Securities Law & Instruments

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from requirement to deliver prospectus subject to sending or delivering a prescribed summary disclosure document to purchasers with trade confirmation when acting as agent of the purchaser -- Relief conditional on implementing alternative prospectus delivery requirement -- Relief consistent with the implementation of the Canadian Securities Administrators Point of Sale Disclosure Project, which contemplates rule-making to codify new alternative prospectus delivery requirement -- Securities Act (Ontario).

January 5, 2016

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 CANACCORD GENUITY CORP. (the Filer)

DECISION

Background

1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting exemptive relief from the Prospectus Delivery Requirement (as defined below) in connection with distributions of an ETF Security (as defined below) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the British Columbia 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 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 and evidences the decision of the securities regulatory authority or regulator in Ontario (the OSC).

Interpretation

2 Terms defined in National Instrument 14-101 Definitions, and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

"Authorized Dealer" means a registered dealer that has entered, or intends to enter, into an agreement with the manager of an ETF (an ETF Manager) authorizing the dealer to subscribe for, purchase and redeem Units from one or more ETFs on a continuous basis from time to time;

"Designated Broker" means a registered dealer that has entered, or intends to enter, into an agreement with an ETF Manager to perform certain duties in relation to the ETF, including posting a liquid two-way market for the trading of the ETF's listed securities on an exchange or another marketplace;

"ETF" means an open end mutual fund that has listed a class of securities on an exchange in Canada;

"ETF Facts" means a prescribed disclosure document in accordance with the regulations, in respect of one or more classes or series of ETF Securities being distributed under a prospectus;

"ETF Security" means a listed security of an ETF;

"Prospectus Delivery Requirement" means the requirement under the Legislation that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement of the Legislation applies, send or deliver to the purchaser or its agent, unless the dealer has previously done so, the latest prospectus and any amendment either before entering into an agreement of purchase and sale resulting from the order or subscription, or not later than midnight on the second business day after entering into that agreement;

"Prospectus Right of Rescission" means the right of action, given to a purchaser under the Legislation, for rescission or damages against a dealer, for failure of the dealer to send or deliver a prospectus to a purchaser of a security or its agent to whom a prospectus and any amendment was required to be sent or delivered but was not sent or delivered in compliance with the Prospectus Delivery Requirement; in Quebec, such a purchaser may apply to have the transaction rescinded or the price revised, at the purchaser's option, without prejudice to the purchaser's claim for damages; collectively, these rights are referred to as the "Prospectus Rights of Rescission";

"Right of Withdrawal" means the right, given to a purchaser under the Legislation, to withdraw from an agreement of purchase and sale for a security to which the Prospectus Delivery Requirement applies if the dealer from which the purchaser purchases the security receives written notice evidencing the intention of the purchaser not to be bound by the agreement within two business days of receipt of the latest prospectus and any amendment; in Québec, this right is called a right to rescind; collectively, these rights are referred to as the "Rights of Withdrawal"; and

"Trade Confirmation Right of Rescission" means the right, given to a purchaser of an ETF Security under the Legislation to rescind the purchase within 48 hours after receiving confirmation of the purchase.

Representations

3 This decision is based on the following facts represented by the Filer:

1. the Filer is registered as an investment dealer in each of the provinces and territories of Canada;

2. the head office of the Filer is located in Vancouver, British Columbia;

3. ETF Securities are, or will be, distributed on a continuous basis in one or more jurisdictions of Canada pursuant to a prospectus; ETF Securities are generally only subscribed for or purchased directly from an ETF by Authorized Dealers or Designated Brokers; investors are generally expected to purchase ETF Securities through dealers executing trades using the facilities of an exchange or another marketplace; ETF Securities may also be issued directly to ETF investors upon the reinvestment of distributions of income or capital gains;

4. commencing in early 2016, the Filer will be an Authorized Dealer and/or Designated Broker that intends to, from time to time, subscribe for and purchase newly issued ETF Securities (Creation Units) directly from one or more ETFs; the Filer will also purchase and sell ETF Securities of the same class as the Creation Units in the secondary market; Creation Units are generally commingled with ETF Securities purchased in the secondary market; as such, it will not be practicable for the Filer to determine whether a particular re-sale of ETF Securities involves Creation Units or ETF Securities purchased in the secondary market;

5. the Filer may also be engaged in purchasing and selling, in the secondary market, ETF Securities of ETFs for which it is not an Authorized Dealer or Designated Broker;

Prospectus Delivery Requirement

6. the first re-sale of a Creation Unit on an exchange or another marketplace in Canada will typically constitute a distribution of Creation Units under the Legislation and the Filer is subject to the Prospectus Delivery Requirement in connection with such re-sales; re-sales of ETF Securities purchased by the Filer in the secondary market, that are not Creation Units, would not ordinarily constitute a distribution of ETF Securities;

7. compliance with the Prospectus Delivery Requirement is not practicable in the circumstances of re-sales of Creation Units on an exchange or another marketplace by the Filer as the Filer will often not know the identity of a purchaser and will generally not know whether a sale involves Creation Units;

8. the OSC has granted relief to various ETF managers (ETF Managers) from the requirements to include an underwriter's certificate in jurisdictions of Canada where the applicable securities legislation contains such an obligation and to include a statement respecting purchasers' statutory rights of withdrawal and rescission in an ETF's prospectus (the ETF Relief); conditions of the ETF Relief include that an ETF must file a prescribed summary disclosure document with the applicable jurisdiction of Canada on the System for Electronic Document Analysis and Retrieval (the Summary Document);

9. under the Legislation, if the Prospectus Delivery Requirement applies in respect of a sale of Creation Units, the purchaser of the Creation Units has a Right of Withdrawal and a Prospectus Right of Rescission;

10. where the Exemption Sought is being relied upon by the Filer in respect of a re-sale of Creation Units, the Right of Withdrawal and Prospectus Right of Rescission will not be available to the purchaser of Creation Units because the Prospectus Delivery Requirement, which triggers these rights, will not apply; and;

11. the Filer, when acting for a purchaser of an ETF Security, is required under the Legislation to deliver a trade confirmation to the purchaser in connection with each trade of an ETF Security, unless the Filer is exempt from the requirement in respect of a particular trade; in applicable jurisdictions of Canada, purchasers of ETF Securities will continue to have the Trade Confirmation Right of Rescission as it is not affected by the grant of an exemption from the Prospectus Delivery Requirement.

Decision

4 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 Exemption Sought is granted, provided that the Filer is in compliance with the following conditions:

1. the Filer undertakes to the principal regulator that it will, unless the Filer has previously done so, send or deliver to each purchaser of an ETF Security who is a customer of the Filer, and to whom a trade confirmation is required under the Legislation to be sent or delivered by the Filer in connection with the purchase, the latest Summary Document filed in respect of the ETF Security not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after the purchase of the ETF Security;

2. the Filer provides to each ETF Manager of an ETF for which it is an Authorized Dealer or Designated Broker, an executed acknowledgement:

(a) acknowledging receipt of a copy of this decision;

(b) agreeing to send or deliver the Summary Document in accordance with this decision;

(c) undertaking that the Filer will attach or bind one ETF's Summary Document with another ETF's Summary Document only if the documents are being sent or delivered under this decision at the same time to an investor purchasing ETF Securities of each such ETF; and

(d) confirming that the Filer has in place written policies and procedures to ensure that there is compliance with the conditions of this decision;

3. the Filer provides to each ETF Manager of an ETF in whose ETF Securities it is generally engaged in purchasing and selling in the secondary market on behalf of its customers, but for which it is not an Authorized Dealer or Designated Broker, an executed acknowledgement:

(a) acknowledging receipt of a copy of this decision;

(b) agreeing to send or deliver the Summary Document in accordance with this decision;

(c) undertaking that the Filer will attach or bind one ETF's Summary Document with another ETF's Summary Document only if the documents are being sent or delivered under this decision at the same time to an investor purchasing ETF Securities of each such ETF; and

(d) confirming that the Filer has in place written policies and procedures to ensure that there is compliance with the conditions of this decision;

4. the Filer files with the principal regulator, to the attention of the Director, Corporate Finance, and with the OSC, to the attention of the Director, Investment Funds and Structured Products, on or before January 31st in each calendar year, commencing January 31, 2017, a certificate signed by an ultimate designated person certifying that, to the best of the knowledge of such person after making due inquiry, the Filer has complied with the terms and conditions of this decision, during the previous calendar year; and

5. if an ETF Manager files an ETF Facts instead of a Summary Document with respect to a class or series of ETF Securities, the latest ETF Facts filed in respect of such class or series of ETF Securities must be substituted for a Summary Document in order to satisfy the foregoing conditions with respect to any purchase of such class or series of ETF Securities that occurs after the date of the filing of such ETF Facts.

The decision will terminate on the latest of: (i) the coming into force of any legislation or rule dealing with the Exemption Sought or (ii) the end date of any applicable transition period for any legislation or rule dealing with the Exemption Sought.

"Peter J. Brady"
Director, Corporate Finance
British Columbia Securities Commission