Under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a firm registered in any jurisdiction of Canada must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual is registered as a dealing, advising or associate advising representative of another firm registered in any jurisdiction of Canada. A registered firm wants to permit an individual to act as a dealing, advising or associate advising representative where the individual is registered as a dealing, advising or associate advising representative of another registered firm -- The registered firms are affiliated entities and have valid business reasons for the individuals to be registered with both firms. The individuals will have sufficient time to adequately serve both firms. The firms have policies and procedures in place to manage potential conflicts of interest. The firms are able to deal with any potential conflicts, including by supervising how the individual will deal with these conflicts. The registered firms are exempted from the prohibition.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 13.4, 15.1.
National Instrument 81-107 Independent Review Committee for Investment Funds.
October 30, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF STEADYHAND INVESTMENT MANAGEMENT LTD. (Steadyhand) AND STEADYHAND INVESTMENT FUNDS INC. (SIFI and together with Steadyhand, the Filers)
1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the restriction in paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), pursuant to section 15.1 of NI 31-103, to permit an individual (the Representative) to be registered as both an advising representative of Steadyhand and a dealing representative of SIFI (Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission (BCSC) is the principal regulator for this application; and
(b) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
2 Terms defined in National Instrument 14-101 Definitions, Multilateral Instrument 11-102 Passport System and NI 31-103 have the same meaning if used in this decision, unless otherwise defined.
3 This decision is based on the following facts represented by the Filers:
1. The Filers are both corporations governed by the Canada Business Corporations Act.
2. Steadyhand is registered in the categories of investment fund manager and portfolio manager with the securities regulatory authorities in British Columbia and Ontario. SIFI is an affiliate of Steadyhand and is registered as a mutual fund dealer with the securities regulatory authorities in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario and is a member of the Mutual Fund Dealers Association (MFDA).
3. the principal regulator of the Filers is the BCSC because the Filers' head offices are located in British Columbia.
4. The Filers are not in default of securities legislation in any jurisdiction of Canada.
5. Steadyhand is the manager of the Steadyhand Savings Fund, Steadyhand Income Fund, Steadyhand Founders Fund, Steadyhand Equity Fund, Steadyhand Global Equity Fund and Steadyhand Small-Cap Equity Fund (together, the Steadyhand Funds), a family of mutual funds distributed pursuant to a simplified prospectus. Steadyhand is the portfolio manager for the Steadyhand Founders Fund, a fund of funds which invests using the other five Steadyhand Funds (all managed by sub-advisors). Steadyhand is registered as a portfolio manager under securities laws to facilitate acting as an investment fund manager, and has no intention to provide discretionary client services.
6. SIFI is relying on approval granted by the MFDA, subject to certain terms and conditions, for the Representative to be registered as a dealing representative of SIFI.
7. SIFT is the principal distributor of the Steadyhand Funds.
8. The Representative is currently registered as an advising representative (portfolio manager) of Steadyhand in British Columbia and Ontario, and he intends to also be registered as a dealing representative (mutual fund dealer) of SIFI in British Columbia and Ontario.
9. The Representative, in his role as advising representative of Steadyhand, only conducts portfolio management duties for the Steadyhand Founders Fund. The Representative also assists with the oversight of the sub-advisors for the other Steadyhand Funds. The Representative does not advise any other clients, including members of the public, in this role. The Representative's portfolio management duties are almost exclusively research and analysis, and the only instances he might engage in any manner of trading or securities-related business is when he determines the asset mix of the Steadyhand Founders Fund and reviews and approves funding allocations of this fund (the Representative does not make any trades on behalf of the Steadyhand Funds).
10. The Representative, in his role as dealing representative of SIFI, will not engage in any discretionary trading or otherwise have any discretionary authority in his capacity as dealing representative of SIFI. The Representative's primary duties will include client contact (including answering questions, seeking feedback, and following up on unresolved issues); maintaining an intimate knowledge of SIFI's products, services and research; and providing back-up support when other team members are absent.
11. The majority of the Representative's time will be spent in his capacity as an advising representative of Steadyhand. The Filers do not expect that the dual registration of the representative will create significant additional work for the Representative, nor will it interfere with his responsibilities to either Filer.
12. The Representative will have sufficient time and resources to adequately serve Steadyhand and SIFI and their respective clients.
13. The Representative will be subject to supervision by, and the applicable compliance requirements of, both Filers. Existing compliance and supervisory structures will apply depending on which regulatory entity's behalf the Representative is acting.
14. There are valid business reasons for the dual registration of the Representative at each of SIFI and Steadyhand. The dual registration will create operational efficiencies and optimization of resources for the two affiliated entities.
15. The Representative will act in the best interests of the Steadyhand Founders Fund and his SIFI clients and deal fairly, honestly and in good faith with them.
16. In order to minimize any client confusion, the relationship between the Filers, and the dual registration of the Representative, will be disclosed in writing, and prior to providing registerable services, to the Steadyhand Founders Fund and clients of SIFI with whom the Representative communicates or otherwise provides services to. Specifically, in respect of any investment funds, the written disclosure will be made in each applicable fund's simplified prospectus, and in respect of SIFI, the written disclosure will be in SIFI's account opening documentation.
17. There will be minimal potential for conflicts of interest or client confusion because the Representative (in his role as advising representative of Steadyhand) and Steadyhand itself (as a portfolio manager) will only advise the Steadyhand Funds, and will not advise any members of the public. In addition, the Filers do not share any clients and accordingly, any client confusion related to the dual registration of the Representative will be minimized.
18. The Representative will clearly understand which Filer he is acting on behalf of when he is conducting registerable activities on behalf of a Filer.
19. Steadyhand and SIFI are affiliated and accordingly, the dual registration of the Representative will not give rise to the conflicts of interest present in a similar arrangement involving unrelated, arm's length firms. The interests of the Filers are aligned and therefore the potential for conflicts of interest is remote. To the extent any conflicts of interest arise as a result of the dual registration of the Representative, the Filers have in place compliance and supervisory policies and procedures to monitor the conduct of the Representative and deal appropriately with these conflicts. The Representative is subject to these policies and procedures.
20. Each of the Filers are subject to the restrictions and requirements in Part 13 of NI 31-103 regarding conflict of interest matters, except as follows. Section 13.4 of NI 31-103 does not apply to Steadyhand as the investment fund manager to certain of its investment funds that are subject to the requirements of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) because these funds must instead comply with the requirements in NI 81-107 relating to conflict of interest matters, inter-fund trades and transactions in securities of related issuers.
22. Steadyhand, while the Representative is a dealing representative of SIFI, even though the Filers are affiliates.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Relief Sought is granted.