Headnote
National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions – Relief granted from conflict of interest reporting requirements in subsection 117(1)(c) of the Securities Act (Ontario) for transactions involving related parties of a mutual fund – monthly reporting not required provided that similar disclosure is made in the management reports on fund performance for each mutual fund and that certain records of related party portfolio transactions are kept by the mutual funds.
Applicable Legislative Provisions
Securities Act (Ontario), subsections 117(1)(c) and 117(2).
October 14, 2009
In the Matter of the Securities Legislation of Ontario and Newfoundland and Labrador (the Jurisdictions)
and
In the Matter of the Process for Exemptive Relief Applications in Multiple Jurisdictions
and
In the Matter of CI Investments Inc. and United Financial Corporation (the Filers)
Decision
Background
The securities regulatory authority or regulator in Ontario (the Passport Review Decision Maker) and in each of Ontario and Newfoundland and Labrador (together, the Coordinated Review Decision Makers) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting each Filer from the requirement in the Legislation (the Monthly Reporting Requirement) that, for each purchase and sale effected by a Fund (as defined below) through a related person or company with respect to which the related person or company received a fee either from the Fund or from the other party to the transaction or from both, the Filer which is the manager of such Fund must file a report within thirty days after the end of the month in which the purchase or sale occurred (the Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) the Ontario Securities Commission is the principal regulator for this application;
(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 by each Filer in British Columbia, Alberta, Saskatchewan, New Brunswick and Nova Scotia in respect of the Relief;
(c) this decision is the decision of the principal regulator; and
(d) this decision evidences the decision of each of the Coordinated Review Decision Makers.
Interpretation
Defined terms contained 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 Filers:
CI Investments Inc. is incorporated under the laws of the Province of Ontario and is registered as an adviser in the categories of investment counsel and portfolio manager (or the equivalent) under the securities legislation of all the provinces of Canada. United Financial Corporation is incorporated under the federal laws of Canada and is registered as an adviser in the categories of investment counsel and portfolio manager (or the equivalent) under the securities legislation of all the provinces and territories of Canada. The head office of each Filer is in Ontario.
Each Filer currently manages the mutual funds listed in Schedule A hereto, each of which is regulated by National Instrument 81-102 – Mutual Funds (NI 81-102). Each Filer may, in the future, become the manager of additional mutual funds (the Future Funds) that are regulated by NI 81-102 (all such present mutual funds and Future Funds being hereinafter referred to as the Funds and, individually, as a Fund).
Each Fund is a reporting issuer under the securities legislation of one or more jurisdictions of Canada.
Each Fund has entered into a management contract with a Filer pursuant to which the Filer provides investment advice to the Fund for valuable consideration and pursuant to which the Filer directs the business, operations and affairs of the Fund. Accordingly, the Filer is the “management company” (or equivalent) under the Legislation and “manager” of such Fund and a “portfolio adviser” to such Fund.
From time to time, each Filer may hire one or more portfolio managers or sub-advisors to the Funds (together with the Filers, the Portfolio Advisors).
Each Fund has an independent review committee (the IRC) as required by National Instrument 81-107 – Independent Review Committee for Investment Funds (NI 81-107).
Each of Blackmont Capital Inc. (Blackmont), Scotia Capital Inc., Scotia Capital (USA) Inc. and Dundee Securities Corporation (together, the Present Related Dealers) is a broker or dealer engaged in trading in securities.
Each Present Related Dealer is a “related person or company” of each Filer within the meaning of the Legislation because:
(a) CI Financial Corp. is both a substantial security holder of each Filer and holds a significant interest in Blackmont; and
(b) The Bank of Nova Scotia is both a substantial security holder of each Filer and holds a significant interest in each Present Related Dealer.
In the future, additional brokers or dealers engaged in trading in securities may become a related person or company of the Filers (the Future Related Dealers and, together with the Present Related Dealers, the Related Dealers).
As disclosed in the annual information forms or prospectuses of the Funds, each Portfolio Advisor may arrange for a purchase or sale of securities by a Fund (a Portfolio Trade) to be executed through a Related Dealer (a Related Dealer Executed Trade), provided that the Related Dealer Executed Trade is made on a “best execution” basis, which includes that the trade is made on terms and conditions comparable to those offered by unrelated brokers and dealers.
The IRC of each Fund has given its positive recommendation for the Funds to effect Related Dealer Executed Trades, subject to the conditions and parameters set in such recommendation.
The Portfolio Advisors have discretion to allocate Portfolio Trades in any manner that they believe to be in the Funds’ best interests. The Related Dealer Executed Trades reflect the business judgment of the Portfolio Advisors uninfluenced by considerations other than the best interests of the Funds. In allocating Related Dealer Executed Trades, consideration is given to commission rates and to research, execution and other services offered.
Each Fund prepares and files interim and annual management reports of fund performance (MRFPs) under National Instrument 81-106 – Investment Fund Continuous Disclosure (NI 81-106). The MRFPs disclose the following information with respect to Related Dealer Executed Trades that occurred during the period to which the MRFP relates: the identity of the Related Dealer; the relationship of the Related Dealer to the Fund; the purpose of the transaction; the measurement basis used to determine the recorded amount and any ongoing commitments to the Related Dealer; the dollar amount of commission, spread or any other fees that the Fund paid to the Related Dealer in connection with Related Dealer Executed Trades; and whether the Fund has relied upon the positive recommendation of its IRC to proceed with Related Dealer Executed Trades and details of any conditions or parameters of such recommendation.
Each Fund also maintains records of all portfolio transactions undertaken by the Fund as required by NI 81-106.
The Monthly Reporting Requirement obligates each Filer to prepare a report of any Related Dealer Executed Trades by each Fund for which the Filer is the manager and file such reports within 30 days of the end of the month in which the Related Dealer Executed Trade occurs. This report discloses, with respect to each Related Dealer Executed Trade: the issuer of the securities purchased or sold; the class or designation of the securities; the amount or number of securities; the consideration; the name of the Related Dealer receiving a fee; the name of the person or company that paid the fee to the Related Dealer; and the amount of the fee received by the Related Dealer.
Each Fund’s MRFPs disclose the amount of brokerage commission paid by each Fund on trades with Related Dealers. This information is presented on a Fund-by-Fund basis.
It is costly and time consuming to prepare and file the reports contemplated by the Monthly Reporting Requirement, which contain information similar to that required by NI 81-106 to be disclosed in the MRFPs, on a monthly and segregated basis for each Fund.
Decision
Each of the Passport Review Decision Maker and the Coordinated Review 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 Passport Review Decision Maker and the Coordinated Review Decision Makers under the Legislation is that the Relief is granted provided that:
(a) the MRFPs for each Fund disclose:
(i) the name of the Related Dealer;
(ii) the amount of fees paid to each Related Dealer, and
(iii) the person or company who paid the fees, if they were not paid by the Fund; and
(b) the records of portfolio transactions maintained by each Fund include, separately for every portfolio transaction effected by the Fund through a Related Dealer:
(i) the name of the Related Dealer;
(ii) the amount of fees paid to the Related Dealer; and
(iii) the person or company who paid the fees.
“Paulette Kennedy”
“Margot Howard”
Paulette Kennedy
Commissioner
Margot Howard
Commissioner
(Name)
(Title)
Ontario Securities Commission
Ontario Securities Commission
SCHEDULE A
CI Alpine Growth Equity Fund
CI American Equity Fund
CI American Equity Corporate Class
CI American ManagersCorporate Class
CI American Small Companies Fund
CI American Small Companies Corporate Class
CI American Value Fund
CI American Value Corporate Class
CI Canadian Investment Fund
CI Canadian Investment Corporate Class
CI Canadian Small/Mid Cap Fund
CI Emerging Markets Fund
CI Emerging Markets Corporate Class
CI European Fund
CI European Corporate Class
CI Global Fund
CI Global Corporate Class
CI Global Health Sciences Corporate Class
CI Global Managers Corporate Class
CI Global Small Companies Fund
CI Global Small Companies Corporate Class
CI Global Science & Technology Corporate Class
CI Global Value Fund
CI Global Value Corporate Class
CI International Fund
CI International Corporate Class
CI International Value Fund
CI International Value Corporate Class
CI Japanese Corporate Class
CI Pacific Fund
CI Pacific Corporate Class
CI Value Trust Corporate Class
CI International Balanced Fund
CI International Balanced Corporate Class
CI Money Market Fund
CI US Money Market Fund
CI Short-Term Corporate Class
CI Short-Term US$ Corporate Class
CI Global Bond Fund
CI Global Bond Corporate Class
CI Can-Am Small Cap Corporate Class
CI Global High Dividend Advantage Fund
CI Global High Dividend Advantage Corporate Class
CI Short-Term Advantage Corporate Class
CI Short-Term Advantage Trust
Harbour Fund
Harbour Corporate Class
Harbour Foreign Equity Corporate Class
Harbour Foreign Growth & Income Corporate Class
Harbour Growth & Income Fund
Harbour Growth & Income Corporate Class
Signature Canadian Resource Fund
Signature Canadian Resource Corporate Class
Signature Select Canadian Fund
Signature Select Canadian Corporate Class
Signature Canadian Balanced Fund
Signature Dividend Fund
Signature Dividend Corporate Class
Signature High Income Fund
Signature High Income Corporate Class
Signature Corporate Bond Fund
Signature Corporate Bond Corporate Class
Signature Income & Growth Fund
Signature Income & Growth Corporate Class
Signature Global Income & Growth Fund
Signature Global Income & Growth Corporate Class
Signature Global Energy Corporate Class
Signature Canadian Bond Fund
Signature Canadian Bond Corporate Class
Signature Short-Term Bond Fund
Signature Mortgage Fund
Portfolio Series Conservative Balanced Fund
Portfolio Series Balanced Growth Fund
Portfolio Series Growth Fund
Portfolio Series Maximum Growth Fund
Portfolio Series Income Fund
Portfolio Series Conservative Fund
Portfolio Series Balanced Fund
Synergy Canadian Corporate Class
Synergy Global Corporate Class
Synergy American Fund
Synergy American Corporate Class
Synergy Tactical Asset Allocation Fund
Select Income Managed Corporate Class
Select Canadian Equity Managed Corporate Class
Select U.S. Equity Managed Corporate Class
Select International Equity Managed Corporate Class
Select 100i Managed Portfolio Corporate Class
Select 80i20e Managed Portfolio Corporate Class
Select 70i30e Managed Portfolio Corporate Class
Select 60i40e Managed Portfolio Corporate Class
Select 50i50e Managed Portfolio Corporate Class
Select 40i60e Managed Portfolio Corporate Class
Select 30i70e Managed Portfolio Corporate Class
Select 20i80e Managed Portfolio Corporate Class
Select 100e Managed Portfolio Corporate Class
Select Staging Fund
Select Income Managed Fund
Select Canadian Equity Managed Fund
Select U.S. Equity Managed Fund
Select International Equity Managed Fund
Cambridge Canadian Equity Corporate Class
Cambridge Global Equity Corporate Class
Cambridge Canadian Asset Allocation Corporate Class
Lakeview Disciplined Leadership Canadian Equity Fund
Lakeview Disciplined Leadership U.S. Equity Fund
Lakeview Disciplined Leadership High Income Fund
Artisan Canadian T-Bill Portfolio
Artisan Most Conservative Portfolio
Artisan Conservative Portfolio
Artisan Moderate Portfolio
Artisan Growth Portfolio
Artisan High Growth Portfolio
Artisan Maximum Growth Portfolio
Artisan New Economy Portfolio
Cash Management Pool
Short Term Income Pool
Canadian Fixed Income Pool
Global Fixed Income Pool
Real Estate Investment Pool
Canadian Equity Small Cap Pool
Canadian Equity Value Pool
Canadian Equity Growth Pool
US Equity Value Pool
US Equity Growth Pool
International Equity Value Pool
International Equity Growth Pool
Emerging Markets Equity Pool
Enhanced Income Pool
US Equity Small Cap Pool
Short Term Income Corporate Class
Canadian Fixed Income Corporate Class
Global Fixed Income Corporate Class
Real Estate Investment Corporate Class
Canadian Equity Small Cap Corporate Class
Canadian Equity Value Corporate Class
Canadian Equity Growth Corporate Class
US Equity Value Corporate Class
US Equity Growth Corporate Class
International Equity Value Corporate Class
International Equity Growth Corporate Class
Emerging Markets Equity Corporate Class
Enhanced Income Corporate Class
US Equity Small Cap Corporate Class
Canadian Equity Alpha Corporate Class
US Equity Value Currency Hedged Corporate Class
US Equity Alpha Corporate Class
International Equity Value Currency Hedged Corporate Class
International Equity Alpha Corporate Class
Institutional Managed Income Pool
Institutional Managed Canadian Equity Pool
Institutional Managed US Equity Pool
Institutional Managed International Equity Pool
CIX Split Corp.
Headnote
National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions – Relief granted from conflict of interest reporting requirements in subsection 117(1)(c) of the Securities Act (Ontario) for transactions involving related parties of a mutual fund – monthly reporting not required provided that similar disclosure is made in the management reports on fund performance for each mutual fund and that certain records of related party portfolio transactions are kept by the mutual funds.
Applicable Legislative Provisions
Securities Act (Ontario), subsections 117(1)(c) and 117(2).