November 21, 2017
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 ARROW CAPITAL MANAGEMENT INC. (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Exemplar Investment Grade Fund (the Proposed Fund), the Proposed Fund having an exchange traded series and a mutual fund series of a mutual fund, and such other mutual funds as are managed and may be managed by the Filer now or in the future and that are structured in the same manner as the Proposed Fund (the Other Funds and together with the Proposed Fund, the Funds and each individually, a Fund) for a decision under the securities legislation of the Jurisdiction (the Legislation) that grants exemptive relief to the Filer and each Fund as set forth below:
(a) an exemption from section 2.6(a)(i) of National Instrument 81-102 Investment Funds (NI 81-102) to permit the Proposed Fund and any other mutual funds that are managed or may be managed by the Filer now or in the future (collectively, the Borrowing Funds and each, a Borrowing Fund) to borrow cash from the custodian of the Borrowing Funds (the Custodian) and, if required by the Custodian, to provide a security interest over any of its portfolio assets as a temporary measure to fund the portion of any distribution payable to Securityholders (as defined below) that represents, in the aggregate, amounts that are owing to, but not yet been received by, the Borrowing Fund (the Borrowing Requirement); and
(b) an exemption to permit the Filer and each Fund to treat the ETF Securities and the Mutual Fund Securities (as defined below) as if such securities were separate funds in connection with their compliance with the provisions of Parts 9, 10 and 14 of NI 81-102 (the Sales and Redemptions Requirements),
(collectively, 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 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 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 from time to time.
Authorized Dealer means a registered dealer that has entered, or intends to enter, into an agreement with the manager of a Fund authorizing the dealer to subscribe for, purchase and redeem Creation Units from one or more Funds on a continuous basis from time to time.
Basket of Securities means, in relation to the ETF Securities of a Fund, a group of securities or assets representing the constituents of the Fund.
Creation Units means newly issued ETF Securities.
Designated Broker means a registered dealer that has entered, or intends to enter, into an agreement with the Filer or an affiliate of the Filer on behalf of a Fund to perform certain duties in relation to the ETF Securities of the Fund, including the posting of a liquid two-way market for the trading of the Fund’s ETF Securities on the TSX or another Marketplace.
ETF Securities means securities of an exchange-traded series of a Fund that are listed or will be listed on the TSX or another Marketplace and that will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
Form 81-101F1 means Form 81-101F1 Contents of Simplified Prospectus.
Marketplace means a “marketplace” as defined in National Instrument 21-101 Marketplace Operations that is located in Canada.
Mutual Fund Securities means securities of a non-exchange-traded series of a Fund that are or will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
NI 81-101 means National Instrument 81-101 Mutual Fund Prospectus Disclosure.
Other Dealer means a registered dealer that acts as authorized dealer or designated broker to exchange-traded funds that are not managed by the Filer and that has received relief under a Prospectus Delivery Decision.
Prescribed Number of ETF Securities means, in relation to a Fund, the number of ETF Securities of the Fund determined by the Filer from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.
Prospectus Delivery Decision means a decision granting relief from the Prospectus Delivery Requirement to an Affiliate Dealer, Authorized Dealer, Designated Broker or Other Dealer dated August 24, 2015 and any subsequent decision granted to an Affiliate Dealer, Authorized Dealer, Designated Broker or Other Dealer that grants similar relief.
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.
Securityholders means, in the case of a Fund, beneficial or registered holders of ETF Securities or Mutual Fund Securities of a Fund, as applicable and, in the case of a Borrowing Fund, beneficial or registered holders of securities of securities of the Borrowing Fund.
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a corporation incorporated under the laws of the Province of Ontario with its head office located in Toronto, Ontario.
The Filer is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador, a portfolio manager in Ontario, an exempt market dealer in Ontario, Alberta, British Columbia and Quebec and commodity trading manager in Ontario.
The Filer is, or will be, the investment fund manager of each Fund and each Borrowing Fund, and the Filer or an affiliate of the Filer is, or will be, the portfolio manager of each Fund and each Borrowing Fund. Another portfolio advisor is, or may be, the sub-advisor to certain of the Funds and Borrowing Funds.
The Filer is not in default of securities legislation in any of the Jurisdictions.
The Proposed ETF Fund is established under the laws of Ontario as an investment fund that is an open-ended mutual fund trust. The Funds and the Borrowing Funds will be either trusts or corporations or classes thereof governed by the laws of the Jurisdiction. Each Fund and Borrowing Fund is, or will be, a reporting issuer in the Jurisdictions in which its securities are distributed. Each Fund offers, or