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.
December 8, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS AND IN THE MATTER OF BNP PARIBAS GLOBAL EQUITY EXPOSURE FUND AND IN THE MATTER OF BNP PARIBAS INVESTMENT PARTNERS CANADA LTD. AND IA CLARINGTON INVESTMENTS INC. (the Filers)
The securities regulatory authority or regulator in the Jurisdiction (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for approval under section 5.5(1)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) of the change of manager of BNP Paribas Global Equity Exposure Fund (the Fund) from BNP Paribas Investment Partners Canada Ltd. (BNP Canada) to IA Clarington Investments Inc. (IA Clarington) (the Approval Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) the Ontario Securities Commission is the principal regulator for this Application;
(b) 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Nunavut, and Yukon; and
(c) the decision is the decision of the principal regulator.
Terms defined in National Instrument 14-101 Definitions or in MI 11-102 have the same meaning if used in this decision unless they are otherwise defined.
This decision is based on the following facts represented by the Filers:
BNP Canada and the Fund
1. BNP Canada is a corporation incorporated under the laws of Canada, which adopted its current name in April 2010. The head office and principal place of business of BNP Canada is located in Toronto. Ontario. BNP Canada is not a reporting issuer.
2. BNP Canada is registered as an investment fund manager (manager) and adviser in the category of portfolio manager in British Columbia, Alberta, Ontario, Quebec and New Brunswick. It is also registered as a commodity trading manager in Ontario and as an exempt market dealer in British Columbia, Alberta, Ontario, and Quebec.
3. BNP Canada is the manager and portfolio manager of the Fund.
4. The Fund is a trust established under the laws of Ontario and BNP Canada is the trustee. The Fund is a reporting issuer.
5. Units of the Fund are offered under a simplified prospectus, annual information form and fund facts documents dated April 13, 2015.
6. The only investors in the Fund are IA Clarington Target Click 2020 Fund, IA Clarington Target Click 2025 Fund and IA Clarington Target Click 2030 Fund (collectively, the Target Click Funds). As at October 30, 2015, the net asset value of the Fund had declined to approximately $22 million.
7. Neither BNP Canada nor the Fund is in default of the securities legislation in any of the jurisdictions of Canada.
8. IA Clarington is a corporation existing under the laws of Canada. The head office of IA Clarington is located in Quebec City, Quebec. IA Clarington is a subsidiary of Industrial Alliance Insurance and Financial Services Inc., a life and health insurance company. IA Clarington is not a reporting issuer.
9. As at October 30, 2015 IA Clarington managed approximately $14 billion in mutual fund assets offered by prospectus. It also acts as trustee, portfolio manager and registrar and transfer agent for its funds and makes use of third party advisers for certain of its funds.
10. IA Clarington is registered as an investment fund manager with the securities regulatory authorities in Ontario, Quebec and Newfoundland and Labrador, and as an adviser in the category of portfolio manager in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador.
11. IA Clarington is currently the manager of three groups of mutual funds, consisting of the IA Clarington Funds, the IA Clarington New Funds, and the Target Click Funds. Each of such mutual funds is a reporting issuer in each of the jurisdictions of Canada.
12. IA Clarington possesses all registrations under the legislation and National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to allow it to manage the Fund after the closing of the Transaction (as described below).
13. IA Clarington is not in default of the securities legislation in any of the jurisdictions of Canada.
The Proposed Transaction
14. BNP Canada determined to terminate the Fund as of December 31, 2015 and provided 60 days prior notice to IA Clarington on behalf of the Target Click Funds regarding such termination. Given the reliance of the Target Click Funds on the Fund, IA Clarington requested BNP Canada to allow IA Clarington to take over the management of the Fund rather than terminating the Fund.
15. Pursuant to an agreement between the Filers, BNP Canada agreed to assign, and IA Clarington agreed to assume, on or before December 31, 2015, and subject to receiving all necessary approvals, the obligations of BNP Canada as trustee and manager under the master management agreement, as trustee under the declaration of trust establishing the Fund, as manager on behalf of the Fund under each of the custody agreements, fund administration services agreement, security agreement and subscription agreement (the Transaction).
16. IA Clarington has an experienced IRC in place for all of its funds and upon completion of the change of manager, the members of the IRC will serve as the IRC for the Fund.
17. IA Clarington is not considering any merger of the Fund.
18. IA Clarington will change the name of the Fund in order to exclude BNP Paribas from the name and replace it with IA Clarington; otherwise, except as discussed above, no changes to the Fund are currently contemplated by IA Clarington. IA Clarington may, however, seek to implement further changes to the Fund following the change of manager if it concludes that such changes would be in the interests of investors; such changes could include changes to the custodian or auditor.
19. IA Clarington has advised the independent review committee (IRC) of the Target Click Funds of the proposed Transaction and has obtained its recommendation that the proposed Transaction achieves a fair and reasonable result for the Target Click Funds.
20. The approval of the Fund's investors is required under section 5.1(1)(b) of NI 81-102 before the Transaction may be completed. As a positive recommendation of the IRC of the Target Click Funds has been given, IA Clarington on behalf of the Target Click Funds will approve the change of manager of the Fund by written resolution.
21. An amendment to the offering documents of the Fund will be made after all necessary approvals have been obtained and before the closing of the Transaction regarding the change in manager and ancillary items, such as proposed name change and change of sub-advisor.
The Change of Manager
22. The experience and integrity of each of the members of the IA Clarington management team is apparent by their education and years of experience in the investment industry
23. IA Clarington has the appropriate personnel, policies and procedures and systems in place to assume the management of the Fund on closing of the Transaction. At least initially, IA Clarington intends to continue the appointment of THEAM SAS as sub-advisor to the Fund. IA Clarington intends to appoint Industrial Alliance Investment Management Inc. as sub-advisor to the Fund.
24. All material agreements regarding the administration of the Fund will either be amended and restated by IA Clarington and the relevant service provider to replace BNP Paribas with IA Clarington and refer to the change in name of the Fund or IA Clarington will enter into new agreements as required.
25. The closing of the Transaction will not adversely affect IA Clarington's financial position or its ability to fulfill its regulatory obligations.
26. The closing of the Transaction is not expected to have any material impact on the business, operations or affairs of the Fund or the unitholders of the Fund.
27. The Fund will not bear any of the costs and expenses associated with the change of manager. Such costs will be borne by the Filers. These costs may include legal and accounting fees, and regulatory fees
28. The Approval Sought will not be detrimental to the protection of investors in the Fund or prejudicial to the public interest.
29. If the Transaction is not closed by December 31, 2015, BNP Canada will terminate the Fund. A termination of the Fund will cause undue hardship to the Target Click Funds and be detrimental to their investors.
The Decision Maker 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 Maker under the Legislation is that the Approval Sought is granted.