Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from the prospectus requirement in securities legislation for issuer that operates a church community program for the purpose of making and administering mortgage loans and funding these mortgage loans by issuing and distributing fixed income securities (Notes).

The Issuer is exempted from the prospectus requirement in securities legislation in connection with the distribution of Notes -- Issuer cannot comply with not for profit issuer prospectus exemption in s. 2.38 of National Instrument 45-106 Prospectus Exemptions (NI 45-106) -- the issuer requires relief to permit certain modifications to the offering memorandum (OM) prospectus exemption in s. 2.9 of NI 45-106 -- advice provided for purposes of subparagraph 2.9(2.1)(b)(iii) of NI 45-106 will be from a restricted dealer, with individuals acting on its behalf that are subject to the same proficiency requirements as a dealing representative of an exempt market dealer -- relief needed to permit a restricted dealer to comply with subsection 2.9(5.2) of NI 45-106 for purposes of distributing OM marketing materials which have been approved in writing by the issuer, and other conditions of the OM prospectus exemption in s. 2.9 of NI 45-106 which require the use of prescribed forms to the extent that such forms currently do not refer to the category of "restricted dealer" in reference to registered firms -- relief needed because certain not for profit affiliates of the issuer may be required to sign an OM certificate under subsection 2.9(9) of NI 45-106 which may put not for profit/charitable assets at risk if used to settle potential claims for misrepresentation in the offering memorandum -- This decision expires in five years.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, ss. 53(1), 74(1) and 144.

Multilateral Instrument 11-102 Passport System, s. 4.7(1).

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

National Instrument 45-102 Resale of Securities, s. 2.5.

National Instrument 45-106 Prospectus Exemptions, ss. 1.1, 2.3, 2.9, 2.38, 6.1, 6.3, 6.4, 6.5, Form 45-106F1, Form 45-106F2, Form 45-106F4, Form 45-106F16, and Form 45-106F17.

Applicable Decision

In the Matter of Pentecostal Financial Services Group Inc. dated June 21, 2007.

August 30, 2019

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Principal Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF PENTECOSTAL FINANCIAL SERVICES GROUP INC. (PFSG or the Issuer), COVENANT SECURITIES CORP.(formerly Pentecostal Securities Corp., CSC or the Dealer), and THE PENTECOSTAL ASSEMBLIES OF CANADA (the PAOC, and collectively with PFSG and CSC, the Filers)

DECISION

Background

For approximately 60 years, one or more of the Filers have operated the Note Program (defined below) in the PAOC Community (defined below) for the purpose of making and administering mortgage loans for charitable purposes (e.g., building and renovating churches and bible colleges) and have funded these mortgage loans by issuing and distributing unsecured fixed rate term promissory notes (each a Note and, collectively, Notes) to members of the Pentecostal community.

The Filers had historically operated the Note Program (defined below) under exemptions from the prospectus and registration requirements available under securities legislation. By decision dated June 21, 2007 (the 2007 Decision), PFSG was granted exemption from the dealer registration requirement and prospectus requirement of applicable securities legislation by certain of the Canadian securities regulatory authorities on terms set out in the 2007 Decision. The 2007 Decision expired on June 21, 2017.

In the 10 years following the 2007 Decision, there were regulatory changes to the registration regime and expansion of the prospectus exempt market, which changed the securities regulatory landscape for offering Notes under the Note Program. Accordingly, it was appropriate for the Filers to transition their business model to align with these regulatory changes.

By decision dated August 30, 2017 (the 2017 Decision), the Filers were granted certain interim relief from the dealer registration requirement and prospectus requirement, in order to facilitate the transition of the Filers to the new distribution model for the Notes set out in the 2017 Decision, and ongoing relief from the prospectus requirement on terms and conditions substantially similar to the OM Exemption (defined below). Following the 2017 Decision, CSC became registered as a restricted dealer in certain Canadian jurisdictions. As a result, the interim relief in the 2017 Decision is no longer applicable.

The Filers have applied to modify the ongoing relief from the prospectus requirement under the 2017 Decision to address contraction of the Note Program and the burden of reporting that it has experienced operating the Note Program under the terms and conditions of the 2017 Decision.

The principal regulator in the Principal Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Principal Jurisdiction (the Legislation) for revocation of the 2017 Decision and for the following exemptive relief as provided for in this decision (collectively, the Exemptions Sought):

(a) an exemption from the prospectus requirement on the same terms and conditions as the ongoing prospectus exemption granted in the 2017 Decision, except with the modifications in (b) and (c) below (the Ongoing Prospectus Exemption Sought);

(b) modification of the ongoing prospectus relief in the 2017 Decision to change the investment limit in the case of Legacy Investors (defined below) from $100,000 in a twelve-month period to $200,000 in a twenty-four-month period, provided that each such Legacy Investor is an eligible investor that has received advice from CSC that the investment is suitable (the Legacy Prospectus Exemption Sought); and

(c) modification of the ongoing prospectus exemption granted in the 2017 Decision to permit PFSG to file a Form 45-106F1 Report of Exempt Distribution (Form 45-106F1) monthly instead of within 10 days of a distribution (the Reporting 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 (the Principal Regulator); and

(b) the Filers have 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 Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, the Northwest Territories, Newfoundland and Labrador, Nunavut, Prince Edward Island, Québec, Saskatchewan, and Yukon (together with the Principal Jurisdiction, the Jurisdictions and each a Jurisdiction).

Interpretation

(1) For the purposes of this decision:

(a) Community Investor means any individual within the PAOC Community, as well as any corporation, trust, partnership and estate associated with such individual;

(b) Legacy Investor means a Note Investor that held Notes with an aggregate principal value greater than $100,000 on August 30, 2017;

(c) Legacy Note means a Note held by a Legacy Investor;

(d) NI 31-103 means National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;

(e) NI 45-106 means National Instrument 45-106 Prospectus Exemptions;

(f) Note Investor means a Community Investor, PAOC Charity or PAOC Trust that is an investor, or prospective investor, in Notes;

(g) Note Program means the issuance and distribution of Notes to Note Investors and the subsequent mortgage loans made by PFSG to PAOC congregations and other PAOC organizations;

(h) Offering Memorandum means the offering memorandum in the form prescribed in Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers and prepared in compliance with this decision;

(i) OM Exemption means the prospectus exemption in section 2.9 of NI 45-106;

(j) PAOC Charity means any church within the PAOC Community and any registered charity within the PAOC Community, including PAOC itself;

(k) PAOC Community means congregants of the PAOC, pastors, ministry leaders and associated individuals, churches, colleges and camps within the PAOC, any registered charity administered by the PAOC, including the PAOC itself and any trust in respect of which the PAOC acts as trustee; and

(l) PAOC Trust means any trust in respect of which the PAOC acts as trustee.

(2) Terms used in this decision that are defined in National Instrument 14-101 Definitions (NI 14-101), NI 45-106, NI 31-103 and MI 11-102 and not otherwise defined in this decision, shall have the same meaning as in NI 14-101, NI 45-106, NI 31-103, or MI 11-102 as applicable, unless the context otherwise requires.

Representations

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

The Filers

1. The PAOC is a registered charity incorporated under Part ll of the Canada Corporations Act and is a "charitable organization" for purposes of the Income Tax Act (Canada). The PAOC carries on its religious and charitable activities in various provinces and territories in Canada but maintains its head office in Ontario. Member congregations of the PAOC are located in each of the Jurisdictions.

2. PFSG is a corporation incorporated under the laws of Canada on March 29, 2005 and is wholly-owned by the PAOC.

3. CSC is a corporation incorporated under the laws of Canada on June 15, 2017 and is wholly-owned by the PAOC. CSC is registered in the category of restricted dealer under the securities legislation in each of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, New Brunswick, Nunavut, Ontario, Prince Edward Island, Québec and Saskatchewan.

4. Each of PFSG, CSC, and the PAOC is not in default of securities legislation in any jurisdiction of Canada.

The Note Program

5. PFSG was established and exists for the purpose of, on the one hand, making and administering mortgage loans, and, on the other hand, issuing and distributing Notes (each of which is an unsecured promissory note) to Note Investors.

6. PFSG uses the proceeds from Notes to make mortgage loans to PAOC congregations and other PAOC organizations for charitable purposes, including building, renovating and repairing church buildings, school facilities and similar undertakings within the PAOC Community.

7. PFSG enters into all mortgage and related security documents as the lender. All mortgage loans are funded by the proceeds PFSG receives from Notes pursuant to the Note Program. PFSG manages and administers the associated mortgage loans.

8. In order to mitigate risk in the Note Program, among other factors, the associated mortgage loans made by PFSG must:

(a) be secured by first mortgages on real property in a jurisdiction of Canada;

(b) have a commercial appraisal of land and buildings to cover market and fire sale liquidation values;

(c) not exceed 65% of the appraised value of the property, except in very limited circumstances;

(d) be insured under mortgage title insurance;

(e) not exceed three times the annual revenue (e.g., donations) of the church or other mortgagor; and

(f) be supported by a resolution of the local church membership at a duly called meeting, with at least a 75% majority approving the decision to apply for the mortgage or a similar threshold of approval for non-church borrowers in the PAOC Community.

9. The activity of PFSG is overseen by its board of directors and the day-to-day management is under the direction of its Executive Director.

10. The activities of CSC are restricted to acting as a dealer in order to facilitate any distributions of, or investments in, Notes under the Note Program or securities of similar debt programs. CSC will not recommend, advise, or solicit a donation from any Note Investor to the PAOC or any entities related to the PAOC.

11. PFSG generates net profits from operating the Note Program. Substantially all such profits are paid to the PAOC for use by the PAOC exclusively in furtherance of its educational, charitable and religious activities, and this will be disclosed in the Offering Memorandum.

12. None of the Filers, or any of their officers, directors, employees or any other individuals acting on behalf of any Filer, will receive any form of commission or transaction-based compensation from Note Investors related to the Note Program. PFSG will pay a fee to CSC for its services.

13. None of the Filers, or any of their officers, directors, employees or any other individuals acting on behalf of any Filer, will pay or receive any referral fees in respect of their activities related to the Note Program.

14. PFSG promotes the Note Program primarily through its website, in church bulletins and in a magazine published by the PAOC. The Note Program may also be promoted by CSC at certain PAOC events (at which the primary attendees are pastors within the PAOC Community) and PFSG may attend to provide factual information on the Note Program. All such advertising includes a prominent reference to the Offering Memorandum and to the CSC contact information for those interested in pursuing an investment in Notes.

15. Prior to the establishment of PFSG and the launch of the Note Program, the PAOC itself ran a similar program for almost 50 years.

16. There have been no defaults on any of the Notes and no complaints from any Note Program participants since the operation of the Note Program under the 2007 Decision. The PAOC is not aware of any such defaults or complaints in the 50 years that the PAOC itself ran a similar program.

Terms and Attributes of the Notes

17. As at the date hereof:

(a) the aggregate principal amount of issued and outstanding Notes is approximately $39 million;

(b) the number of Notes issued and outstanding is approximately 377; and

(c) the number of Community Investors who hold Notes is approximately 141, and they hold approximately $19.5 million of the aggregate principal amount of issued and outstanding Notes.

18. The Notes are issued in principal amounts varying from $5,000 to several hundred thousand dollars. Interest on the Notes is paid semi-annually and the Notes are issued for terms to maturity ranging from one year to five years (at the Note Investor's option). During the last 10 years, PFSG has raised approximately $7 million per year from the issue of Notes and issued Notes to approximately 35 to 75 Note Investors per year (many of which were returning investors).

19. The interest rate payable under the Notes is normally determined based on monthly assessments of current competitive lending rates in the market and may vary based on when an investment in the Notes is made and depending on the term of Notes selected by the Note Investor. Frequency of assessments may be increased or decreased, as deemed necessary based on prevailing market conditions.

20. As a Note approaches its maturity date, the holder of the Note is given the option to receive repayment of the amount owing under the Note or to reinvest that amount in a new Note, or a combination of both. In most cases, Note Investors opt to renew or reinvest their Notes. Historically, and prior to the 2017 Decision, the Note renewal rate has been over 92%. As maturity dates are spread throughout the year, Notes are renewed throughout the year. Since the 2017 Decision, the renewal rate has dropped to approximately 70%.

21. PFSG engages in short-term investing in term deposits (fixed-term investments available at a Canadian financial institution) in order to manage the in-flow of the proceeds from the sale of Notes and the out-flow of proceeds by way of mortgage loans. Short-term investments in term deposits normally last no longer than 90 days (and are only made to account for discrepancies between the dates that funds are received from Note Investors and the dates that new mortgage loans are entered into for PAOC projects).

The Prior Decisions and Activities

22. Initially, PAOC (and later, PFSG) operated the Note Program by issuing, distributing and trading in Notes pursuant to exemptions from the prospectus and registration requirements available under applicable securities legislation.

23. From June 21, 2007, PFSG operated the Note Program pursuant to exemptions from the dealer registration requirement and prospectus requirement on terms set out in the 2007 Decision. The 2007 Decision expired on June 21, 2017.

24. From August 30, 2017, PFSG operated the Note Program pursuant to certain interim relief from the dealer registration requirement and prospectus requirement, in order to facilitate the transition of the Filers to the new distribution model for the Notes set out in the 2017 Decision, and ongoing prospectus requirement on terms set out in the 2017 Decision. The interim relief expired on August 30, 2017. The 2017 Decision expires on August 30, 2022.

25. Since the 2017 Decision came into effect, the aggregate principal amount of Notes outstanding under the Note Program has declined by approximately 23%, including a decline of approximately 5% attributable to the application of the $100,000 investment limit and a further decline of approximately 1.5% attributable to the application of the other investment limits under the 2017 Decision. The Filers require the Exemptions Sought to minimize disruption to the Note Program.

The Ongoing Prospectus Exemption Sought

26. Following the date of this decision, PFSG will only distribute Notes to Note Investors either in accordance with prospectus exemptions available under securities legislation or in accordance with the terms and conditions of this decision.

27. PFSG requires the Ongoing Prospectus Exemption Sought in order to modify certain terms and conditions of the OM Exemption to reflect the unique features of its distribution model and structure.

28. In particular, PFSG requires the Ongoing Prospectus Exemption Sought because CSC is registered in the category of restricted dealer and, therefore, does not meet the requirements of:

(a) subparagraph 2.9(2.1)(b)(iii) of NI 45-106 for purposes of determining whether the investment is suitable;

(b) subsection 2.9(5.2) of NI 45-106 for purposes of distributing OM marketing materials that have been approved in writing by the issuer; or

(c) various prescribed forms and applicable schedules, which are required under the conditions to the OM Exemption and, without the Ongoing Prospectus Exemption Sought, would not permit PFSG or CSC to include the category of restricted dealer in reference to registered firms when completing these forms and schedules.

29. As a dealing representative of CSC is subject to the same proficiency requirements that a dealing representative of an exempt market dealer would be subject to under NI 31-103, a dealing representative of CSC is appropriately qualified to determine whether an investment above the $30,000 investment limit is suitable for the purposes of subparagraph 2.9(2.1)(b)(iii) of NI 45-106.

30. PFSG also requires the Ongoing Prospectus Exemption Sought as certain PAOC Community entities may fall within the definition of a "promoter" under securities legislation and, as a result, would be required to sign the OM in accordance with subsection 2.9(9)(c) of NI 45-106. However, these entities signing the OM as a promoter may potentially put certain charitable assets at risk if such assets were to be used to settle any potential claims for misrepresentation in the OM. The PAOC Community has undertaken to implement a number of additional investor protection measures (as described below) under the Note Program.

The Legacy Prospectus Exemption Sought

31. PFSG requires the Legacy Prospectus Exemption Sought in order to minimize disruption in the Note Program. Notes are issued through the year, and have terms varying from one year to five years. Legacy Notes were issued before PFSG was subject to the 2017 Decision, with the result that maturity dates for one or more Legacy Notes held by a single Legacy Investor may fall within the same twelve month period. Prior to the 2017 Decision, the Legacy Investor would often choose to reinvest the proceeds of a matured Legacy Note or Legacy Notes in a new Note or Notes.

32. Under the 2017 Decision, if the Legacy Investor was an eligible investor but not an accredited investor (as those terms are defined in NI 45-106), the investment in new Notes was subject to investment limits based on those of the OM Exemption. Where the principal amount of the Legacy Note or Legacy Notes of the Legacy Investor maturing within a twelve month period aggregated greater than $100,000, the Legacy Investor was not permitted to reinvest the portion of the returned capital in excess of $100,000.

33. The loss of investment from Legacy Investors described above has contributed approximately 5% to the decline in the Note Program.

34. Under the Legacy Prospectus Exemption Sought, PFSG will be permitted to aggregate Legacy Note maturity dates over a two year period, and will be permitted to aggregate the investment limits for both of those periods into a single $200,000 investment limit for twenty-four months. In circumstances in which the Legacy Investor wishes to reinvest the proceeds of the maturing Legacy Note or Notes into a new Note or Notes, the Legacy Prospectus Exemption Sought will permit PFSG to issue up to $200,000 aggregate principal amount of Notes to the Legacy Investor at the time of maturity over the course of the twenty-four month period.

35. In compliance with the terms of the Ongoing Prospectus Exemption Sought, all investments in new Notes under the Legacy Prospectus Exemption Sought will be subject to receiving advice from CSC that the investment is suitable.

The Reporting Exemption Sought

36. PFSG requires the Reporting Exemption Sought in order to ease financial and administrative burden. During the years of operation of the Note Program prior to the 2017 Decision, Notes have been issued throughout the year, and have terms varying from one year to five years. Accordingly, Notes mature on a continuous basis. As Note Investors reinvest the proceeds of the maturing Notes, distribution of these new Notes occurs on a continuous basis. The corresponding reporting obligations of PFSG under the 2017 Decision result in the preparation and filing of reports on a parallel continuous basis.

37. The Reporting Exemption Sought will allow PFSG to pool the Note distribution data on a monthly basis and prepare and file a single report for all Note distributions made in the calendar month. This schedule of reporting will ease the financial and administrative burden on PFSG.

Additional Investor Protection Measures and Solvency Matters

38. In operating the Note Program, PFSG follows strict guidelines for making investments in mortgage loans, as described above. Among other risks, the distribution model of the Note Program requires PFSG to manage risks associated with the difference in the term to maturity of the Notes (typically one to five years) and the term to maturity of the mortgage loans (typically five years). The difference in these terms to maturity may, from time to time, lead to the value of PFSG's current assets (e.g., mortgage loan repayments) being lower than the value of PFSG's current liabilities (e.g., Note payments). PFSG addresses this risk by carefully managing the timing of the maturity dates of the Notes and mortgages, and by taking the steps outlined below.

39. PFSG attempts to align maturity dates of mortgages and Notes so that it has available funds should Note Investors choose to receive repayment of the amount owing under their Notes. In the event that cash-on-hand will or may be insufficient to repay the amounts due on Notes, CSC will attempt to find new Note Investors to purchase Notes in the same aggregate principal amount and, if successful, will use the proceeds from the new issue to redeem the existing Notes.

40. PFSG has entered into a subordination agreement with the PAOC with respect to each PAOC Charity and each PAOC Trust such that the repayment of the interest and principal on each Note held by a PAOC Charity or PAOC Trust is subordinate to the repayment of the interest and principal on each Note held by a Community Investor in respect of any Notes having the same maturity date.

41. The PAOC invests in preferred shares of PFSG in order to build additional equity in PFSG to mitigate the business risks outlined above and the risk of any potential default in the payment of a mortgage loan. The PAOC has reinvested in PFSG in the form of preferred shares, which investment is currently approximately $1.9 million. The PAOC will increase its preferred share position to 10% of the mortgage portfolio operated by PFSG by committing 50% of the annual profits paid by PFSG to the PAOC to the preferred share capitalization until it reaches 10% of the total mortgage portfolio.

42. In respect of the preferred share capital provided to PFSG by the PAOC, by operation of corporate law and bankruptcy and insolvency law, this share capital may be available to creditors and any payments owing to the PAOC as a preferred shareholder will be subordinate to the claims of any creditors. In addition, PFSG will only make payments to the PAOC as a preferred shareholder when PFSG is profitable and the current assets of PFSG are greater than the current liabilities of PFSG at the date that a payment to preferred shareholders is payable.

43. The PAOC has qualified for, and has available to it, a line of credit from a bank listed in Schedule I of the Bank Act (Canada). The line of credit has a limit of $3 million dollars, all of which is currently available, as at the date of this decision. The PAOC has agreed that it will make the line of credit available to PFSG as required to meet its obligations to Community Investors under the Notes held by such investors.

44. The Offering Memorandum provided to each Community Investor will describe PFSG's activities and operation of the Note Program, including its guidelines for making investments in mortgage loans. The Offering Memorandum will also describe among other risk factors material to PFSG and the Notes, the operating risks faced by PFSG due to the difference in the term to maturity of each Note and each mortgage as described above.

45. Annually, PFSG will provide to staff of the Principal Regulator a summary of any repayments, including any advance repayments, of principal in respect of Notes to a PAOC Charity or PAOC Trust and a summary of any redemptions of preferred shares to the PAOC that have occurred in the prior 12 month period.

Additional Ongoing Trading and Distribution Activities

46. In respect of a distribution of any Note under the Note Program where PFSG is relying on this decision, PFSG and CSC will adhere to the investment limits in condition I.b of this decision in each Jurisdiction. Accordingly, if PFSG is relying on this decision in respect of a distribution to a Community Investor that is an individual and also an eligible investor (as defined in NI 45-106), each such Community Investor will be subject to the same investment restrictions.

47. Notwithstanding the foregoing, PFSG will adhere to the adjusted investment limits in condition I.c of this decision in the case of Legacy Investors.

48. PFSG will continue to deliver an Offering Memorandum to each prospective Community Investor before the prospective Community Investor has agreed in writing to purchase a Note. The Offering Memorandum:

(a) will include relevant information including the key terms of the Notes; the relationship between PFSG, CSC and the PAOC; that PFSG is the entity issuing the Notes, and the relevant risks related thereto; and

(b) will contain a contractual right of rescission and a right of action for misrepresentation against PFSG unless such rights are otherwise provided under securities legislation where the Community Investor is resident.

49. CSC will record and maintain records in respect of any suitability assessments it conducts, including any discussions with Community Investors regarding the suitability of an investment in Notes.

50. The Filers will take reasonable steps to identify, and respond to, any material conflicts of interest between the Filers and the Note Investors. The Filers will manage these conflicts, and will avoid any conflicts that cannot be managed.

Decisions

The Principal Regulator is satisfied that these decisions meet the tests set out in the Legislation for the Principal Regulator to make these decisions.

The decisions of the Principal Regulator under the Legislation are:

(1) The 2017 Decision is revoked.

(2) The Exemptions Sought are granted provided that all of the following conditions are met:

I. PFSG is distributing a Note where:

a. the Note Investor purchases the Note as principal;

b. subject to I.c., the acquisition cost of all securities acquired under the OM Exemption (or a decision of a securities regulatory authority that provides an exemption from the prospectus requirement that is substantially similar to the OM Exemption) in the preceding 12 months by a Note Investor who is an individual does not exceed the following amounts:

i. in the case of a Note Investor that is not an eligible investor, $10,000;

ii. in the case of a Note Investor that is an eligible investor, $30,000;

iii. in the case of a Note Investor that is an eligible investor and that received advice from a portfolio manager, investment dealer, exempt market dealer or CSC that the investment is suitable, $100,000,

c. in the case of a Legacy Investor that is an eligible investor and that received advice from a portfolio manager, investment dealer, exempt market dealer or CSC that the investment is suitable, the acquisition cost of all securities acquired under the OM Exemption (or a decision of a securities regulatory authority that provides an exemption from the prospectus requirement that is substantially similar to the OM Exemption) in the preceding 24 months by such Legacy Investor who is an individual does not exceed $200,000. (For greater certainty, condition 1.c is a limited accommodation that only applies to a Legacy Investor that continues to hold any principal amount of Legacy Notes. If a Legacy Investor ceases to hold any principal amount of Legacy Notes, the limited accommodation in condition 1.c. would not be available to any future investment by the Legacy Investor);

d. at the same time or before the Note Investor signs the agreement to purchase the Note, PFSG:

i. delivers an offering memorandum to the Note Investor in compliance with conditions VI to XIII, and

ii. obtains a signed risk acknowledgement from the Note Investor in compliance with condition XV, and

e. the Note distributed by PFSG is an unsecured, fixed interest rate, non-convertible debt instrument of PFSG with a term of 5 years or less.

II. PFSG is not an investment fund.

III. The investment limits described in conditions I.b.ii and iii will not apply if the Note Investor is:

a. an accredited investor; or

b. a person described in subsection 2.5(1) of NI 45-106 [Family, friends and business associates].

IV. PFSG is not distributing a short-term securitized product under the Note Program.

V. No commission or finder's fee is paid to any person.

VI. The offering memorandum delivered to Note Investors must comply with the requirements of Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers, as may be amended from time to time, except that for purposes of Form 45-106F2 and the applicable schedules to Form 45-106F2, PFSG or CSC may include the category of restricted dealer where required.

VII. An offering memorandum delivered to a Note Investor in reliance on this decision:

a. must incorporate by reference, by way of a statement in the offering memorandum, OM marketing materials related to each distribution under the offering memorandum and delivered or made reasonably available to a prospective Note Investor before the termination of the distribution; and

b. is deemed to incorporate by reference OM marketing materials related to each distribution under the offering memorandum and delivered or made reasonably available to a prospective Note Investor before the termination of the distribution.

VIII. A portfolio manager, investment dealer, exempt market dealer or CSC must not distribute OM marketing materials unless the OM marketing materials have been approved in writing by PFSG.

IX. An offering memorandum delivered under this decision must provide the Note Investor with a contractual right to cancel the agreement to purchase the Note by delivering a notice to PFSG not later than midnight on the 2nd business day after the Note Investor signs the agreement to purchase the Note.

X. The offering memorandum delivered under this decision must contain a contractual right of action against PFSG for rescission or damages that

a. is available to the Note Investor if the offering memorandum, or any information or documents incorporated or deemed to be incorporated by reference into the offering memorandum, contains a misrepresentation, without regard to whether the Note Investor relied on the misrepresentation;

b. is enforceable by the Note Investor delivering a notice to PFSG;

i. in the case of an action for rescission, within 180 days after the Note Investor signs the agreement to purchase the Note; or

ii. in the case of an action for damages, before the earlier of

A. 180 days after the Note Investor first has knowledge of the facts giving rise to the cause of action, or

B. 3 years after the date the Note Investor signs the agreement to purchase the Note,

c. is subject to the defence that the Note Investor had knowledge of the misrepresentation;

d. in the case of an action for damages, provides that the amount recoverable

i. must not exceed the price at which the Note was offered, and

ii. does not include all or any part of the damages that PFSG proves does not represent the depreciation in value of the Note resulting from the misrepresentation, and

e. is in addition to, and does not detract from, any other right of the Note Investor.

XI. An offering memorandum delivered under this decision must contain a certificate that states the following:

"This offering memorandum does not contain a misrepresentation."

XII. The certificate required under condition XI of this decision must be signed

a. by PFSG's chief executive officer and chief financial officer or, if PFSG does not have a chief executive officer or chief financial officer, an individual acting in that capacity; and

b. on behalf of the directors of PFSG, by

i. any 2 directors who are authorized to sign, other than the persons referred to in paragraph (a), or

ii. all the directors of PFSG.

XIII. A certificate under condition XI must be true

a. at the date the certificate is signed; and

b. at the date the offering memorandum is delivered to the Note Investor.

XIV. If a certificate under condition XI ceases to be true after it is delivered to the Note Investor, PFSG cannot accept an agreement to purchase the Note from the Note Investor unless

a. the Note Investor receives an update of the offering memorandum;

b. the update of the offering memorandum contains a newly dated certificate signed in compliance with condition XII; and

c. the Note Investor re-signs the agreement to purchase the Note.

XV. A risk acknowledgement obtained under this decision must comply with the requirements of Form 45-106F4, including applicable schedules, except that for purposes of Form 45-106F4 and the applicable schedules to Form 45-106F4, PFSG or CSC may include the category of restricted dealer where required. PFSG must retain the signed risk acknowledgment for 8 years after the distribution.

XVI. PFSG must

a. hold in trust all consideration received from the Note Investor in connection with a distribution of a Note under this decision until midnight on the 2nd business day after the Note Investor signs the agreement to purchase the Note; and

b. return all consideration to the Note Investor promptly if the Note Investor exercises the right to cancel the agreement to purchase the Note described under condition IX.

XVII. PFSG must file a copy of an offering memorandum delivered under this decision and any update of a previously filed offering memorandum with the securities regulatory authority on or before the 10th day after the distribution under the offering memorandum or update of the offering memorandum.

XVIII. PFSG must file with the securities regulatory authority a copy of all OM marketing materials required or deemed to be incorporated by reference into an offering memorandum delivered under this decision,

a. if the OM marketing materials are prepared on or before the filing of the offering memorandum, concurrently with the filing of the offering memorandum; or

b. if the OM marketing materials are prepared after the filing of the offering memorandum, within 10 days of the OM marketing materials being delivered or made reasonably available to a prospective Note Investor.

XIX. OM marketing materials filed under condition XVIII must include a cover page clearly identifying the offering memorandum to which they relate.

XX. For purposes of financial statement reporting, PFSG must comply with subsections 2.9(17.5), (17.7) to (17.13), (17.15) to (17.17) and (17.19) of the OM Exemption as if PFSG had distributed securities under the OM Exemption.

XXI. PFSG must make reasonably available to each holder of a Note acquired under this decision a notice of each of the following events in accordance with Form 45-106F17, within 10 days of the occurrence of the event:

a. a discontinuation of PFSG's business;

b. a change in PFSG's industry;

c. a change of control of PFSG.

XXII. PFSG is required to make the disclosure required respectively by conditions XX (in respect of subsections 2.9(17.5) and (17.19) of the OM Exemption as referenced above) and XXI of this decision until the earlier of

a. the date PFSG becomes a reporting issuer in any jurisdiction of Canada; and

b. the date PFSG ceases to carry on business.

XXIII. In Ontario, PFSG is designated a market participant under the Securities Act (Ontario).

XXIV. For each distribution made in reliance on this decision, PFSG will file a completed Form 45-106F1 in accordance with Part 6 of NI 45-106, as may be amended from time to time, or within 10 days of the end of the calendar month in which the distribution occurred. For purposes of Form 45-106F1 and the applicable schedules to Form 45-106F1, PFSG or CSC may include the category of restricted dealer where required.

XXV. The first trade in securities distributed in reliance on this decision will be deemed to be a distribution that is subject to section 2.5 of National Instrument 45-102 Resale of Securities.

XXVI. The additional investor protection measures for the Note Program described in representations 38 to 45 above must remain in effect as of the date of distribution.

XXVII. In the event of an amendment to subsection 2.9(2.1)(b) of NI 45-106, the same amendment is deemed to be made to condition I.b of this decision, provided that advice that an investment is suitable may be provided by a portfolio manager, investment dealer, exempt market dealer or CSC.

(3) PFSG will only distribute Notes in a jurisdiction through a dealer that is appropriately registered in the jurisdiction.

(4) This decision will expire upon the date that is five years from the date of this decision.

"Grant Vingoe"
"Heather Zordel"
_____________________
_____________________
Vice-Chair
Commissioner
Ontario Securities Commission
Ontario Securities Commission