchases of a Public Fund or a Pooled Fund,
(I) the Filer, as manager of the Public Fund, obtains the approval of the applicable IRC of the Public Fund in respect of an In-Specie Transfer in accordance with the terms of s. 5.2 of NI 81-107; and
(II) the Filer, as manager of the Public Fund, and the applicable IRC, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-Specie Transfer;
(B) the Filer obtains the prior written consent of the client of the relevant Managed Account before it engages in any In specie Transfers in connection with the purchase of Fund Securities of the Public Fund or Pooled Fund;
(C) the Public Fund or Pooled Fund would at the time of payment be permitted to purchase the securities of the Managed Account;
(D) the securities are acceptable to the Filer as portfolio manager of the Public Fund or Pooled Fund and consistent with the Public Fund's or Pooled Fund's investment objectives;
(E) the value of the securities sold to the Public Fund or Pooled Fund is at least equal to the issue price of the Fund Securities of the Public Fund or Pooled Fund for which they are payment, valued as if the securities were portfolio assets of that Public Fund or Pooled Fund;
(F) the account statement next prepared for the Managed Account will include a note describing the securities delivered to the Public Fund or Pooled Fund and the value assigned to such securities; and
(G) the Public Fund or Pooled Fund keeps written records of all In specie Transfers during the financial year of the Public Fund or Pooled Fund, reflecting details of the securities delivered to the Public Fund or Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(ii) if the transaction is the redemption of Fund Securities of a Public Fund or a Pooled Fund by a Managed Account:
(A) in respect of the In specie Transfer Relief as it applies to redemptions of a Public Fund or a Pooled fund:
(I) the Filer, as manager of the Public Fund, obtains the approval of the applicable IRC of the Public Fund in respect of an In-Specie Transfer in accordance with the terms of section 5.2 of NI 81-107; and
(II) the Filer, as manager of the Public Fund, and the applicable IRC, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-Specie Transfer;
(B) the Filer obtains the prior written consent of the client of the relevant Managed Account to the payment of redemption proceeds in the form of an In specie Transfer;
(C) the securities are acceptable to the Filer as portfolio manager of the Managed Account and consistent with the Managed Account's investment objectives;
(D) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security of the Public Fund or the Pooled Fund used to establish the redemption price;
(E) the holder of the Managed Account has not provided notice to terminate its Managed Account Agreement with the Filer;
(F) the account statement next prepared for the Managed Account will include a note describing the securities delivered to the Managed Account and the value assigned to such securities; and
(G) the Public Fund or the Pooled Fund keeps written records of all In specie Transfers during the financial year of the Public Fund or the Pooled Fund, reflecting details of the securities delivered by the Public Fund or the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(iii) the Filer does not receive any compensation in respect of any sale or redemption of Fund Securities of a Public Fund or a Pooled Fund and, in respect of any delivery of securities further to an In specie Transfer, the only charge paid by the Managed Account, if any, is the commission charged by the dealer executing the trade;
(iv) if the transaction is the purchase of Fund Securities of a Public Fund by a Pooled Fund:
(A) the Filer, as manager of the Public Fund, obtains the approval of the IRC of the Public Fund in respect of an In-Specie Transfer in accordance with the terms of section 5.2 of NI 81-107;
(B) the Filer, as manager of the Public Fund, and the applicable IRC, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In specie Transfer;
(C) the Public Fund would at the time of payment be permitted to purchase those securities;
(D) the securities are acceptable to the Filer as portfolio manager of the Public Fund, and consistent with the Public Fund's investment objectives;
(E) the value of the securities is at least equal to the issue price of the Fund Securities of the Public Fund for which they are payment, valued as if the securities were portfolio assets of that Public Fund; and
(F) each of the Public Fund and the Pooled Fund will keep written records of an In-Specie Transfer in a financial year of a Public Fund, reflecting details of the securities delivered to the Public Fund or the Pooled Fund, and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(v) if the transaction is the redemption of Fund Securities of a Public Fund by a Pooled Fund:
(A) the Filer, as manager of the Public Fund, obtains the approval of the IRC of the Public Fund in respect of the In specie Transfer in accordance with the terms of section 5.2 of NI 81-107;
(B) the Filer, as manager of the Public Fund, and the applicable IRC, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-Specie Transfer;
(C) the securities are acceptable to the portfolio adviser of the Pooled Fund, and consistent with the investment objective of the Pooled Fund;
(D) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Securities used to establish the redemption price of the Public Fund; and
(E) each of the Public Fund and the Pooled Fund will keep written records of an In-Specie Transfer in a financial year of the Public Fund or the Pooled Fund, reflecting details of the securities delivered by the Public Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(vi) if the transaction is the purchase of Fund Securities of a Pooled Fund by a Pooled Fund:
(A) the Pooled Fund would at the time of payment be permitted to purchase those securities;
(B) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund, and consistent with the Pooled Fund's investment objectives;
(C) the value of the securities is at least equal to the issue price of the Fund Securities of the Pooled Fund for which they are payment, valued as if the securities were portfolio assets of that Pooled Fund; and
(D) each Pooled Fund will keep written records of an In-Specie Transfer in a financial year of a Pooled Fund, reflecting details of the securities delivered to the Pooled Fund, and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(vii) if the transaction is the redemption of Fund Securities of a Pooled Fund by a Pooled Fund:
(A) the securities are acceptable to the portfolio adviser of the Pooled Fund, and consistent with the investment objective of the Pooled Fund;
(B) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Securities used to establish the redemption price of the Pooled Fund; and
(C) each Pooled Fund will keep written records of an In-Specie Transfer in a financial year of the Pooled Fund, reflecting details of the securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and
(viii) the Filer does not receive any compensation in respect of any sale or redemption of units of a Public Fund or a Pooled Fund and, in respect of any delivery of securities further to an In-Specie Transfer, the only charge paid by the Pooled Fund or the Public Fund is the commission charged by the dealer executing the trade.
This decision is effective on the Completion Date.
"Darren McKall"
Investment Funds Branch
Ontario Securities Commission