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 The Public Sector Pension Investment Board AND ITS AFFILIATES
DECISION
Background
The principal regulator in the Jurisdiction has received an application from The Public Sector Pension Investment Board (the PSP Investment Board) and each of its wholly-owned Canadian subsidiaries as set out in Schedule A, including any future affiliates that are established for the same purposes as the entities listed in Schedule A (the Affiliated Entities; collectively, the Affiliated Entities and the PSP Investment Board are the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation), that:
(a) the Filers be exempt from the “early warning requirements”, as such term is defined in NI 62-103 – Early Warning System and Related Take-Over Bid and Insider Reporting Issues (NI 62-103) (the Early Warning Requirements);
(b) the Filers be exempt from the “moratorium provisions”, as such term is defined in NI 62-103 (the Moratorium Provisions); and
(c) the Filers and every director or senior officer of each Filer who is an insider of a reporting issuer solely as a result of being a director or senior officer of the Filer, be exempt from the requirements in the Legislation for an insider of a reporting issuer to file reports disclosing the insider’s direct or indirect beneficial ownership of, or control or discretion over, securities of a reporting issuer (the Insider Reporting Requirements),
provided that, in each case, the Filers comply with, and meet, the applicable reporting and filing requirements, and any other applicable conditions enumerated in NI 62-103 as if each of the Filers were an “eligible institutional investor” thereunder (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) 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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia and Newfoundland and Labrador.
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and in NI 62-103 have the same meaning used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The PSP Investment Board was established as a Crown corporation under the Public Sector Pension Investment Board Act (the PSP Investment Board Act) and is governed by the PSP Investment Board Act and the Regulations made thereunder.
2. The head office of the PSP Investment Board is located in Ottawa, Ontario.
3. All of the share capital of the PSP Investment Board is held by the President of the Treasury Board of Canada (the President of the Treasury Board).
4. The mission of the PSP Investment Board under the PSP Investment Board Act is to manage amounts that are transferred to it by the following pension funds:
(a) Public Service Superannuation Investment Fund and the Public Service Pension Fund;
(b) the Canadian Forces Superannuation Investment Fund and the Canadian Forces Pension Fund;
(c) the Royal Canadian Mounted Police Superannuation Investment Fund and the Royal Canadian Mounted Police Pension Fund; and
(d) the Reserve Force Pension Fund
(collectively, the Pension Funds), and to invest their assets with a view of achieving a maximum rate of return, without undue risk of loss, having regard to the funding, policies and requirements of the Pension Funds and their ability to meet their financial obligations.
5. As at March 31, 2007, the PSP Investment Board managed consolidated net assets having an aggregate value of approximately $35 billion and it is expected that this amount will not differ significantly as at March 31, 2008.
6. The PSP Investment Board is the sole provider of investment management services to the Pension Funds and does not provide investment management services to any other parties other than the Pension Funds. Management of the funds transferred to the Filers by the Pension Funds is done on a global and collective basis. All funds under management by the Filers are designated and provided for pursuant to the PSP Investment Board Act and will ultimately be returned to the Pension Funds.
7. From time to time, the PSP Investment Board may, in accordance with the PSP Investment Board Act and in fulfilling its mandate thereunder, invest and transact through the Affiliated Entities. The Affiliated Entities are all federally incorporated under the Canada Business Corporations Act and are used for certain tax or corporate reasons to hold passive investments. The funds and investments held by the Affiliated Entities are subject to the same investment restrictions and guidelines as would otherwise be applicable to the PSP Investment Board pursuant to the PSP Investment Board Act.
8. The PSP Investment Board has the capacity of a natural person and its business is managed and supervised by a board of directors (the Board of Directors) appointed by the Governor in Council on the recommendation of the President of the Treasury Board.
9. The Board of Directors is required to establish, and has established, an audit committee and an investment committee.
10. The Regulations establish the requirements for a written statement of investment policies, standards, and procedures (Investment Statement) in respect of the PSP Investment Board’s portfolio of investments, and limitations on investments, including a prohibition on any direct or indirect investment in the securities of a corporation to which are attached more than 30% of the votes that may be cast to elect the directors of that corporation. Pursuant to the Regulations, the Board of Directors is required to review the Investment Statement at least once each financial year.
11. The Board of Directors is required to send copies of unaudited quarterly financial statements to the President of the Treasury Board, the Minister of National Defence and the Minister of Public Safety and Emergency Preparedness within 45 days after the end of the three month period to which they relate, and to provide the President of the Treasury Board, the Minister of National Defence and the Minister of Public Safety and Emergency Preparedness with an annual report on the operations of the PSP Investment Board (the Annual Report) within 90 days of the end of each financial year. The Annual Report is made available to contributors under the Canadian Forces Superannuation Act, the Public Service Superannuation Act, and the Royal Canadian Mounted Police Superannuation Act after being provided to the President of the Treasury Board, the Minister of National Defence and the Minister of Public Safety and Emergency Preparedness. Lastly, the Annual Report is tabled in Parliament.
12. The Annual Report is required to include: (i) audited annual financial statements in the form set out in the Financial Administration Act; (ii) a certificate of the Board of Directors stating that the investments of the PSP Investment Board held during the year were in accordance with the PSP Investment Board Act and the Investment Statement; (iii) the Investment Statement and information regarding the objectives of the PSP Investment Board; (iv) a summary of the code of conduct for officers and employees of the PSP Investment Board; and (v) a report of any special examination referred to in the Financial Administration Act.
13. The PSP Investment Board is required to cause a special examination to be carried out at least once every five years, and at such additional times as the Governor in Council, the President of the Treasury Board or the Board of Directors may require, in respect of itself and the Affiliated Entities, to determine if financial and management control and information systems and management practices were maintained in a manner that provided reasonable assurance that: (i) its assets are safeguarded and controlled; (ii) its financial, human and physical resources are managed economically and efficiently; and (iii) its operations are carried out effectively.
14. Pursuant to the PSP Investment Board Act, the operational costs of the Filers are paid for directly by the Pension Funds. Other than the reimbursement of the Filers’ operational costs, no additional fees are paid to the Filers by the Pension Funds.
15. The investment management activities carried out by the Filers with respect to the assets that are transferred to it by the Pension Funds are comparable to the services provided by an “investment manager”, as that term is defined in NI 62-103. However, the Filers do not technically satisfy the definition of an “investment manager” for purposes of NI 62-103 because: (i) none of the Filers are registered as an “adviser” nor act as advisers in reliance upon exemptions from the adviser registration requirement under the Legislation and (ii) none of the Filers provide services to the Pension Funds under a contractual arrangement, but rather such services are provided pursuant to their mandate as prescribed by the PSP Investment Board Act.
16. Although the Filers perform a similar functional role to that of an “investment manager” in providing services to the Pension Funds, for the reasons noted above, the Filers do not technically satisfy the definition of an “investment manager” nor otherwise qualify as an “eligible institutional investor” under NI 62-103. Therefore, unless the Exemption Sought is granted, neither the Filers nor the directors and senior officers of the Filers are able to rely upon the exemptions from the Early Warning Requirements, the Moratorium Provisions and the Insider Reporting Requirements that may be available to eligible institutional investors and the directors and senior officers of such eligible institutional investors under NI 62-103.
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 each of the Filers complies with and meets the applicable reporting and filing requirements, and any other applicable conditions enumerated in NI 62-103, as if each of the Filers were an “eligible institutional investor” thereunder.
“Suresh Thakrar” “Paul K. Bates”
Name: Suresh Thakrar Name: Paul K. Bates
Title: Commissioner Title: Commissioner
Ontario Securities Commission Ontario Securities Commission
SCHEDULE A
Blue & Gold Private Investments Inc.
Galvaude Private Investments Inc.
Infra-PSP GP Partners Inc.
Ivory Private Investments Inc.
Port-aux-Choix Private Investments Inc.
PSP Capital Inc.
PSP Finco Inc.
PSPIB G.P. Finance Inc.
PSPIB G.P. Inc.
PSPIB G.P. Partners Inc.
PSPIB IRP60 Inc.
PSPIB Michigan G.P. Inc.
PSPIB Realty International Inc.
PSPIB-AFP Inc.
PSPIB-FLSA Inc.
PSPIB-MSR Inc.
PSPIB-RE Direct Inc.
PSPIB-RE Finance Inc.
PSPIB-RE Finance Partners Inc.
PSPIB-RE Finance Partners II Inc.
PSPIB-RE Partners Inc.
PSPIB-SDL Inc.
PSPIB Destiny Inc.
PSPLUX Sàrl
Trinity Bay Private Investments Inc.
Datura Private Investments Inc.
Red Isle Private Investments Inc.
PSP Public Credit I Inc.
Infra-PSP Canada Inc.
Infra-PSP ECEF Inc.
Infra-PSP Partners Inc.