Securities Law & Instruments


Headnote

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 mutual funds to include in annual and interim management reports of fund performance the financial highlights and past performance of the funds that are derived from the funds’ annual financial statements that pertain to time periods when the funds were not a reporting issuer.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 4.4. 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) and Part C, Items 3(1) and 4.
September 20, 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
GUARDIAN CAPITAL LP
(the Filer)

AND

IN THE MATTER OF
GUARDIAN CANADIAN EQUITY SELECT FUND,
GUARDIAN CANADIAN FOCUSED EQUITY FUND,
GUARDIAN EMERGING MARKETS EQUITY FUND,
GUARDIAN INTERNATIONAL EQUITY SELECT FUND AND
GUARDIAN U.S. EQUITY SELECT FUND
(each a Fund, and collectively, the Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Funds for a decision under the securities legislation of the regulator (the Legislation) exempting the series I units of the Funds (Series I 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 Sections 15.3(2) and 15.3(4)(c) 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 each Fund to include in its annual and interim management reports of fund performance (individually, an MRFP and collectively, the MRFPs) 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)           in the case of Guardian Canadian Equity Select Fund, Guardian International Equity Select Fund and Guardian U.S. Equity Select Fund, the Funds have not distributed their 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 Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan and Yukon.

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.             Each Fund is an open-ended mutual fund trust created under the laws of the Province of Ontario on the date of formation shown in the table below:

Fund Name

Date of Formation

Inception Date (Series I Units)

Guardian Canadian Equity Select Fund

August 29, 2016

August 31, 2016

Guardian Canadian Focused Equity Fund

December 15, 2015

December 15, 2015

Guardian Emerging Markets Equity Fund

June 30, 2014

June 30, 2014

Guardian International Equity Select Fund

August 29, 2016

August 31, 2016

Guardian U.S. Equity Select Fund

August 29, 2016

August 31, 2016


2.             The inception date for a series of a Fund (individually, an Inception Date, and collectively, the Inception Dates) is the day, on or after the date of formation, that units of the series of the Fund were first available for sale.

3.             The Funds are governed by an amended and restated master declaration of trust dated March 14, 2011, as amended.

4.             The Filer is the investment fund manager of the Funds. The head office of the Filer is located in Ontario.

5.             The Filer is registered as a portfolio manager and exempt market dealer in each province of Canada and as an investment fund manager in each of Ontario, Québec and Newfoundland and Labrador. The Filer is also registered as a commodity trading counsel and commodity trading manager in Ontario.

6.             Since the respective Inception Dates until April 22, 2016, Series I Units of Guardian Canadian Focused Equity Fund and Guardian Emerging Markets Equity Fund were distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 Prospectus Exemptions (NI 45-106) in each Jurisdiction. Since the respective Inception Dates until April 20, 2017, Series I Units of Guardian Canadian Equity Select Fund, Guardian International Equity Select Fund and Guardian U.S. Equity Select Fund were distributed to investors on a prospectus-exempt basis in accordance with NI 45-106 in each Jurisdiction. During such period of time, the Funds were distributed to accredited investors, the majority of which investors were managed account investors.

7.             Since the issuance of the receipt for the simplified prospectus, annual information form and fund facts (the Disclosure Documents):

i.              in the case of each of Guardian Canadian Focused Equity Fund and Guardian Emerging Markets Equity Fund on April 22, 2016, series W units and the Series I Units were qualified for distribution to the public and such Funds became reporting issuers under the securities legislation of each province and territory of Canada, other than Québec (collectively, the Jurisdictions); at that time, these Funds commenced offering series W units to the public pursuant to the Disclosure Documents; although Series I Units of these Funds were also qualified for distribution to the public at that time, the Filer has only recently decided to more actively market Series I Units of Guardian Canadian Focused Equity Fund and Guardian Emerging Markets Equity Fund to the public; and

ii.             in the case of each of Guardian Canadian Equity Select Fund, Guardian International Equity Select Fund and Guardian U.S. Equity Select Fund on April 20, 2017, such Funds became reporting issuers under the securities legislation of the Jurisdictions and have distributed Series I Units to the public.

8.             Since becoming reporting issuers, the Funds have been available for distribution to any investor that enters into an agreement, or whose investment advisor enters into an agreement, with the Filer or one of the Filer’s affiliates. The majority of these investors are managed account investors. In addition, each Fund became subject to the requirements of NI 81-102 and NI 81-106 that apply only to investment funds that are reporting issuers.

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

10.          Since its Inception Date, as a “mutual fund in Ontario”, each Fund has complied with its obligation to prepare and send audited annual and unaudited interim financial statements to all holders of its securities in accordance with NI 81-106.

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

12.          Each Fund has been managed substantially similarly after it became a reporting issuer as it was prior to becoming a reporting issuer. As a result of each Fund becoming a reporting issuer:

i.              the Fund’s investment objectives have not changed other than minor changes, such as regarding the change in tax status of certain investments;

ii.             Series I unitholders of the Fund continue to pay a negotiated investment advisory fee;

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 that are available to investors of mutual funds managed by the Filer, as described in the Disclosure Documents; and

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

13.          As a reporting issuer, each Fund is required under NI 81-106 to prepare and send MRFPs to all holders of its securities on an annual and interim basis.

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

15.          The Filer has been granted exemptive relief similar to the Requested Relief, which permits the MRFPs of Series I Units of each mutual fund, not including the Funds, for which the Filer acts as investment fund manager to include financial highlights and performance data that relate to a period prior to the mutual fund becoming a reporting issuer, such relief having been sought in respect of all mutual funds that were offered on a private placement basis prior to becoming reporting issuers.

16.          The Filer also proposes to present the performance data of Series I Units of each Fund for the time period since its Inception Date in sales communications and fund facts of each 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 each Fund, with respect to its Series I Units, to include its performance data since its Inception Date in sales communications and fund facts (the NI 81-102 and NI 81-101 Relief).

17.          The performance data and other financial data of each Fund for the time period before it became a reporting issuer is significant and meaningful information for existing and prospective investors of Series I 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 Series I Units of each Fund relating to a period prior to when each Fund became a reporting issuer discloses:

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

(ii)           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)          that the Filer obtained exemptive relief to permit the disclosure of performance data of Series I Units of the Fund relating to a period prior to when the Fund was a reporting issuer; and

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

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

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

“Vera Nunes”
Investment Funds and Structured Products Branch
Ontario Securities Commission