Securities Law & Instruments

Headnote

 

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Exemption from subsection 5.1(a) of NI 81-105 to allow investment fund managers to pay to a participating dealer direct costs incurred by the participating dealer relating to a sales communication, investor conference or investor seminar prepared or presented by the participating dealer which has a primary purpose of providing educational information on financial planning matters.

 

Applicable Legislative Provisions

 

National Instrument 81-105 Mutual Fund Sales Practices, ss. 5.1(a) and 9.1.

 

August 14, 2018

 

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

CIBC ASSET MANAGEMENT INC. AND

CANADIAN IMPERIAL BANK OF COMMERCE

(the Filers)

 

DECISION

 

Background

 

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for relief from subsection 5.1(a) of National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) to permit the Filers to pay to a participating dealer direct costs incurred by the participating dealer relating to a sales communication, investor conference or investor seminar prepared or presented by the participating dealer (collectively, the Cooperative Marketing Initiatives and each a Cooperative Marketing Initiative) if the primary purpose of the Cooperative Marketing Initiative is to promote or provide educational information concerning investing in securities and investment, retirement, tax and estate planning (collectively, Financial Planning) matters (the Exemption Sought).

 

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


a)            the Ontario Securities Commission is the principal regulator for this application; and

 

b)            each of the Filers 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 each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

 

Interpretation

 

Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 81-105 have the same meaning if used in this decision, unless otherwise defined.

 

Representations

 

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

 

1.             CIBC Asset Management Inc. (CAMI) is a corporation incorporated under the federal laws of Canada and its head office is located in Toronto, Ontario.

 

2.             CAMI is registered as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer under the securities legislation of each of the Jurisdictions, as an investment fund manager in British Columbia, Newfoundland and Labrador, Ontario and Québec, and as a commodity trading manager in Ontario.

 

3.             Canadian Imperial Bank of Commerce (CIBC) is a Schedule 1 Canadian chartered bank governed by the Bank Act (Canada) with its head office in Toronto, Ontario.

 

4.             CIBC is registered as an investment fund manager in Newfoundland and Labrador and Québec.

 

5.             The Filers act and may in the future act as investment fund managers in respect of various mutual funds (the Funds) governed by National Instrument 81-102 Investment Funds, the securities of which are qualified for distribution to investors in each of the Jurisdictions pursuant to various simplified prospectuses, as they may be amended or renewed from time to time.

 

6.             Securities of the Funds are distributed by participating dealers in the Jurisdictions.

 

7.             Each of the Filers is a “member of the organization” (as that term is defined in NI 81-105) of the Funds, as the Filers are the managers of the Funds.

 

8.             Each of the Filers complies with NI 81-105, including Part 5 of NI 81-105, in respect of its marketing and educational practices.

 

9.             The Filers are not in default of securities legislation in any of the Jurisdictions.

 

10.          Under subsection 5.1(a) of NI 81-105, the Filers are permitted to pay direct costs incurred by a participating dealer where the purpose of the Cooperative Marketing Initiative is to promote or provide educational information about the Funds, the mutual fund family of which the Funds are members, or mutual funds generally.

 

11.          Subsection 5.1(a) of NI 81-105 prohibits the Filers from paying direct costs incurred by a participating dealer relating to a Cooperative Marketing Initiative where the primary purpose is to provide educational information about Financial Planning matters. Consequently, the Filers are not permitted to sponsor the cost of sales communications, investor seminars or investor conferences prepared or presented by participating dealers where the main topics discussed include investment planning, retirement planning, tax planning and estate planning, each of which are aspects of Financial Planning.

 

12.          The Filers and their affiliates have expertise in Financial Planning matters or may retain others with such expertise from time to time.

 

13.          In addition to the topics currently permitted under subsection 5.1(a) of NI 81-105, the Filers wish to sponsor Cooperative Marketing Initiatives where the primary purpose of the Cooperative Marketing Initiatives is to provide educational information concerning Financial Planning matters. The Filers will comply with subsections 5.1(b) to (e) of NI 81-105 in respect of such Cooperative Marketing Initiatives it sponsors.

 

14.          Mutual funds typically form only a portion of an investor’s portfolio and should be considered in the broader context of the investor’s Financial Planning. Allowing the Filers to sponsor Cooperative Marketing Initiatives on Financial Planning matters may benefit investors as it may facilitate and potentially increase investors' access to educational information on such matters, which may in turn better equip them to make financial decisions that involve mutual funds.

 

15.          Under sections 5.2 and 5.5 of NI 81-105, the Filers are permitted to sponsor the costs incurred by participating dealers in attending or organizing and presenting at conferences where the primary purpose is the provision of educational information on, among other things, financial planning.

 

16.          Specifically, under subsection 5.2(a) of NI 81-105, the Filers are permitted to provide a non-monetary benefit to a representative of a participating dealer by allowing him or her to attend a conference or seminar organized and presented by the Filers where the primary purpose is the provision of educational information about, among other things, financial planning, investing in securities or mutual fund industry matters.

 

17.          Similarly, under subsection 5.5(a) of NI 81-105, the Filers are permitted to pay to a participating dealer part of the direct costs the participating dealer incurs in organizing or presenting at a conference or seminar that is not an investor conference or investor seminar referred to in section 5.1 of NI 81-105, where the primary purpose is the provision of educational information about, among other things, financial planning, investing in securities or mutual fund industry matters.

 

18.          The Filers will not require participating dealers to sell any of their Funds or other financial products to investors as a condition of the Filers’ sponsorship of a Cooperative Marketing Initiative.

 

19.          The Filers will pay for their sponsorship of a Cooperative Marketing Initiative out of their normal sources of revenue. Accordingly, the sponsorship cost will not be borne by the Funds.

 

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 Exemption Sought is granted, provided that in respect of a Cooperative Marketing Initiative whose primary purpose is to provide educational information concerning Financial Planning matters:

 

a)            the Filers otherwise comply with the requirements of subsections 5.1(b) through (e) of NI 81-105;

 

b)            the Filers do not require any participating dealer to sell any of their Funds or other financial products to investors;

 

c)             other than as permitted by NI 81-105, the Filers do not provide participating dealers and their representatives with any financial or other incentives for recommending any of their Funds to investors;

 

d)            the materials presented in a Cooperative Marketing Initiative concerning Financial Planning matters contain only general educational information about such matters;

 

e)            the Filers prepare or approve the content of the general educational information about Financial Planning matters presented in a Cooperative Marketing Initiative they each sponsor, and select or approve an appropriately-qualified speaker for each presentation about such matters delivered in a Cooperative Marketing Initiative;

 

f)             any general educational information about Financial Planning matters presented in a Cooperative Marketing Initiative contains an express statement that the content presented is for information purposes only, and is not providing advice to the attendees of the investor conference or investor seminar or the recipients of the sales communication, as applicable; and

 

g)            any general educational information about Financial Planning matters presented in a Cooperative Marketing Initiative contains an indication of the types of professionals who may generally be qualified to provide advice on the subject matter of the information presented.

 

“Robert P. Hutchison”

Commissioner

 

“Peter Currie”

Commissioner