May 17, 2018
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
BMO Investments Inc.
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DECISION
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## Background
The principal regulator in the Jurisdiction has received an application from BMO Investments Inc. (together with its affiliates, the Filer) on behalf of:
(a) the BMO mutual funds listed in Schedule A (collectively, the Proposed ETF Funds), each of which offers an exchange-traded series, and such other exchange-traded series 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 ETF Funds (the Other Funds) and together with the Proposed ETF Funds, the Funds and each individually, a Fund) for a decision under the securities legislation of the Jurisdiction (the Legislation) that:
a. permits each Fund to borrow cash from the custodian of the Fund (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 Fund (the Borrowing Requirement); and
b. permits 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 ETF Exemptions);
(b) existing mutual funds managed by the Filer (the Existing Top Funds) and additional mutual funds that may be managed by the Filer now or in the future (together with the Existing Top Funds, the Top Funds) for a decision under the Legislation that:
a. permits each Top Fund to purchase an ETF Security of, or enter into a specified derivatives transaction with respect to, a Fund, the ETF Securities of which are not “index participation unit” (IPUs), as such term is defined in NI 81-102 even though, immediately after the transaction, more than 10% of the net asset value of the Top Fund would be invested, directly or indirectly, in ETF Securities (the Concentration Restriction);
b. permits each Top Fund to purchase an ETF Security, the ETF Securities of which are not IPUs such that, after the purchase, the Top Fund would hold ETF Securities representing more than 10% of:
i. the votes attaching to the outstanding voting securities of the Fund; or
ii. the outstanding equity securities of the Fund (the Control Restriction); and
c. permits each Top Fund to pay brokerage commissions in relation to its purchase and sale on the TSX or another Marketplace (as defined below) of ETF Securities (the Payment of Fees Restrictions)
(collectively, the Top Fund Exemptions, and together with the ETF Exemptions, 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 and MI 11-102 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 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 a Fund, a group of securities or assets representing the constituents of the Fund.
Designated Broker means a registered dealer that has entered, or intends to enter, into an agreement with the Filer to perform certain duties in relation to the ETF Securities, 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 ETF 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.
ETF Series means an exchange-traded series of a Fund.
Form 41-101F2 means Form 41-101F2 Information Required in an Investment Fund Prospectus.
Form 81-101F1 means Form 81-101F1 Contents of Simplified Prospectus.
Marketplace means a “marketplace” as defined in National Instrument 21-101 Marketplace Operation 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 41-101 means National Instrument 41-101 General Prospectus Requirements.
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 beneficial or registered holders of ETF Securities or Mutual Fund Securities, as applicable.
TSX means the Toronto Stock Exchange.
## Representations
This decision is based on the following facts represented by the Filer:
### The Filer
1. BMO Investments Inc. is a corporation governed by the laws of Canada with its head office in Toronto, Ontario.
2. BMO Investments Inc. is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador, and as a mutual fund dealer in each of the Jurisdictions.
3. The Filer is, or will be, the investment fund manager of each Fund.
minicounsel