Headnote National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -Mutual fund manager granted exemption from subsection 5.1(a) of NI 81-105 to allow 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 on financial planning matters. Applicable Legislative Provisions National Instrument 81-105 Mutual Fund Sales Practices, ss.5.1(a) and 9.1.
April 4, 2014
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
Fidelity Investments Canada ULC (the “Filer”)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer 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 Filer 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 (collectively, the “Cooperative Marketing Initiatives” and each a “Cooperative Marketing Initiative”) if the primary purpose of the Cooperative Marketing Initiative is to provide educational information concerning financial 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 Filer has provided notice that 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, Northwest Territories, Yukon and Nunavut (the “Passport Jurisdictions”)
Interpretation
Defined terms in National Instrument 14-101 Definitions, MI 11-102 or NI 81-105 have the same meaning in this Decision, unless otherwise defined.
Representations
This Decision is based on the following facts represented by the Filer:
The Filer is a corporation continued under the laws of Alberta with its head office based in Toronto, Ontario.
The Filer is not in default of the securities legislation of any jurisdiction of Canada.
The Filer manufactures and manages a number of retail mutual funds (the “Funds”) that are qualified for distribution to investors in each province and territory of Canada. The securities of the Funds are distributed by participating dealers in the Jurisdiction and Passport Jurisdictions.
The Filer is a “member of the organization” (as that term is defined in NI 81-105) of the Funds as it is the manager of the Funds.
The Filer complies with NI 81-105, including Part 5 of NI 81-105, in respect of its marketing and educational practices.
Under subsection 5.1(a) of NI 81-105, the Filer is 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.
Subsection 5.1(a) of NI 81-105 prohibits the Filer from paying to a participating dealer the direct costs incurred by it relating to a Cooperative Marketing Initiative where the primary purpose is to provide educational information about financial planning matters. Consequently, the Filer is not permitted to sponsor the cost of sales communications, investor seminars or investor conferences prepared or presented by participating dealers where the main topics discussed include investment planning, retirement planning, tax planning and estate planning, each of which are aspects of financial planning.
The Filer has expertise in financial planning matters, including investment, retirement, tax and estate planning, or may retain others with such expertise. In addition to the topics currently permitted under subsection 5.1(a) of NI 81-105, the Filer wishes to sponsor Cooperative Marketing Initiatives whose primary purpose is to provide educational information concerning financial planning, including such topics as investment, retirement, tax and estate planning. The Filer will otherwise comply with subsections 5.1(b) through (e) of NI 81-105 in respect of the Cooperative Marketing Initiatives it sponsors.
The Filer submits that as mutual funds typically form only a portion of an investor’s portfolio, mutual funds should be considered in the broader context of an investor’s financial planning, including investment, retirement, tax and estate planning. Allowing the Filer to sponsor Cooperative Marketing Initiatives on financial planning matters will benefit investors as it will facilitate and potentially increase investors’ access to educational information on such matters, which will better equip them to make financial decisions that involve mutual funds.
Under sections 5.2 and 5.5 of NI 81-105, the Filer is permitted to sponsor the costs incurred by participating dealers in attending or organizing and presenting at conferences where the primary purpose is the provision of educational information on, among other things, financial planning. Specifically, under subsection 5.2(a) of NI-81-105, the Filer is permitted to provide a non-monetary benefit to a representative of a participating dealer by allowing him or her to attend a conference or seminar organized and presented by the Filer where the primary purpose is the provision of educational information about, among other things, financial planning, investing in securities or mutual fund industry matters. Similarly, under subsection 5.5(a) of NI 81-105, the Filer is permitted to pay to a participating dealer part of the direct costs the participating dealer incurs in organizing or presenting at a conference or seminar that is not an investor conference or investor seminar referred to in section 5.1, where the primary purpose is the provision of educational information about, among other things, financial planning, investing in securities or mutual fund industry matters.
The Filer will not require participating dealers to sell any of its Funds or other financial products to investors as a condition of the Filer’s sponsorship of a Cooperative Marketing Initiative.
The Filer will pay for its sponsorship of a Cooperative Marketing Initiative out of its normal sources of revenue. Accordingly, the sponsorship cost will not be borne by the Funds.
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 whose primary purpose is to provide educational information concerning financial planning matters:
(i) the Filer otherwise complies with the requirements of subsections 5.1(b) through (e) of NI 81-105;
(ii) the Filer does not require any participating dealer to sell any of its Funds or other financial products to investors;
(iii) other than as permitted by NI 81-105, the Filer does not provide participating dealers and their representatives with any financial or other incentives for recommending any of its Funds to investors;
(iv) the materials presented in a Cooperative Marketing Initiative concerning financial planning matters, including investment, retirement, tax and estate planning matters, contain only general educational information about such matters;
(v) the Filer prepares or approves the content of the general educational information about financial planning matters presented in a Cooperative Marketing Initiative and selects or approves an appropriately qualified speaker for each presentation about financial planning matters delivered in a Cooperative Marketing Initiative;
(vi) any general educational information about financial 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
(vii) any general educational information about financial 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.
“Judith Robertson” ________ “Anne Marie Ryan” ________
Name: Judith N. Robertson Name: Anne Marie Ryan
Title: Commissioner Title: Commissioner
Ontario Securities Commission Ontario Securities Commission