Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions –Relief granted from the Securities Act to permit a dealer to send or deliver the Fund Facts instead of the simplified prospectus to satisfy current prospectus delivery requirements subject to conditions – the right of withdrawal and right of rescission under securities legislation apply to the sending and delivery of the Fund Facts – sunset clause on relief – terms and conditions consistent with CSA Staff Notice 81-321 Early Use of the Fund Facts to Satisfy Prospectus Delivery Requirements.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S. 5, as am., sections 71 and 147.
January 31, 2012
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 ING DIRECT ASSET MANAGEMENT LIMITED
AND
IN THE MATTER OF ING DIRECT FUNDS LIMITED
DECISION
Background
The principal regulator in the Jurisdiction has received an application from ING Direct Asset Management Limited (Manager) and ING Direct Funds Limited (Dealer, together with the Manager, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (Legislation) for exemptive relief to permit the Dealer to send or deliver the most recently filed fund facts document (Fund Facts) to satisfy the requirement contained in the Legislation that obligates a dealer to send or deliver, within a specified time period and in a specified manner, the prospectus, and any amendment to the prospectus (Delivery Requirement), in respect of an order or subscription to purchase securities of a Fund (as defined below) (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 subsection 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, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Nunavut and Yukon (together with the Jurisdiction, the Passport Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions, and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Right of Withdrawal means the right, given to a purchaser under the Legislation, to withdraw from a purchase order for a security of a mutual fund if the dealer from which the purchaser purchases the security receives written notice evidencing the intention of the purchaser not to be bound by the purchase order within two days of receipt of the latest prospectus sent or delivered in compliance with the Delivery Requirement. In Québec, this right is called a right to rescind. Collectively, these rights are referred to as the Rights of Withdrawal.
Right of Rescission means the right of action, under the Legislation, for rescission or damages against a dealer, for failure of the dealer to send or deliver the prospectus to a purchaser of a security to whom a prospectus was required to be sent or delivered, but was not sent or delivered in compliance with the Delivery Requirement. In Québec, such a purchaser may apply to have the transaction rescinded or the price revised, at the purchaser's option, without prejudice to the purchaser's claim for damages. Collectively, these rights are referred to as the Rights of Rescission.
Representations
This decision is based on the following facts represented by the Filers:
The Manager is registered as an investment fund manager in the Jurisdiction. The Manager is the manager of the ING Direct Streetwise Funds (the Existing Funds).
The Dealer is registered as a mutual fund dealer in each of the Passport Jurisdictions. The Dealer is a member of the Mutual Fund Dealers Association of Canada and, in Québec, is a member of the Chambre de la sécurité financière. The Dealer is the principal distributor of the Existing Funds.
The head office of the Filers is located in Ontario.
Each of the Existing Funds and any future mutual funds managed by the Manager (the Existing Funds together with any future funds, the Funds) is, or will be, offered for sale on a continuous basis in one or more of the Passport Jurisdictions pursuant to a simplified prospectus (each, a Prospectus) governed by National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101).
Each Fund is, or will be, a reporting issuer in one or more of the Passport Jurisdictions.
Securities of the Funds are, or will be, distributed by the Dealer.
The Manager renewed the simplified prospectus for the Existing Funds on November 17, 2011 (the Current Prospectus). The Current Prospectus specified under Item 3 of Part A of Form 81-101F1 Contents of Simplified Prospectus that the Fund Facts is incorporated by reference into the Current Prospectus. The Dealer executed a certificate in the annual information form as principal distributor of the Existing Funds in support of that filing.
The Filers and the Existing Funds are not in default of securities legislation in any of the Passport Jurisdictions.
Pursuant to the Legislation, the Dealer has an obligation to send or deliver the Prospectus to a purchaser of a security of a Fund within two days of their purchase of the security.
Pursuant to the Canadian Securities Administrators' (the CSA) point of sale disclosure project for mutual funds (the Project), the CSA has determined that it is desirable to create a summary disclosure document called the Fund Facts.
CSA Staff Notice 81-319 Status Report on the Implementation of Point of Sale Disclosure for Mutual Funds, outlines the CSA's decision to implement the point of sale disclosure framework in stages.
Stage 1 of the Project became effective on January 1, 2011 by amending NI 81-101 and related instruments mandating a mutual fund to prepare and file a Fund Facts on the System for Electronic Document Analysis and Retrieval (SEDAR) for each relevant class or series of the mutual fund, and having the Fund Facts posted to the mutual fund's or its manager's website and delivered to any person upon request, at no cost.
Stage 2 of the Project proposes to allow delivery of the Fund Facts to satisfy the current requirement under the Legislation to send or deliver a prospectus within two days of purchasing a mutual fund.
The Filers have determined that it would be desirable to apply for relief consistent with the proposed requirements in Stage 2 of the Project prior to the implementation of the Stage 2 amendments and, accordingly, require an exemption to satisfy the Delivery Requirement, as contemplated by CSA Staff Notice 81-321 Early Use of Fund Facts to Satisfy Prospectus Delivery Requirements.
Investors will be able to request a copy of the Prospectus, at no cost, by contacting the Manager or the Dealer and will continue to be able to access the Prospectus on the SEDAR website and on the website of the Manager or the Fund (as applicable).
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:
- Prior to providing the Fund Facts to the Dealer to send or deliver in lieu of the Prospectus, the Manager:
(a) files a Fund Facts for the applicable class or series of securities of the Fund in accordance with the requirements of NI 81-101 and in the format prescribed by Form 81-101F3 Contents of Fund Facts Document;
(b) discloses in the Fund Facts for a specific class or series
(i) if management fees, administration fees and/or other fees are payable directly by investors to the Manager in respect of holding securities of that class or series of the mutual fund, the existence of such fees and, in any Fund Facts filed after the date of this decision and no later than the next renewal of the Prospectus for such class or series, the maximum management fees, administration fees and/or other fees that may be charged by the Manager to the investor; and
(ii) any requirement for an investor to participate in a fee-based arrangement with their dealer in order to be eligible to purchase the particular class or series of the mutual fund; and
(c) renews or amends the Prospectus that offers such class or series of the Fund to specify under Item 3 of Part A of Form 81-101F1 Contents of Simplified Prospectus that the Fund Facts is incorporated by reference into the Prospectus.
- A Fund Facts that is being sent or delivered will not be attached to, or bound with another Fund Facts unless each Fund Facts:
(a) relates to securities of a Fund that have been purchased by the investor; and
(b) is being sent or delivered pursuant to this decision.
The Manager and the Dealer relying on the ability to send or deliver Fund Facts in lieu of the Prospectus for the Funds managed by the Manager, grants to an investor purchasing the securities of a Fund a right equivalent to the Rights of Withdrawal upon the sending or delivery of the Fund Facts. The Rights of Withdrawal and the Rights of Rescission will no longer apply if the Fund Facts is sent or delivered to an investor in accordance with the time period and in the manner specified for the Prospectus under the Delivery Requirement.
The Dealer has in place written policies and procedures to ensure that there is compliance with the conditions of this decision.
In the event a Fund Facts is not sent or delivered in accordance with this decision, the Dealer will send or deliver a Prospectus and the Rights of Rescission will continue to apply to the failure to send or deliver the Prospectus.
Investors in the Funds managed by the Manager receive notice in a document other than the Fund Facts, at or before the time they receive the Fund Facts, indicating that they will have equivalent rights and protections otherwise applicable under securities law in their jurisdiction for the sending or delivery of the Fund Facts, which includes wording substantially similar to the following:
The Fund Facts for the securities you purchase is being sent or delivered to you instead of the simplified prospectus. You will continue to have the equivalent rights and protections otherwise applicable under securities law as if you were sent or delivered the simplified prospectus. Depending on your province or territory, you may have the right to:
withdraw from an agreement to buy securities of mutual funds within two business days after you receive a fund facts document, or
cancel your purchase within 48 hours after you receive confirmation of the purchase.
For more information, see the securities law of your province or territory or ask a lawyer.
The Manager will cause the Funds managed by it to honour any request made by an investor to exercise a right equivalent to the Rights of Withdrawal in respect of an agreement to purchase securities of a Fund managed by the Manager that the Dealer fails to honour, provided such request is made in respect of a validly exercised right.
The Exemption Sought terminates the earlier of (a) 6 months from any notice by the CSA that the Exemption Sought may no longer be relied upon; and (b) the coming into force of any legislation or rule relating to the sending or delivery of the Fund Facts to satisfy the Delivery Requirement.
"Margot C. Howard"
"Vern Krishna"
Name: Margot C. Howard Title: Commissioner Ontario Securities Commission
Name: Vern Krishna Title: Commissioner Ontario Securities Commission