Headnote
NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – mutual fund manager granted exemption to replace earlier relief which expired as a result of sunset clause – exemption allows mutual fund manager to pay a participating dealer direct costs incurred 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 concerning tax or estate planning matters – exemption will also permit a participating dealer to solicit and accept payments of direct costs relating to such sales communications, investor conferences or investor seminars in accordance with subsection 2.2(2) of NI 81–105 – initial sunset clause will continue to apply to new applicants seeking similar exemptive relief
Applicable Legislative Provisions
National Instrument 81-105 Mutual Fund Sales Practices, ss.5.1(a) and 9.1.
August 9, 2011
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 MACKENZIE FINANCIAL CORPORATION (“Mackenzie”)
AND
COUNSEL PORTFOLIO SERVICES INC. (“Counsel”)
(together, 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 of the principal regulator (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 (each individually referred to as a Cooperative Marketing Initiative and collectively as Cooperative Marketing Initiatives) if the primary purpose of the Cooperative Marketing Initiative is to provide educational information concerning tax or estate 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) 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut (the "Jurisdictions").
Interpretation
Defined terms contained in National Instrument 14-101 Definitions, MI 11-102 and NI 81-105 have the same meaning in this decision unless they are otherwise defined in this decision.
Representations
This decision is based on the following facts represented by the Filers:
Mackenzie is a corporation organized under the laws of the Province of Ontario with its head office based in Toronto, Ontario.
Counsel is a corporation organized under the laws of the Province of Ontario with its head office based in Mississauga, Ontario.
Mackenzie is an indirect wholly-owned subsidiary of IGM Financial Inc. (IGM). Counsel is an indirect wholly-owned subsidiary of Investment Planning Counsel Inc. (IPCI), and IPCI is majority owned by IGM. Mackenzie and Counsel are affiliates of each other as each of them is an indirect subsidiary of IGM.
Mackenzie manages a number of retail mutual funds (the Mackenzie Funds) that are qualified for distribution to investors in each of the provinces and territories of Canada (the Jurisdictions).
Counsel manages a number of retail mutual funds (the Counsel Funds, and together with the Mackenzie Funds, the Funds) that are qualified for distribution to investors in the Jurisdictions (except for the Province of Quebec).
Each of Mackenzie and Counsel is a "member of the organization" (as that term is defined in NI 81-105) of the Funds as each is the manager of the Mackenzie Funds and the Counsel Funds, respectively.
The Funds are distributed by participating dealers that are not related to the Filers and by participating dealers that are affiliates of the Filers (the Affiliated Dealers).
The Affiliated Dealers include: Investors Group Securities Inc., M.R.S Securities Services Inc. and IPC Securities Corporation (each an investment dealer) and IPC Investment Corporation, Investors Group Financial Services Inc., M.R.S. Inc. and M.R.S. Correspondent Corporation (each a mutual fund dealer). The Affiliated Dealers are affiliates of the Filers as they are also indirect subsidiaries of IGM. The Affiliated Dealers may hold, sell, and/or recommend securities of the Funds in their capacity as participating dealers of the Funds.
The Filers and other "members of the organization" (as that term is defined in NI 81-105) of the Funds do not encourage the Affiliated Dealers and their representatives to recommend the Funds over unrelated mutual funds.
The Filers comply with NI 81-105, in particular Part 5 of NI 81-105, in respect of their marketing and educational practices. Other than as permitted by NI 81-105, the Filers do not provide any participating dealers and their representatives with any incentive for recommending the Funds to investors.
Under subsection 5.1(a) of NI 81-105, the Filers are currently permitted to pay a participating dealer direct costs incurred by the participating dealer relating to a Cooperative Marketing Initiative if the primary purpose of the Cooperative Marketing Initiative is to promote, or provide educational information concerning, a mutual fund, the mutual fund family of which the mutual fund is a member, or mutual funds generally.
Under subsection 5.2(a) of NI 81-105, the Filers are permitted to sponsor events attended by representatives of participating dealers which have the provision of educational information about, among other things, financial planning, investing in securities or mutual fund industry matters as their primary purpose.
Subsection 5.1(a) prohibits the Filers from paying to a participating dealer direct costs incurred by the participating dealer relating to a Cooperative Marketing Initiative where the primary purpose is to provide educational information about tax or estate planning matters.
The Filers have expertise in tax and estate planning matters or may retain others with such expertise. 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 tax or estate planning matters. The Filers will comply with subsections 5.1(b) -- (e) of NI 81-105 in respect of such Cooperative Marketing Initiatives they sponsor.
The Filers have previously applied for and obtained the Exemption Sought, and Cooperative Marketing Initiatives conducted in respect of such previously granted exemption have been carried out in accordance with the terms and conditions of that exemption and in compliance with the applicable rules set out in NI 81-105.
The Filers are of the view that sponsoring Cooperative Marketing Initiatives where the primary purpose is to provide educational information about tax or estate planning matters will benefit investors.
The Filers are of the view that participating dealers of its Funds do not have vested interests in selling their Funds over other mutual funds.
Each Filer has not engaged in any Cooperative Marketing Initiatives during the period between March 10, 2011 and August 9, 2011.
Each Filer has applied for registration as an investment fund manager in Ontario.
The Filers and other relevant parties are not in default of securities legislation in the Jurisdiction.
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 the primary purpose of which is to provide educational information concerning tax or estate planning matters:
(i) the Filers do not require any participating dealer to sell any of its Funds or other financial products to investors;
(ii) 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 its Funds to investors;
(iii) the materials presented in a Cooperative Marketing Initiative concerning tax or estate planning matters contain only general educational information about tax or estate planning matters;
(iv) the Filers prepare or approve the content of the general educational information about tax or estate planning matters presented in a Cooperative Marketing Initiative and selects or approves an appropriately qualified speaker for each presentation about tax or estate planning matters delivered in a Cooperative Marketing Initiative;
(v) any general educational information about tax or estate 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
(vi) any general educational information about tax or estate 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.
“James E.A. Turner” “Paulette L. Kennedy”
__________________________ ___________________________
Name: James E.A. Turner Name: Paulette L. Kennedy
Title: Commissioner Title: Commissioner
Ontario Securities Commission Ontario Securities Commission