National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval for abridgment of securityholder notice period to 34 days -- filers did not mail written notice in time, notice period abridged to achieve a fair and reasonable result.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 5.8(2), 19.1.
July 22, 2015
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 FIRST ASSET CAN-FINANCIALS COVERED CALL ETF; FIRST ASSET CAN-60 COVERED CALL ETF; FIRST ASSET ACTIVE CANADIAN REIT ETF; FIRST ASSET ALL CANADA BOND BARBELL INDEX ETF; FIRST ASSET GOVERNMENT BOND BARBELL INDEX ETF; FIRST ASSET CORPORATE BOND BARBELL INDEX ETF AND FIRST ASSET MORNINGSTAR EMERGING MARKETS COMPOSITE BOND INDEX ETF (the Funds) AND IN THE MATTER OF FIRST ASSET INVESTMENT MANAGEMENT INC. (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") for exemptive relief (the "Abridgement Relief") for the Funds which are exchange traded funds managed by the Filer in respect of which the representations set out below are applicable, from section 5.8(2) of National Instrument 81-102 -- Investment Funds ("NI 81-102").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(i) the Ontario Securities Commission is the principal regulator for this application; and
(ii) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport 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, Yukon, Northwest Territories and Nunavut (the "Jurisdictions").
Terms defined in NI 81-102, National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision unless otherwise defined.
This decision is based on the following facts represented by the Filer.
1. The Filer is a corporation incorporated under the laws of the Jurisdiction.
2. The registered office of the Filer is located at 95 Wellington Street West, Suite 1400, Toronto, Ontario.
3. The Filer is registered as an adviser for securities in the category of portfolio manager, as an adviser for commodities in the category of commodity trading manager, as a dealer in the category of exempt market dealer and an investment fund manager, under the Securities Act (Ontario).
4. The investment fund manager of each Fund is the Filer.
5. Neither the Filer nor the Funds are in default of securities legislation in the Jurisdiction or in any of the Jurisdictions.
6. Each Fund (a) is an exchange traded fund established under the laws of Ontario; (b) is a reporting issuer under the securities laws of each of the provinces and territories of Canada; (c) has issued securities qualified for distribution in all provinces and territories of Canada pursuant to a prospectus prepared and filed in accordance with the securities legislation of Ontario; and (d) has securities that are listed and trade on the Toronto Stock Exchange (TSX).
7. Due to their current small size, and in recognition of the existence of suitable alternative funds managed by the Filer, the Filer intends to terminate the Funds on or about August 31, 2015.
8. On June 30, 2015, in accordance with the terms of the declaration of trust of each Fund, the Filer provided notice of its intention to terminate the Funds on or about August 31, 2015 by way of a press release (the "Press Release"), which press release was filed on SEDAR and posted on the Filer's website.
9. On July 2, 2015 a material change report (the "Material Change Report") relating to the Filer's intention to terminate the Funds on or about August 31, 2015 was filed on SEDAR.
10. On July 9, 2015 amendments to the Funds' current prospectus and related ETF summary documents (collectively the "Prospectus Amendments") of each Fund were filed on SEDAR reflecting the Filer's intention to terminate the Funds on or about August 31, 2015 and such prospectus and related ETF summary documents were receipted on July 14, 2015.
11. In preparing for the termination of the Funds, the Filer understood section 5.8(2) of NI 81-102 as not requiring written notice delivered to existing securityholders by way of mailing but rather notice in accordance with the Declaration of Trust (which requires a press release only).
12. Notice regarding the termination of the Funds will be sent to each securityholder of the Funds as soon as possible, and at least 34 days prior to the date of termination of each Fund (scheduled for August 31, 2015).
13. If the Filer is required to delay the date of termination of each Fund, it will result in unnecessary confusion for securityholders of the Funds given that the Press Release, the Material Change Report, and the receipted Prospectus Amendments each indicated that the Funds will be terminated on August 31, 2015.
14. If the Filer is required to delay the termination date of the Funds, it will result in unnecessary operational expenses for the Funds and their securityholders.
15. It is the Filers' view that it would not be prejudicial to the securityholders of the Fund to abridge the notice period required under section 5.8(2) of NI 81-102 from 60 days to not less than 34 days for the following reasons:
(a) the securityholders of the Fund will be sufficiently aware of the termination of the Funds as securityholders in listed securities ordinarily obtain material information about their holdings through press releases that are linked to the Fund's ticker symbol, and through visiting the Filer's or other financial websites; and
(b) a delay of the date of termination of the Funds beyond August 31, 2015 will result in unnecessary operational expenses and unnecessary confusion for securityholders of the Funds.
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 Abridgement Relief is granted provided that the Notice is given to securityholders of the Fund at least 34 days before the Closing Date