Headnote NP 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 concerning financial, tax or estate planning matters.
Applicable Legislative Provisions National Instrument 81-105 Mutual Fund Sales Practices, ss.5.1(a) and 9.1.
January 14, 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 CI INVESTMENTS INC.
(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 (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 a participating dealer direct costs incurred by the participating dealer relating to a sale 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 financial, tax or estate planning matters (the “Requested Relief”).
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 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, Yukon, Northwest Territories and Nunavut (together with Ontario, the “Jurisdictions”).
Interpretation
Terms defined in National Instrument 14-101 – Definitions, MI 11-102 and NI 81-105 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a corporation organized under the laws of the Province of Ontario with its head office based in Toronto, Ontario.
The Filer manages a number of retail mutual funds (the “Funds”) that are qualified for distribution to investors in each of the Jurisdictions. Securities of the Funds are distributed by participating dealers in the 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, in particular Part 5 of NI 81-105, in respect of its marketing and educational practices. The Filer is not in default of securities legislation in any of the Jurisdictions.
Under subsection 5.1(a) of NI 81-105, the Filer is 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.
Subsection 5.1(a) of NI 81-105 prohibits the Filer 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 financial, tax or estate planning matters.
The Filer has expertise in financial, 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 Filer wishes to sponsor Cooperative Marketing Initiatives where the primary purpose of the Cooperative Marketing Initiatives is to provide educational information concerning financial, tax or estate planning matters. The Filer will comply with subsections 5.1(b)-(e) of NI 81-105 in respect of such Cooperative Marketing Initiatives it sponsors.
The Filer is of the view that sponsoring Cooperative Marketing Initiatives where the primary purpose is to provide educational information about financial, tax or estate planning matters will benefit investors.
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 Requested Relief is granted, provided that in respect of a Cooperative Marketing Initiative, the primary purpose of which is to provide educational information concerning financial, tax or estate planning matters:
(i) the Filer does not require any participating dealer to sell any of the Funds or other financial products to investors;
(ii) 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 the Funds to investors;
(iii) the materials presented in a Cooperative Marketing Initiative concerning financial, tax or estate planning matters contain only general educational information about financial, tax or estate planning matters;
(iv) the Filer prepares or approves the content of the general educational information about financial, tax or estate planning matters presented in a Cooperative Marketing Initiative it sponsors and selects or approves an appropriately-qualified speaker for each presentation about financial, tax or estate planning matters delivered in a Cooperative Marketing Initiative;
(v) any general educational information about financial, 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 financial, 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.
Signed
Signed
Name: Wes M. Scott
Title: Commissioner
Ontario Securities Commission
Name: Vern Krishna
Title: Commissioner
Ontario Securities Commission