National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief granted to exchange-traded funds for initial and continuous distribution of units -- Relief from take-over bid requirements in connection with normal course purchases of units on the Toronto Stock Exchange or another marketplace in Canada.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 94-99.1, 147.
July 14, 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 INVESCO CANADA LTD. (the Filer) AND THE EXISTING EXCHANGE-TRADED FUNDS MANAGED BY THE FILER (the Existing Funds)
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Existing Funds and such other exchange-traded mutual funds as the Filer, or an affiliate of the Filer, may manage in the future (the Future Funds, and together with the Existing Funds, the Funds and individually, a Fund) for a decision under the securities legislation of the principal regulator (the Legislation) that:
(a) revokes the Prior Relief (as defined below); and
(b) exempts the Filer and each Fund from the requirements of the Legislation related to take-over bids, including the requirement to file a report of a take-over bid and to pay the accompanying fee with each applicable jurisdiction in respect of take-over bids (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 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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions (NI 14-101) and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
"Authorized Dealer" means a registered broker or dealer that has entered into a continuous distribution dealer agreement with the Filer, on behalf of one or more Funds, and that subscribes for and purchases Units from those Funds.
"Designated Broker" means a registered dealer that has entered into a designated broker agreement with the Filer, on behalf of one or more Funds, to perform certain duties in relation to those Funds.
"Take-over Bid Requirements" means the requirements of the Legislation relating to take-over bids, including the requirement to file a report of a take-over bid and to pay the accompanying fee, in each of the Jurisdictions.
"Unitholders" means beneficial or registered holders of Units of a Fund, as applicable.
"Units" means the redeemable, transferable units of a Fund.
This decision is based on the following facts represented by the Filer:
The Prior Relief
1. Pursuant to the September 19, 2008 decision In the Matter of Invesco Trimark Ltd. (the 2008 Decision), the Filer obtained relief that exempted exchange-traded funds managed by the Filer that issue index participation units as defined in National Instrument 81-102 Investment Funds (NI 81-102) from the Take-over Bid Requirements (Take-over Bid Relief for IPUs), among other requirements.
2. Pursuant to the October 23, 2012 decision In the Matter of Invesco Canada Ltd. (the 2012 Decision), the Filer obtained relief that exempted PowerShares Tactical Bond ETF (PTB ETF) from the Take-over Bid Requirements, among other requirements.
3. The 2008 Decision and 2012 Decision, collectively, are referred to as the Prior Relief.
4. As of the date of this decision, the Filer will no longer rely on the Prior Relief.
The Filer and the Funds
5. The Filer is a corporation amalgamated under the laws of Ontario and its head office is located in Toronto, Ontario.
6. Each Fund is, or will be, a mutual fund governed by the laws of the Province of Ontario and a reporting issuer under the laws of some or all of the Jurisdictions.
7. Each Fund is, or will be, subject to NI 81-102, subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities.
8. Each Fund is, or will be, in continuous distribution. The Units of each Fund are, or will be, listed on the TSX or another marketplace in Canada.
9. The Filer has filed, or will file, a long form prospectus in accordance with National Instrument 41-101 General Prospectus Requirements on behalf of the Funds, subject to any exemptions that have been or may be granted by the applicable securities regulatory authorities.
10. The Filer is a registered investment fund manager, portfolio manager, commodity trading manager, exempt market dealer and mutual fund dealer in Ontario. The Filer, or an affiliate of the Filer, is or will be the trustee and the manager of each of the Funds, and is or will be responsible for the administration of each of the Funds.
11. Units of a Fund are, or will be, distributed on a continuous basis in one or more of the Jurisdictions under a prospectus. Units may generally only be subscribed for or purchased directly from a Fund by Designated Brokers or Authorized Dealers (Creation Units). Designated Brokers or Authorized Dealers subscribe for Creation Units for the purpose of facilitating investor purchases of Units on the TSX or another marketplace in Canada.
12. Designated Brokers perform certain other functions, which include standing in the market with a bid and ask price for Units of a Fund for the purposes of maintaining liquidity for the Units.
13. Upon notice given by the Filer from time to time, and in any event, not more than once quarterly, a Designated Broker may be contractually required to subscribe for Units of a Fund for cash in a dollar amount not to exceed a specified percentage of the net asset value of the Units, or such other amount established by the Filer and disclosed in the prospectus of the Funds, next determined following delivery of the notice of subscription to that Designated Broker.
14. The net asset value per Unit of the Funds will be calculated and published daily on the website of the Funds.
15. Although Units of the Funds trade or will trade on the TSX and the acquisition of Units can therefore be subject to the Take-over Bid Requirements:
(a) it is difficult for purchasers of Units of the Funds to monitor compliance with Take-over Bid Requirements because the number of outstanding Units is always in flux as a result of the ongoing issuance and redemption of Units by the Funds; and
(b) the way in which Units of the Funds are priced deters anyone from either seeking to acquire control, or offering to pay a control premium, for outstanding Units because Unit pricing for a Fund is dependent upon the performance of the portfolio of that Fund as a whole.
16. The application of the Take-over Bid Requirements to the Funds would have an adverse impact on Unit liquidity because they could cause Designated Brokers and other large Unitholders to cease trading Units once prescribed take-over bid thresholds are reached.
17. In the Take-over Bid Relief for IPUs, the Filer was previously granted relief from the Take-over Bid Requirements for exchange-traded funds that are managed by the Filer, or an affiliate of the Filer, and that issue index participation units as defined in NI 81-102. As PTB ETF does not issue index participation units, the Filer was unable to rely on the Take-over Bid Relief for IPUs, and PTB ETF was granted similar relief in the 2012 Decision.
18. The Filer wishes to combine the Prior Relief into one decision, so that all Funds may have relief from the Take-over Bid Requirements. The Filer therefore requests that the Prior Relief be revoked and replaced with this 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 Prior Relief is revoked and that the Exemption Sought is granted.