August 24, 2015
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
RBC GLOBAL ASSET MANAGEMENT INC.
(the Filer)
AND
THE EXISTING EXCHANGE-TRADED FUNDS MANAGED BY THE FILER (the Existing Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Existing Funds and such other exchange-traded mutual funds as the Filer, or an affiliate of the Filer, may establish in the future (the Future Funds, and together with the Existing Funds, the ETFs and individually, an ETF) for a decision under the securities legislation of the principal regulator (the Legislation) that:
- exempts the Filer and each ETF from
(a) the requirement to include a certificate of an underwriter in an ETF’s prospectus (the Underwriter’s Certificate Requirement); and
(b) the requirement to include in an ETF’s prospectus the statement respecting purchasers’ statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed in item 36.2 of Form 41-101F2 Information Required in an Investment Fund Prospectus (the Prospectus Form Requirement)
(collectively, the Exemption Sought);
varies all previous decisions granted by the principal regulator prior to July 19, 2013 that exempted the Filer and the ETFs from the Underwriter’s Certificate Requirement (the Prior Underwriter’s Certificate Relief), by revoking the Prior Underwriter’s Certificate Relief and by revoking, as applicable, the representations relating to prospectus delivery contained in such decisions (the Prospectus Delivery Representations); and
revokes a decision the Filer obtained from the principal regulator dated July 19, 2013 granting the Exemption Sought until September 1, 2015 (the Original Decision).
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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and National Instrument 81-102 Investment Funds (NI 81-102) have the same meaning if used in this decision, unless otherwise defined.
Affiliate Dealer means a registered dealer that is an affiliate of an Authorized Dealer or Designated Broker and that participates in the re-sale of Creation Units (as defined below) from time to time.
Authorized Dealer means a registered dealer that has entered, or intends to enter, into an agreement with the manager of an ETF (an ETF Manager) authorizing the dealer to subscribe for, purchase and redeem Creation Units from one or more ETFs on a continuous basis from time to time.
Designated Broker means a registered dealer that has entered, or intends to enter, into an agreement with an ETF Manager to perform certain duties in relation to the ETF, including posting a liquid two-way market for the trading of the ETF’s listed securities on the TSX or another marketplace.
ETF Facts means a prescribed disclosure document in accordance with the regulations, in respect of one or more classes or series of ETF Securities being distributed under a prospectus.
ETF Security means a listed security of an ETF.
Other Dealer means a registered dealer that acts as authorized dealer or designated broker to other exchange-traded funds that are not managed by the Filer and that has received relief under a Prospectus Delivery Decision.
Prospectus Delivery Decision means a decision granting relief from the Prospectus Delivery Requirement to a Designated Broker, Authorized Dealer, Affiliate Dealer or Other Dealer dated July 19, 2013, or any subsequent decision granting similar relief to a Designated Broker, Authorized Dealer, Affiliate Dealer or Other Dealer, and in each case, that is in effect at the relevant time.
Prospectus Delivery Requirement means the requirement that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement of the Legislation applies, send or deliver to the purchaser or its agent, unless the dealer has previously done so, the latest prospectus and any amendment either before entering into an agreement of purchase and sale resulting from the order or subscription, or not later than midnight on the second business day after entering into that agreement.
Summary Document means a document, in respect of one or more classes or series of ETF Securities being distributed under a prospectus, prepared in accordance with Schedule A.
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a corporation organized under the federal laws of Canada, with a head office in Ontario.
Each ETF is, or will be, a mutual fund governed by the laws of the Province of Ontario and a reporting issuer under the laws of some or all of the Jurisdictions.
Each ETF is, or will be, subject to NI 81-102, subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities.
Each ETF is, or will be, in continuous distribution. The ETF Securities of each ETF are, or will be, listed on the TSX or another marketplace in Canada.
The Filer has filed, or will file, a long form prospectus in accordance with National Instrument 41-101 General Prospectus Requirements on behalf of the ETFs, subject to any exemptions that have been or may be granted by the applicable securities regulatory authorities.
The Filer will act as the trustee, investment fund manager and portfolio adviser to the ETFs. The Filer is registered in the Province of Ontario as an adviser in the category of portfolio manager, as an adviser for commodities in the category of commodity trading manager, as a dealer in the category of exempt market dealer and as an investment fund manager.
ETF Securities are, or will be, distributed on a continuous basis in one or more of the Jurisdictions under a prospectus. ETF Securities may generally only be subscribed for or purchased directly from the ETFs by Authorized Dealers or Designated Brokers (Creation Units). Authorized Dealers or Designated Brokers subscribe for Creation Units for the purpose of facilitating investor purchases of ETF Securities on the TSX or another marketplace in Canada.
In addition to subscribing for and re-selling Creation Units, Authorized Dealers, Designated Brokers and Affiliate Dealers are also generally engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market. Other Dealers may also be engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market despite not being an Authorized Dealer, Designated Broker or Affiliate Dealer.
According to the Authorized Dealers and Designated Brokers, Creation Units are generally commingled with other ETF Securities purchased by the Authorized Dealers, Designated Brokers and Affiliate Dealers in the secondary market. As such, it is not practicable for the Authorized Dealers, Designated Brokers or Affiliate Dealers to determine whether a particular re-sale of ETF Securities involves Creation Units or ETF Securities purchased in the secondary market.
Designated Brokers perform certain other functions, which include standing in the market with a bid and ask price for ETF Securities for the purpose of maintaining liquidity for the ETF Securities.
Except for Authorized Dealer and Designated Broker subscriptions for Creation Units, as described above, and other distributions that are exempt from the Prospectus Delivery Requirement under the Legislation, ETF Securities generally may not be purchased directly from an ETF. Investors are generally expected to purchase and sell ETF Securities, directly or indirectly, through dealers executing