National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from the Securities Act to permit a dealer who uses FFxpressTM, provided by InvestorPOS, 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, 147.
November 5, 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
TD WATERHOUSE CANADA INC.
IN THE MATTER OF
The principal regulator in the Jurisdiction (the Principal Regulator) has received an application from TDWCI and InvestorPOS (together with TDWCI, the Filers) for a decision under the securities legislation of the Principal Regulator (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 (Delivery Requirement), in respect of an order or subscription to purchase securities of a Fund (as defined below) (the Exemption Sought).
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 Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Nunavut and Yukon (together with the Jurisdiction, the Passport Jurisdictions).
Terms defined in National Instrument 14-101 Definitions, and MI 11-102 have the same meanings if used in this decision (the Decision), unless otherwise defined.
Right of Withdrawal means the right, given to a purchaser under the Legislation, to withdraw from a purchase order for a security of a mutual fund if the dealer from whom 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 the right to rescind. 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 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.
This Decision is based on the following facts represented by the Filers:
1. InvestorPOS is a corporation incorporated under the laws of Ontario with its head office located in Ontario.
2. InvestorPOS provides technology solutions to investment fund managers and dealers who distribute mutual fund securities to facilitate the composition, production and delivery of investor communications and disclosure documents. The InvestorPOS service offering, known as FFxpressTM, effects delivery of Fund Facts in accordance with the Delivery Requirement, to investors on behalf of registered dealers, including TDWCI (the Dealers) who have entered into, or may wish to enter into, contracts with InvestorPOS.
3. TDWCI is registered as an investment dealer in each of the provinces and territories of Canada and is a member of the Investment Industry Regulatory Organization of Canada. Its head office is located in Ontario.
4. TDWCI is not in default of securities legislation in any Passport Jurisdiction.
5. TDWCI will deliver the Fund Facts electronically through FFxpressTM.
6. Each Dealer is, or will be, registered as a dealer in one or more of the Passport Jurisdictions. A Dealer is, or will be, a member of either: (i) the Investment Industry Regulatory Organization of Canada, or (ii) the Mutual Fund Dealers Association of Canada, or their successors.
7. The Dealers distribute a range of mutual funds (each, a Fund, or collectively, the Funds) which are offered for sale on a continuous basis, in one or more of the Passport Jurisdictions, pursuant to a simplified prospectus (each, a Prospectus) prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101).
8. Pursuant to the Delivery Requirement, the Dealers have the obligation to send or deliver a Prospectus to a purchaser of a security of a Fund within two days of the purchase of the security.
Point of Sale Project
9. Pursuant to the Canadian Securities Administrators' (the CSA) point of sale disclosure project for Funds (the Project), the CSA has determined that it is desirable to create a summary disclosure document called the fund facts document (defined above as Fund Facts).
10. CSA Staff Notice 81-319 Status Report on the Implementation of Point of Sale Disclosure for Mutual Funds dated June 18, 2010 outlines the CSA's decision to implement the Project in stages.
11. Stage 1 of the Project became effective on January 1, 2011 by amending NI 81-101 and related instruments mandating a Fund to prepare and file a Fund Facts on SEDAR for each relevant class or series of the Fund, and having the Fund Facts posted to the Fund's or its manager's website and delivered to any person upon request, at no cost.
12. Stage 2 of the Project requires delivery of the Fund Facts instead of the Prospectus to satisfy the Delivery Requirement. On June 13, 2013, the CSA published final amendments to implement Stage 2 of the Project (the Stage 2 Amendments). The Stage 2 Amendments contain a transition period requiring dealers to send or deliver the Fund Facts instead of the Prospectus to satisfy the Delivery Requirement as of June 13, 2014 (the Effective Date).
13. CSA Staff Notice 81-321 Early Use of the Fund Facts to Satisfy Prospectus Delivery Requirements dated February 24, 2011 (CSA Notice 81-321) encourages the filing of applications for exemptive relief to allow the early use of the Fund Facts to satisfy the Delivery Requirement.
Early Use of Fund Facts
14. The Filers have determined that it would be desirable to apply for exemptive relief consistent with the Stage 2 Amendments prior to the Effective Date and, accordingly, require an exemption to use the Fund Facts to satisfy the Delivery Requirement, as contemplated by CSA Notice 81-321.
15. The Dealers have entered into, or may wish to enter into, contracts with InvestorPOS to use FFxpressTM for the electronic and/or paper delivery of the Fund Facts to satisfy the Delivery Requirement.
16. FFxpressTM, a proprietary technology of InvestorPOS, is an online repository that catalogues and maintains the Fund Facts which have been filed with securities regulators. The Fund Facts are obtained through a feed from the System for Electronic Document Analysis and Retrieval ("SEDAR"). FFxpressTM enables electronic and paper delivery of the most recently filed Fund Facts corresponding to a client's purchase of Funds.
17. FFxpressTM offers the Dealers a record of the date, time and manner of delivery (i.e. electronically or by mail) of the Fund Facts, as well as a record of the version of the Fund Facts delivered, enabling reporting for compliance reporting and record-keeping for audit purposes.
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 Exemption Sought is granted provided that:
1. A Fund Facts that is being sent or delivered in accordance with this Decision will not be attached to, or bound with another Fund Facts or any other document except in the manner contemplated and permitted in the Stage 2 Amendments.
2. Any Dealer relying on the ability to send or deliver Fund Facts in lieu of the Prospectus grants to an investor purchasing the securities of a Fund a right equivalent to the Rights of Withdrawal upon the sending or delivery of the Fund Facts. 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.
3. The clients of a Dealer relying on this Decision will receive notice (the Notice), at or before the time they receive the Fund Facts, indicating that they will have rights equivalent to the Rights of Withdrawal and Rights of Rescission for the sending or delivery of the Fund Facts, which includes wording substantially similar to the following:
The Fund Facts for the securities you purchased 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.
4. Prior to a Dealer relying on the ability to send or deliver Fund Facts in lieu of the Prospectus, InvestorPOS or an agent of InvestorPOS 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 of the matters referred to in paragraph (5) below, to be signed and returned by the Dealer to InvestorPOS or its agent.
5. A Dealer seeking to rely on this Decision to send or deliver the Fund Facts in lieu of the Prospectus, will, prior to doing so:
(a) acknowledge receipt of a copy of this Decision providing the Exemption Sought;
(b) appoint InvestorPOS as its service provider for the delivery, in electronic and/or paper form, of the Fund Facts through the FFxpressTM service as described in this Decision;
(c) confirm that it will provide a right equivalent to the Rights of Withdrawal attached to the sending or delivery of the Fund Facts;
(d) instruct InvestorPOS to provide the Notice referred to in paragraph (3) above to the Dealer's clients in a document other than the Fund Facts, but delivered contemporaneously with the Fund Facts;
(e) confirm that clients of the Dealer will continue to be able to request a copy of the Prospectus at no cost by contacting the Dealer;
(f) confirm that the Dealer has in place written policies and procedures to ensure that there is compliance with the conditions of this Decision;
(g) consent to InvestorPOS providing to staff of the Principal Regulator the name of the Dealer, and identifying the Dealer as having entered into an agreement with InvestorPOS and providing such information regarding the Dealer's reliance on the Exemption Sought as staff of the Principal Regulator may request, including providing staff of the Principal Regulator with a copy of the acknowledgement and agreement referred to in subparagraph (h); and
(h) deliver to InvestorPOS a signed acknowledgement and agreement binding the Dealer to the foregoing.
6. In the event a Fund Facts is not sent or delivered in accordance with this Decision, a Dealer, will send or deliver a Prospectus and the Rights of Rescission will continue to apply to the failure to send or deliver the Prospectus.
7. InvestorPOS will maintain records of all Dealers who have entered into agreements on the terms specified herein and will notify staff of the Principal Regulator within 10 business days of the end of each month of the names of such Dealers and provide such other information regarding the Dealer's reliance on this Decision as staff of the Principal Regulator may request, including providing staff of the Principal Regulator with a copy of the acknowledgement and agreement referred to in paragraph (5) hereof.
8. The Exemption Sought terminates on the Effective Date.