NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted from self-dealing provisions in s. 118 of the Act and s. 115 of the Reg. to permit certain funds to conduct inter-fund trades between mutual funds, pooled funds, and managed accounts - inter-fund trades will comply with conditions in s. 6.1(2) of National Instrument 81-107 - Independent Review Committee for Investment Funds (NI 81-107) including Independent Review Committee approval or client consent – relief also subject to pricing and transparency conditions.
Applicable Legislative Provisions
Securities Act (Ontario), sections 118(2)(b), 121(2)(a)(ii), and 147.
Ontario Regulation 1015 General Regulation, section 115(6).
National Instrument 81-107 – Independent Review Committee for Investment Funds.
August 29, 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
AND
ALBERTA, SASKATCHEWAN,
NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND
AND NEWFOUNDLAND AND LABRADOR
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
LEITH WHEELER INVESTMENT COUNSEL LTD.
(the Filer)
AND
IN THE MATTER OF
THE FUNDS LISTED IN SCHEDULE A
(each an Existing NI 81-102 Fund and, collectively, the Existing NI 81-102 Funds)
AND
IN THE MATTER OF
THE FUNDS LISTED IN SCHEDULE B
(each an Existing Pooled Fund and, collectively, the Existing Pooled Funds)
DECISION
Background
The securities regulatory authority or regulator in Ontario has received an application from the Filer, on behalf of the Existing NI 81-102 Funds, the Existing Pooled Funds and managed accounts (the Existing Managed Accounts) that it, or an affiliate of it, manages or acts as portfolio manager for, and in respect of future investment funds (the Future Funds) and future managed accounts (the Future Managed Accounts) that the Filer, or an affiliate of it, will manage or act as portfolio manager for, for a decision under the securities legislation of the jurisdiction of the principal regulator (the Legislation) for an exemption from the prohibition (the Inter-Fund Trading Prohibition) in section 118(2)(b) of the Legislation in order to permit trades (the Inter-Fund/Account Trades) in securities between the Existing Funds, the Future Funds, the Existing Managed Accounts, and the Future Managed Accounts (the Passport Exemption).
The securities regulatory authority or regulator in each of Alberta, Saskatchewan, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (the First Jurisdictions) (the First Coordinated Exemptive Relief Decision Makers) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the prohibition (the Investment Counsel Prohibition) in the Legislation of the First Jurisdictions that prohibits a purchase or sale of a security in which an investment counsel, or any associate of an investment counsel, has a direct or indirect beneficial interest from or to any portfolio managed or supervised by the investment counsel in order to permit the Inter-Fund/Account Trades (the First Coordinated Exemptive Relief).
The securities regulatory authority or regulator in each of Ontario and Newfoundland and Labrador (the Second Jurisdictions) (the Second Coordinated Exemptive Relief Decision Makers and together with the First Coordinated Exemptive Relief Decision Makers, the Coordinated Exemptive Relief Decision Makers) has received an application from the Filer for a decision under the securities legislation of the Second Jurisdictions (the Legislation) for an exemption from the prohibition (the Inter-Fund Trading Prohibition) against a portfolio manager knowingly causing an investment portfolio under its management to purchase or sell securities of any issuer from or to the account of a responsible person, any associate of a responsible person, or the portfolio manager in order to permit the Inter-Fund/Account Trades (the Second Coordinated Exemptive Relief and together with the First Coordinated Exemptive Relief, the Coordinated Exemptive Relief)
Under the Process for Exemptive Relief Applications for Multiple Jurisdictions:
the Ontario Securities Commission is the principal regulator for this application,
the Filer has provided notice that section 4.7(2) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick, and Nova Scotia,
the decision is the decision of the principal regulator, and
the decision evidences the decision of each Coordinated Exemptive Relief Decision Maker.
Interpretation
Terms defined in MI 11-102 and National Instrument 14-101 Definitions, and in National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meaning in this MRRS Decision Document unless they are otherwise defined in this Decision Document.
NI 81-102 Fund means each Existing NI 81-102 Fund and Future Fund that is subject to NI 81-102.
Pooled Fund means each Existing Pooled Fund and Future Fund that is not a reporting issuer and is not subject to NI 81-102.
Fund means each NI 81-102 Fund and each Pooled Fund.
Managed Account means each Existing Managed Account and Future Managed Account.
Representations
This decision is based on the following facts represented by the Filer:
Each Fund is, or will be, an open-ended mutual fund trust or an open-ended mutual fund corporation.
The Filer is, or will be, the manager and/or the portfolio adviser of each Fund.
Each NI 81-102 Fund is, or will be, a reporting issuer in one or more of the Jurisdictions. None of the Pooled Funds are, or will be, a reporting issuer in any of the Jurisdictions.
Neither the Filer nor any Fund is in default of the securities legislation in any of the Jurisdictions.
The Filer is or will be the portfolio manager of each Managed Account.
A Fund may be an associate of the Filer, or an affiliate of the Filer, that is a responsible person, and/or an investment counsel in respect of a portfolio of another Fund and/or another Managed Account.
The Filer has established, or will establish, an independent review committee (IRC) in respect of each NI 81-102 Fund.
The Filer will establish an IRC (which will likely also be the IRC in respect of the NI 81-102 Funds) in respect of each Pooled Fund.
The mandate of the IRC of a Pooled Fund will include, among other things, approving purchases and sales of securities between the Pooled Fund and another Pooled Fund, a NI 81-102 Fund, and/or a Managed Account. The IRC of the Pooled Funds will be composed by the Filer in accordance with the requirements of section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. Further, the IRC of the Pooled Funds will not approve purchases and/or sales of securities between a Pooled Fund, another Pooled Fund, a NI 81-102 Fund, and/or a Managed Accounts unless it has made the determination set out in section 5.2(2) of NI 81-107. The IRC of the Pooled Funds will also comply with section 4.5 of NI 81-107.
Purchases and sales of securities involving a NI 81-102 Fund will be referred to the IRC of the NI 81-102 Fund under section 5.2(1) of NI 81-107 and will be subject to the requirements of section 5.2(2) of NI 81-107.
The investment management agreement or other documentation in respect of a Managed Account will contain the authorization of the client for the portfolio manager to purchase securities from and/or to sell securities to another Managed Account, a NI 81-102 Fund and/or a Pooled Fund.
The Filer has determined that it would be in the interests of the NI 81-102 Funds, the Pooled Funds and the Managed Accounts to receive the Requested Relief.
The Filer is unable to rely upon the exemption from the Inter-Fund Trading Prohibition and Investment Counsel Prohibition codified under s. 6.1(4) of NI 81-107 in connection with the Inter-Fund Trades with or between the Pooled Funds or the Managed Accounts. Inter-Fund Trades involving only NI 81-102 Funds will be conducted in accordance with the exemption codified under s. 6.1(4) of NI 81-107.
Decision
Each of the principal regulator and the Coordinated Exemptive Relief Decision Makers is satisfied that the decision meets the test set out in the Legislation for the relevant regulator or securities regulatory authority to make the decision.
The decision of the principal regulator and the Coordinated Exemptive Relief Decision Makers respectively under the Legislation is that the Passport Exemption and the Coordinated Exemptive Relief are granted provided that:
- In respect of an Inter-Fund/Account Trade between a NI 81-102 Fund and a Pooled Fund or a Managed Account:
(a) if the transaction is with a Pooled Fund, the IRC of the Pooled Fund has approved the transaction in respect of the Pooled Fund on the same terms as are required under section 5.2 of NI 81-107;
(b) if the transaction is with a Managed Account, the investment management agreement or other documentation in respect of the Managed Account authorizes the transaction; and
(c) the transaction complies with paragraphs (b) to (g) of subsection 6.1(2) of NI 81-107.
- In respect of an Inter-Fund/Account Trade by a Pooled Fund:
(a) the IRC of the Pooled Fund has approved the transaction in respect of the Pooled Fund on the same terms as are required under section 5.2 of NI 81-107;
(b) if the transaction is with another Pooled Fund or a NI 81-102 Fund, the IRC of the other Fund has approved the transaction in respect of the other Fund on the same terms as are required under section 5.2 of NI 81- 107;
(c) if the transaction is with a Managed Account the investment management agreement or other documentation in respect of the Managed Account authorizes the transaction; and
(d) the transaction complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.
- In respect of an Inter-Fund/Account Trade by a Managed Account:
(a) the investment management agreement or other documentation in respect of the Managed Account authorizes the transaction, as does the investment management agreement or other documentation in respect of the other Managed Account, if the transaction is with another Managed Account;
(b) if the transaction is with a Fund, the IRC of the Fund has approved the transaction in respect of the Fund on the same terms as are required under section 5.2 of NI 81-107; and
(c) the transaction complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.
”Suresh Thakrar” “Mary Condon”
Suresh Thakrar Mary Condon
Schedule A Existing NI 81-102 Funds
Leith Wheeler Balanced Fund
Leith Wheeler Canadian Equity Fund
Leith Wheeler Fixed Income Fund
Leith Wheeler Money Market Fund
Leith Wheeler U.S. Equity Fund
Leith Wheeler International Equity Plus Fund
Schedule B Existing Pooled Funds
Leith Wheeler Diversified Pooled Fund
Leith Wheeler Total Return Bond Pooled Fund
Leith Wheeler Long Term Bond Pooled Fund
Leith Wheeler Unrestricted Diversified Pooled Fund
Leith Wheeler US Pension Pooled Fund
Leith Wheeler Total Return Long Bond Pooled Fund
Leith Wheeler Special Canadian Equity Pooled Fund
Leith Wheeler Constrained Fixed Income Pooled Fund
Headnote
NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted from self-dealing provisions in s. 118 of the Act and s. 115 of the Reg. to permit certain funds to conduct inter-fund trades between mutual funds, pooled funds, and managed accounts - inter-fund trades will comply with conditions in s. 6.1(2) of National Instrument 81-107 - Independent Review Committee for Investment Funds (NI 81-107) including Independent Review Committee approval or client consent – relief also subject to pricing and transparency conditions.
Applicable Legislative Provisions
Securities Act (Ontario), sections 118(2)(b), 121(2)(a)(ii), and 147.
Ontario Regulation 1015 General Regulation, section 115(6).
National Instrument 81-107 – Independent Review Committee for Investment Funds.