Securities Law & Instruments

Headnote

 

National Policy 11-203 – relief granted from sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) of National Instrument 81-102 Investment Funds to permit a mutual fund, that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in their sales communications performance data for the period when the fund was not a reporting issuer – relief also granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure for the purposes of the relief requested from Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document, to permit the mutual fund to include in its fund facts for certain series, the past performance data for the period when the fund was not a reporting issuer.

 

National Policy 11-203 – relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Form 81-106F1, Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1, to permit a mutual fund that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in annual and interim management reports of fund performance the financial highlights and past performance of the fund that are derived from the fund’s annual financial statements that pertain to time periods when the fund was not a reporting issuer.

 

Applicable Legislative Provisions

 

National Instrument 81-102 Mutual Funds, ss. 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), 15.8(3)(a.1), 19.1.

National Instrument 81-101 Investment Fund Prospectus Disclosure, s. 2.1.

National Instrument 81-106 Mutual Fund Continuous Disclosure, ss. 4.4 and 17.1.

Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, Part B, Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2).

Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, Part C, Items 3(1) and 4.

Form 81-101F3 Contents of Fund Facts Document, Part I, Item 5.

 

August 3, 2017

 

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

CALDWELL INVESTMENT MANAGEMENT LTD.

(the Filer)

 

AND

 

IN THE MATTER OF

CALDWELL CANADIAN VALUE MOMENTUM FUND

(the Fund)

 

DECISION

 

Background

 

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Series O units, Series F units and Series I units of the Fund (each, a Series of Units and collectively, the Units) from:

 

(a)           Section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and

 

(b)           Items 3.1(7), 4.1(1) in respect of the requirement to comply with section 15.3(2) of National Instrument 81-102 Investment Funds (NI 81-102), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Fund to include in its annual and interim management reports of fund performance the past performance data of the Fund notwithstanding that:

 

(i)            such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus; and

 

(ii)           the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,

 

(collectively, the Requested Relief).

 

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

 

(a)           the Ontario Securities Commission is the principal regulator for the 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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.

 

Interpretation

 

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

 

Representations

 

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

 

1.             The Fund is an open-end unit trust established under the laws of the Province of Ontario and governed pursuant to an Amended and Restated Declaration of Trust dated as of March 28, 2014 (the Inception Date)

 

2.             The Filer is the investment fund manager and the trustee of the Funds. The head office of the Filer is located in Ontario.

 

3.             The Filer is registered as a portfolio manager and investment fund manager in Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan.

 

4.             Since the Inception Date, the Fund was distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 Prospectus Exemptions (NI 45-106) in all provinces and territories of Canada, except for Quebec.

 

5.             A simplified prospectus, annual information form and fund facts (the Disclosure Documents) has been filed to permit the Fund to distribute Series O Units, Series F Units and Series I Units to the public and become a reporting issuer under the securities legislation of each province and territory of Canada, other than Québec. Upon the issuance of the receipt for the Disclosure Documents, the Fund becomes subject to the requirements of NI 81-102 and NI 81-106 that apply only to investment funds that are reporting issuers.

 

6.             The Filer and the Funds are not in default of securities legislation in any province or territory of Canada.

 

7.             Since its Inception Date, as a "mutual fund in Ontario", the Fund has prepared and sent audited annual and unaudited interim financial statements to all holders of its securities in accordance with NI 81-106.

 

8.             Since its Inception Date, the Fund has complied with the investment restrictions and practices contained in NI 81-102, including not using leverage in the management of its portfolio.

 

9              The Fund will be managed substantially similarly as it was prior to becoming a reporting issuer. As a result of the Fund becoming a reporting issuer:


i.              the Fund's investment objectives have not changed;

 

ii.             the fee structure of Fund Units has not changed;

 

iii.            the day-to-day administration of the Fund has not changed, other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which would have impacted the portfolio management of the Fund) and to provide additional features, such as a monthly investment plan, that are available to investors of the mutual funds managed by the Filer, as described in the Disclosure Documents; and

 

iv.            the management expense ratio of the Units of the Fund has not increased by more than 0.10% for any Series of Units, which the Filer considers an immaterial amount.

 

10.          As a reporting issuer, the Fund will be required under NI 81-106 to prepare and send annual and interim management reports of fund performance (individually, an MRFP and collectively, the MRFPs) to all holders of its securities on an annual and interim basis.

 

11.          Without the Requested Relief, the MRFP of the Fund cannot include financial highlights and performance data of the Fund that relate to a period prior to its becoming a reporting issuer.

 

12.          The Filer also proposes to present the performance data of each Series of Units of the Fund for the time period since its inception in sales communications and fund facts of the Fund. The Filer has filed a separate application for exemptive relief from certain provisions of NI 81-102 and Form 81-101F3 Contents of Fund Facts Document to permit the Fund, with respect to each of its Series of Units, to include its performance data since its inception in sales communications and fund facts (the NI 81-102 and NI 81-101 Relief).

 

13.          The performance data and other financial data of the Fund for the time period before it became a reporting issuer is significant and meaningful information for existing and prospective investors of each Series of Units of the Fund.

 

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 Requested Relief is granted provided that:

 

(a)           any MRFP that includes performance data of a Series of Units of the Fund relating to a period prior to when the Fund was a reporting issuer:

 

(i)            discloses that the Fund was not a reporting issuer during such period;

 

(ii)           discloses that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer;

 

(iii)          discloses that the financial statements of the Fund for such period are posted on the Fund's website and are available to investors upon request; and

 

(iv)          discloses performance data of the Series of Units of the Fund as applicable for the 10, 5, 3 and one year periods as well as since its inception until the since inception data includes a 10 year period.

 

(b)           the Filer posts the financial statements of the Fund for the past 10 years, or since the Fund's inception, whichever period is lesser, on the Fund's website and makes those financial statements available to investors upon request; and

 

(c)           the Fund prepares sales communications and fund facts in accordance with the NI 81-102 and NI 81-101 Relief.

 

“Darren McKall”

Manager, Investment Funds and Structured Products

Ontario Securities Commission