Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of a mutual fund -- change of manager is not detrimental to unitholders or contrary to the public interest.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.5(3), 5.7.

November 21, 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
BRIGATA CAPITAL MANAGEMENT INC.
(Brigata Capital)

AND

COUNSEL PORTFOLIO SERVICES INC.
(CPSI, and together with Brigata Capital, the Filers)

AND

BRIGATA DIVERSIFIED PORTFOLIO
(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval of the proposed change of manager of the Fund from Brigata Capital to CPSI (theChange of Manager) under section 5.5(1)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Approval 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 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 of Canada.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. Brigata Capital is a corporation incorporated under the Canada Business Corporations Act with its head office in Ottawa, Ontario.

2. Brigata Capital is the manager and trustee of the Fund. Brigata Capital is registered as an investment fund manager under the securities legislation of each of Ontario, Québec and Newfoundland and Labrador.

3. Independent Planning Group Inc. (IPG) is the holder of all of the Class A common shares, representing 74.77% of the voting shares, of Brigata Capital. All of the Class B common shares of Brigata Capital are held by minority shareholders (the Minority Shareholders), representing the remaining 25.23% of the voting shares of Brigata Capital.

4. Brigata Capital is not in default of any requirements under applicable securities legislation.

5. The Fund is an open-ended mutual fund trust established under a master declaration of trust dated as of January 2, 2008, as amended.

6. The portfolio manager of the Fund is, and will continue to be after the Change of Manager, Heward Investment Management Inc.

7. The units of the Fund are currently offered for sale in each of the provinces of Canada under a simplified prospectus, annual information form and fund facts, each dated June 21, 2013, as amended.

8. The Fund is a reporting issuer in each of the provinces of Canada and is not in default of any requirements under applicable securities legislation.

9. IPC Portfolio Services Inc. (IPCPSI) is a corporation incorporated under the Business Corporations Act (Ontario) with its head office in Mississauga, Ontario. IPCPSI has entered into agreements to purchase 100% of the outstanding Class A and Class B common shares of Brigata Capital from IPG and the Minority Shareholders. The transaction (the Transaction) is scheduled to close on or about December 2, 2013. The Transaction will result in a change of control of Brigata Capital.

10. Shortly after completion of the Transaction, Brigata Capital will be amalgamated with CPSI, a wholly owned subsidiary of IPCPSI (the Amalgamation). The Transaction and subsequent Amalgamation will result in an effective change of manager of the Fund, with the amalgamated corporation (the Amalgamated Corporation), which will continue under the name Counsel Portfolio Services Inc., becoming the trustee and manager of the Fund, effective on or about December 2, 2013. The Transaction and subsequent Amalgamation is subject to the receipt of all necessary regulatory and unitholder approvals, securities registrations and the satisfaction or waiver of all other conditions to the proposed Transaction.

11. The Filers have considered the views of staff of the OSC published in OSC Staff Notice 81-710 Approvals for Change in Control of a Mutual Fund Manager and Change of a Mutual Fund Manager under National Instrument 81-102 Mutual Funds. The Filers are seeking approval of the securities regulatory authorities of the Transaction and subsequent Amalgamation in a single application characterized as a change of manager under section 5.5(1)(a) of NI 81-102.

12. In accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, a press release announcing the Change of Manager was issued on August 20, 2013 and subsequently filed on SEDAR. In addition, a material change report and an amendment to the simplified prospectus, annual information form and fund facts for the Fund were filed on August 30, 2013 in connection with the Change of Manager.

13. As required by National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107), an independent review committee (the IRC) was appointed for the Fund. Brigata Capital presented the potential conflict of interest matters related to the Change of Manager to the IRC for a recommendation on October 7, 2013. The IRC reviewed the potential conflict of interest matters related to the Change of Manager and provided its positive recommendation for the Change of Manager, after determining that the Change of Manager, if implemented, would achieve a fair and reasonable result for the Fund.

14. The approval of unitholders of the Fund is required under section 5.1(b) of NI 81-102. A special meeting of the unitholders of the Fund was held on November 5, 2013 for unitholders to consider the Change of Manager (the Meeting). The notice of Meeting and the management information circular in respect of the Meeting (the Circular) were mailed to unitholders of the Fund and copies thereof were filed on SEDAR in accordance with applicable securities legislation. The Circular contained sufficient information regarding the business, management and operations of CPSI, including details of the funds it manages and its officers and board of directors, and all information necessary to allow unitholders to make an informed decision about the Change of Manager and to vote on the Change of Manager. All other information and documents necessary to comply with applicable proxy solicitation requirements of securities legislation for the Meeting were mailed to unitholders of the Fund. Unitholders of the Fund approved the Change of Manager at the Meeting.

15. CPSI is a corporation incorporated under the Business Corporations Act (Ontario) with its head office in Mississauga, Ontario.

16. CPSI is registered as a portfolio manager and investment fund manager in Ontario, and as an investment fund manager in Newfoundland and Labrador.

17. If the Change of Manager is approved, CPSI will, prior to closing of the Transaction, obtain any additional registrations necessary in order to continue offering the Fund in each of the provinces of Canada, including becoming registered in the category of investment fund manager in Québec.

18. CPSI is not in default of any requirements under applicable securities legislation.

19. CPSI is currently the manager and trustee of 36 mutual funds, which are offered for distribution in each of the provinces and territories of Canada, except Québec (the Counsel Funds). As at September 30, 2013, CPSI's mutual fund assets under management were approximately $3.1 billion. CPSI is a member of the IGM Financial Inc. group of companies, which had over $126 billion in assets under administration as of September 30, 2013.

20. It is expected that the directors and officers of CPSI will be the directors and officers of the Amalgamated Corporation.

21. The individuals that will be principally responsible for the management of the Fund as directors and officers of the Amalgamated Corporation have the requisite integrity and experience, as required under section 5.7(1)(a)(v) of NI 81-102.

22. As at the completion of the Transaction and the Amalgamation, the current members of the IRC of the Fund will cease to act as members pursuant to section 3.10(1)(b) of NI 81-107 and it is anticipated that the existing members of the IRC for the Counsel Funds will constitute the IRC of the Fund upon the implementation of the Change of Manager.

23. Currently, the Fund pays all of its operating expenses directly. It is contemplated that, subject to completion of the Transaction and following the expiry of the applicable notice period, the Fund will amend its fee structure such that it will pay a fixed administration fee to the manager in exchange for the manager paying certain operating expenses currently paid by the Fund (the Fee Change). In accordance with section 5.3(1)(b) of NI 81-102, unitholders of the Fund have been given at least 60 days' notice of the Fee Change before the date of implementation of the Fee Change, which is expected to be on or about January 1, 2014. On October 7, 2013, the IRC of the Fund reviewed the potential conflict of interest matters relating to the Fee Change and provided its positive recommendation for the Fee Change after considering that the Fee Change achieves a fair and reasonable result for the Fund.

24. In the event that regulatory approval or unitholder approval for the Change of Manager is not obtained and the parties to the Transaction nevertheless expect to complete the Transaction, the Fee Change will not be implemented and it is expected that the Fund will be terminated. Accordingly, unitholders have been provided with 60 days' notice of such termination which, if implemented, will be effected on or about December 17, 2013.

25. Other than as required to reflect the Transaction, the Amalgamation and the Fee Change, CPSI does not currently contemplate any changes to the material contracts of the Fund.

26. No material changes to the Fund, other than those described above, are contemplated by the Filers at this time.

27. No immediate material changes to the day-to-day operations of the manager of the Fund are expected at this time.

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 the Approval Sought is granted.

"Darren McKall"
Manager, Investment Funds Branch
Ontario Securities Commission