Tangerine Investment Management Inc. (formerly known as ING Direct Asset Management Limited)

Headnote

National Policy 11-203 Process for Exemption Relief Applications in Multiple Jurisdictions -- relief from s. 4.1(1) of NI 81-102 for dealer-managed mutual funds to invest in distributions of debt securities for which dealer-manager acts as underwriter during distribution period or 60 day period following distribution, and s. 4.1(2) of NI 81-102, following the acquisition of the manager by another organization, to permit mutual funds to purchase securities of related entities on primary and secondary markets, subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.1(1), 4.1(2), 19.1.

July 31, 2014

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 TANGERINE INVESTMENT MANAGEMENT INC. (formerly known as ING DIRECT ASSET MANAGEMENT LIMITED) (the "Filer") AND IN THE MATTER OF THE FUNDS (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the existing and future mutual funds of which the Filer is the investment fund manager or the portfolio adviser or both and to which National Instrument 81-102 -- Mutual Funds ("NI 81-102") applies (each, a "Fund" and, collectively, the "Funds"), for a decision under the securities legislation of the Jurisdiction (the "Legislation") for relief (the "Requested Relief"):

(a) under section 19.1 of NI 81-102 from section 4.1(1) of NI 81-102 (the "Investment Prohibition") to permit the investment by the Funds in debt securities of an issuer during the period of the distribution (the "Distribution") or during the period of 60 days after the Distribution (the "60-Day Period"), notwithstanding the involvement of one of the Filer's associates or affiliates as an underwriter in the Distribution and

notwithstanding that the debt securities do not have a "designated rating" by a "designated rating organization" as contemplated by section 4.1(4.1) of NI 81-102; and

(b) under section 19.1 of NI 81-102 from section 4.1(2) of NI 81-102 (the "Requested Section 4.1(2) Relief") to permit the investment by the Funds in a class of securities of an issuer (a "Related Person") of which a partner, director, officer or employee of the dealer manager of the mutual fund, or a partner, director, officer or employee of an affiliate or associate of the dealer manager, is a partner, director or officer, notwithstanding that the Funds are dealer managed mutual funds and the partner, director, officer or employee

1) may participate in the formulation of investment decisions made on behalf of the dealer managed mutual fund;

2) may have access before implementation to information concerning investment decisions made on behalf of the dealer managed mutual fund; and

3) may influence, other than through research, statistical and other reports generally available to clients, the investment decisions made on behalf of the dealer managed mutual fund;

(the foregoing individuals being referred to as "Access Persons").

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 Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied on in Alberta, British Columbia, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Yukon Territory, Northwest Territories and Nunavut Territory (collectively, the "Non-Principal Jurisdictions").

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 Definitions, NI 81-102 and National Instrument 81-107 Independent Review Committee for Investment Funds ("NI 81-107") 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 in respect of the Filer and the Funds:

The Filer

1. The Filer is a corporation existing under the laws of Canada, and is registered as an adviser in the category of portfolio manager in the Jurisdiction. The Filer is also an investment fund manager within the meaning of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103") in the Jurisdiction, Québec and Newfoundland and Labrador.

2. On November 15, 2012, The Bank of Nova Scotia ("Scotiabank") completed the acquisition of ING Bank of Canada, the parent company of the Filer (the "Change of Control Transaction").

3. The Filer is or will be the manager or portfolio adviser of each of the Funds.

4. Neither of the Filer nor any of the Funds is in default of securities legislation in the Jurisdiction or in any of the Non-Principal Jurisdictions.

5. The Filer is currently an affiliate of Scotia Capital Inc. and the Filer, or an affiliate of the Filer, may become an affiliate or associate of additional dealers in the future (each of which is a "Related Dealer", and collectively the "Related Dealers"), any of which may act as an underwriter in a Distribution.

6. Scotiabank is a principal shareholder of a dealer. As a result, the Filer is or will be a "dealer manager" within the meaning of NI 81-102 ("Dealer Manager") in respect of the Funds. An affiliate of the Filer is also, or may also be, a Dealer Manager in respect of the Funds. Accordingly, each of the Funds is or will be a "dealer managed mutual fund" within the meaning of NI 81-102.

The Funds

7. Each of the Funds is, or will be, a mutual fund established under the laws of Ontario or one of the other Jurisdictions, and none of the Funds is or will be a "money market fund" as defined in NI 81-102.

8. The securities of each of the Funds are, or will be, qualified for distribution pursuant to a simplified prospectus, annual information form and a fund facts document that has been, or will be, prepared and filed in accordance with the securities legislation of each of the Jurisdictions. Each of the Funds is or will be a "dealer managed mutual fund" that is or will be a reporting issuer in one or more of the Jurisdiction and the Non-Principal Jurisdictions.

9. The investment strategies of each of the Funds permit, or will permit, it to invest in the securities purchased.

10. Each of the Funds has or will have an IRC appointed under NI 81-107. The IRC complies, or will comply, with the standard of care set out in section 3.9 of NI 81-107.

11. The Filer may wish to invest the assets of the Funds in exchange-traded and non-exchange-traded securities of Scotiabank or other Related Persons.

12. Section 6.2 of NI 81-107 provides an exemption from the mutual fund conflict of interest investment restrictions for purchases of Related Person securities if the purchase is made on an exchange. The Funds are permitted to invest in exchange-traded securities of Related Persons pursuant to section 6.2 of NI 81-107. However, section 6.2 of NI 81-107 does not provide an exemption from section 4.1(2) of NI 81-102 and it does not provide an exemption for purchases of non-exchange-traded debt securities.

13. A director, officer, or employee of the Filer who is an Access Person may be a director or officer of Scotiabank or another affiliate and a director, officer or employee of Scotiabank or another affiliate who is an Access Person may be a director or officer of other issuers, which will result in the Filer and such other issuers being Related Persons.

14. One or more directors of Scotiabank may be a director or officer of other related entities. The directors and officers of such other issuers may be Access Persons as a result of the structure of the investment management activities of the Filer, Scotiabank and its related entities, which will result in such other issuers being Related Persons.

15. Related Persons of the Filer are issuers of both exchange-traded and non-exchange-traded securities.

16. Non-exchange-traded securities that are debt securities issued by Related Persons, in addition to securities that are listed and traded on an exchange, may be appropriate investments for the Funds.

17. Directors, officers and employees of the Filer or of an affiliate or associate of the Filer may be directors, officers or employees of a Related Person who do not meet the exceptions in section 4.1(2) of NI 81-102 such that the Requested Section 4.1(2) Relief is required by the Filer to permit the Funds to invest in securities of a Related Person.

18. he Filer is seeking the Requested Section 4.1(2) Relief to permit the Funds to purchase and hold non-exchange traded securities that are debt securities, other than asset backed commercial paper securities, with a term to maturity of 365 days or more, issued by a Related Person in a primary distribution or treasury offering ("Primary Offering") or in the secondary market.

19. The Funds require Requested Section 4.1(2) Relief because:

a. There is currently and has been for several years a very limited supply of highly rated corporate debt;

b. Diversification is reduced to the extent that a Fund is limited with respect to investment opportunities; and

c. To the extent that a Fund is trying to track or outperform a benchmark it is important for the Fund to be able to purchase any securities included in the benchmark. Debt securities of Related Persons of the Filer are included in most of the Canadian debt indices.

20. Each non-exchange-traded security purchased by a Fund pursuant to the Requested Section 4.1(2) Relief will be a debt security issued by a Related Person that has been given, and continues to have at the time of purchase, a "designated rating" by a "designated rating organization" as such terms are defined in NI 81-102.

21. If a Fund's purchase of non-exchange-traded securities issued by Related Persons involves an inter-fund trade with another fund to which NI 81-107 applies, the provisions of section 6.1(2) of NI 81-107 will apply to such transaction.

22. The Filer has determined that it would be in the best interests of the Funds to receive the Requested Section 4.1(2) Relief.

23. As portfolio adviser to a Fund, the Filer, or any affiliate of the Filer that acts as the portfolio adviser to a Fund and is a Dealer Manager, may wish to cause a Fund to invest in debt securities that do not have a "designated rating" by a "designated rating organization" as such terms are defined in National Instrument.44-101 -- Short Form Prospectus Distributions ("NI 44-101"), and where a Related Dealer is underwriting the offering of such debt securities.

24. The Funds require the Requested Relief from the Investment Prohibition because:

a. there is a limited supply of debt securities issued by issuers other than the federal or a provincial government ("Non-Government Debt Securities");

b. frequently, the only source of new issues of Non-Government Debt Securities will be offerings that are, in whole or in part, underwritten by a Related Dealer; and

c. Non-Government Debt Securities that the Filers wish to purchase for the Funds may not have a "designated rating" by a "designated rating organization".

25. The Filer considers that a Fund managed or advised by it may be prejudiced if it cannot purchase, during a Distribution or in the 60-Day Period, Non-Government Debt Securities that are consistent with the Fund's investment objective. Forgoing participation in these investment opportunities may be a significant opportunity cost for the relevant Funds, as they would be denied timely access to these securities purely as a result of the coincidental participation of a Related Dealer in the transaction and the lack of a designated rating of the securities distributed.

26. The Filer operates independently from the Related Dealers with regard to their respective investment decisions. Information and influence barriers ensure that a Fund has no involvement in a Related Dealer's function as underwriter. Moreover, transactions executed in reliance on the Requested Relief represent the business judgment of the applicable portfolio adviser uninfluenced by considerations other than the best interests of the applicable Fund. This principle is reflected in the policies and procedures that have been implemented and approved by the IRC for dealing with related parties.

27. The details of a Distribution and a Related Dealer's involvement as an underwriter in such Distribution will not be known to a Filer sufficiently long enough in advance to be practical to make an application for relief on a case-by-case basis. Furthermore, a case-by-case approach is not economical or otherwise efficient for the Filer or the Funds.

28. Where any proposed investment is also subject to a restriction arising from the applicability of section 111 of the Securities Act (Ontario), or paragraph 13.5(2)(b) of NI 31-103, the Filer and the Funds shall rely on relief granted to 1832 Asset Management L.P. and its affiliates dated October 29, 2013 in order to proceed with the investment, or shall not proceed with making the investment if that proposed investment would not meet all the requirements under the orders referenced in this section.

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 Requested Relief is granted on the following conditions:

A. In respect of the relief from the Investment Prohibition:

i) at the time of each purchase, the purchase is consistent with, or is necessary to meet, the investment objective of the Fund and represents the business judgment of the portfolio adviser of the Fund uninfluenced by considerations other than the best interests of the Fund or in fact is in the best interests of the Fund;

ii) the manager of the Fund complies with section 5.1 of NI 81-107 and the manager and IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the investment in the securities;

iii) at the time of the purchase, the IRC of the Fund has approved the transaction in accordance with section 5.2(2) of NI 81-107;

iv) if the Non-Government Debt Securities are acquired during the Distribution,

a. at least one underwriter acting as underwriter in the Distribution is not a Related Dealer,

b. at least one purchaser who is independent and arm's length to the Fund(s) and the Related Dealers must purchase at least 5% of the securities distributed under the Distribution,

c. the price paid for the securities by a Fund in the Distribution shall be no higher than the lowest price paid by any of the arm's length purchasers who participate in the Distribution, and

d. a Fund and any related Funds for which the Filer or its affiliate or associate acts as manager and/or portfolio adviser can collectively acquire no more than 20% of the securities distributed under the Distribution in which a Related Dealer acts as underwriter;

v) if the Non-Government Debt Securities are acquired during the 60-Day Period,

a. the ask price of the securities is readily available as provided in Commentary 7 to section 6.1 of NI 81-107,

b. the price paid for the securities by a Fund is not higher than the available ask price of the security, and

c. the purchase is subject to market integrity requirements as defined in NI 81-107;

vi) the Non-Government Debt Securities acquired by the Funds pursuant to the Requested Relief cannot be asset-backed commercial paper; and

vii) no later than the time a Fund files its annual financial statements, the manager of the Fund will file the particulars of each investment made by the Fund pursuant to the Requested Relief during its most recently completed financial year.

B. In respect of the Requested Section 4.1(2) Relief is granted to permit purchases of Related Person securities, provided that:

i) the purchase or holding is consistent with, or is necessary to meet, the investment objective of the Fund;

ii) the IRC of the Fund has approved the transaction in accordance with section 5.2(2) of NI 81-107;

iii) the Filer complies with 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 for any standing instructions the IRC provides in connection with the transactions;

iv) if the purchases are made in the secondary market:

a. if the security is an exchange-traded security, the purchase is made on an exchange on which the securities of the issuer are listed and traded;

b. if the security is not an exchange-traded security,

I. the price payable for the security is not more than the ask price of the security;

II. the ask price of the security is determined as follows:

a. if the purchase occurs on a marketplace, the price payable is determined in accordance with the requirements of that marketplace; or

b. if the purchase does not occur on a marketplace,

i. the Fund may pay the price for the security at which an independent, arm's length seller is willing to sell the security, or

ii. if the Fund does not purchase the security from an independent, arm's length seller, consistent with Commentary 7 of section 6.1 of NI 81-107, the Fund must pay the price quoted publicly by an independent marketplace or obtain, immediately before the purchase, at least one quote from an independent, arm's-length purchaser or seller and not pay more than that quote;

c. the transaction complies with any applicable "market integrity requirements" as defined in NI 81-107;

v) if the purchases are made in a Primary Offering:

a. the size of the Primary Offering is at least $100 million;

b. at least two purchasers who are independent, arm's-length purchasers, which may include "independent underwriters" within the meaning of National Instrument 33-105, Underwriting Conflicts, collectively purchase at least 20% of the Primary Offering;

c. no Fund shall participate in the Primary Offering if following its purchase the Fund would have more than 5% of its net assets invested in non-exchange traded debt securities of the Related Person;

d. no Fund shall participate in the Primary Offering if following its purchase the Fund together with related Funds will hold more than 20% of the securities issued in the Primary Offering;

e. the price paid for the securities by a Fund in the Primary Offering shall be no higher than the lowest price paid by any of the arm's length purchasers who participate in the Primary Offering;

vi) no later than the time the Fund files its annual financial statements, the Filer files with the securities regulatory authority or regulator the particulars of any such investments; and

vii) the reporting obligation in section 4.5 of NI 81-107 applies to the Requested Section 4.1(2) Relief granted in this decision and the IRC of the Fund complies with section 4.5 of NI 81-107 in connection with any instance that it becomes aware that the Filer did not comply with any of the conditions of this decision.

"Darren McKall"

Manager, Investment Funds Branch

Ontario Securities Commission