Sun Life Assurance Company of Canada and Sun Life Capital Trust (Re), 2021 CanLII 118912

Ontario Commission des 22nd Floor 22e étage Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8

November 23, 2021

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 SUN LIFE ASSURANCE COMPANY OF CANADA (“SLA”) AND SUN LIFE CAPITAL TRUST (the “Trust”, and together with SLA, the “Filers”)

DECISION

Background

The Filers received an order dated January 13, 2017 (the “2017 Order”) of the securities regulatory authority or regulator of each province and territory of Canada exempting the Filers from the continuous disclosure and certification requirements of securities legislation as specified in the 2017 Order. The 2017 Order expires on January 15, 2022.

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the “Legislation”) to replace the 2017 Order, provided that:

1. SLA be granted an exemption (a “Continuous Disclosure Exemption”) from the Continuous Disclosure Requirements pursuant to section 13.1 of NI 51-102;

2. the Trust be granted a Continuous Disclosure Exemption from the Continuous Disclosure Requirements pursuant to section 13.1 of NI 51-102;

3. SLA be granted an exemption (a “Certification Exemption”) from the Certification Requirements pursuant to section 8.6 of NI 52-109;

4. the Trust be granted a Certification Exemption from the Certification Requirements pursuant to section 8.6 of NI 52-109;

5. insiders of SLA be granted an exemption (the “Insider Profile Exemption”) from the requirement to file an insider profile under section 2.1 of NI 55-102 pursuant to section 6.1 of NI 55-102;

6. insiders of SLA be granted an exemption (the “Insider Reporting Exemption”) from the Insider Reporting Requirements in respect of securities of SLA pursuant to section 121(2)(a)(ii) of the Act and section 10.1 of NI 55-104;

7. SLA be granted an exemption (the “Prospectus Qualification Exemption”) from the Prospectus Qualification Requirements in respect of a distribution of SLA Preferred Shares pursuant to section 8.1 of NI 44-101 and section 11.1 of NI 44-102; and

8. SLA be granted an exemption (the “Prospectus Disclosure Exemption”) from the Prospectus Disclosure Requirements in respect of a distribution of SLA Preferred Shares pursuant to section 8.1 of NI 44-101 and section 11.1 of NI 44-102 (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 Filers have provided notice that section 4.7(1) of Multilateral Instrument 11- 102 Passport System is intended to be relied upon in each of the provinces and territories other than Ontario.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision. In this decision, the following terms have the following meanings:

“Accumulated Unpaid Indicated Yield” means, at any time, an amount, if any, per SLEECS Series B equal to the Indicated Yield payable by the Trust thereon in respect of all previous Regular Distribution Dates remaining unpaid by the Trust;

“Act” means the Securities Act (Ontario);

“Affiliate” has the meaning given to such term in NI 51-102;

“AIF” means an annual information form;

“Annual Certificates” has the meaning given to such term in NI 52-109;

“Annual Filings” means an issuer’s AIF, annual financial statements and annual MD&A filed pursuant to NI 51-102;

“Automatic Exchange” means the automatic exchange of SLEECS — Series B for SLA Preferred Shares Series W upon the occurrence of certain events relating to the solvency of SLA or actions taken by the Superintendent in respect of the financial strength of SLA;

“Certification Requirements” means the requirements to file Annual Certificates under sections 4.1 and 6.1, as applicable, of NI 52-109 and Interim Certificates under sections 5.1 and 6.2, as applicable, of NI 52-109;

“Continuous Disclosure Filings” means:

(a) annual financial statements required by section 4.1 of NI 51-102;

(b) interim financial reports required by section 4.3 of NI 51-102;

(c) AIFs required by section 6.1 of NI 51-102;

(d) annual and interim MD&A required by section 5.1 of NI 51-102;

(e) press releases and material change reports required by section 7.1 of NI 51-102 in the case of material changes that are also material changes in the affairs of SLF; and

(f) material contracts required by section 12.2 of NI 51-102 in the case of material contracts that are also contracts of SLF;

“Continuous Disclosure Requirements” means the requirements contained in NI 51-102 to file and deliver, as applicable, the Continuous Disclosure Filings;

“Credit Facilities” means the unsecured, non-interest bearing credit facilities provided to the Trust by SLA or its Affiliates in connection with the offerings of the SLEECS;

“Credit Support Issuer” has the meaning given to such term in NI 51-102;

“Credit Support Issuer Exemptions” means the exemption from the Continuous Disclosure Requirements in section 13.4 of NI 51-102 and the exemption from the Certification Requirements in section 8.5 of NI 52-109;

“Current Indicated Yield” means, at any time, in respect of the current Distribution Period, an amount per SLEECS – Series B equal to the Indicated Yield pro-rated for the number of days elapsed from and including the first day of the Distribution Period to but excluding the date of redemption, provided that there has not been a Distribution Diversion Event with respect to such Distribution Period;

“Debt Guarantee” means the subordinated guarantee dated November 15, 2007 by SLF of SLA’s payment obligations in respect of the SLA 6.30% Subordinated Debentures, as amended and restated on January 12, 2012 and January 13, 2017;

“Deficiency Payment” means a payment calculated as follows:

(a) if at the date of determination a winding-up order has been made with respect to SLF, then the Deficiency Payment shall be the amount that, when paid to the holders of the SLA Preferred Shares outstanding as of the Triggering Event, will result in:

(i) the holders of SLA’s Class A Shares, Class B Shares, Class C Shares and Class E Shares outstanding as of the Triggering Event receiving payment of the same proportion of the unpaid amounts on such shares as the holders of such shares would have received had their claim to such unpaid amounts on the final distribution of surplus of SLF, if any, pursuant to section 95(1) of the WURA ranked on a parity with the claims of the holders of SLF’s Class A Shares; and

(ii) the holders of SLA’s Class D Shares outstanding as of the Triggering Event receiving payment of the same proportion of the unpaid amounts on such shares as the holders of such shares would have received had their claim to such unpaid amounts on the final distribution of surplus of SLF, if any, pursuant to section 95(1) of the WURA ranked on a parity with the claims of the holders of SLF’s Class B Shares; and

(b) in all circumstances other than those listed above, the Deficiency Payment shall be the amount equal to the aggregate unpaid amounts attributable to all classes of SLA Preferred Shares outstanding as of the Triggering Event;

“Designated Credit Support Securities” has the meaning given to such term in NI 51-102;

“Distribution Date” means the last day of June and December of each year that the Trust distributes its Net Distributable Funds;

“Distribution Diversion Event” means either (i) SLA fails to declare Dividends on the SLA Class B Non-Cumulative Preferred Shares Series A or (ii) if there are Public Preferred Shares outstanding, SLA fails to declare Dividends on any of the Public Preferred Shares in accordance with their respective terms, in either case, during the Dividend Reference Period;

“Distribution Period” means the periods commencing on and including June 25, 2002 to but excluding the next Distribution Date;

“Dividend Reference Period” means the three-month period immediately prior to the commencement of the Distribution Period ending on the day preceding the Distribution Date;

“Dividend Stopper Undertaking” means the covenant of SLA and SLF for the benefit of holders of SLEECS – Series B that, if the Trust fails on any Regular Distribution Date to pay the Indicated Yield on the SLEECS – Series B in full, SLA will not pay Dividends on the SLA Dividend Restricted Shares, being the Public Preferred Shares, or, if SLA Dividend Restricted Shares are not outstanding, SLF will not pay Dividends on the SLF Dividend Restricted Shares, in each case, until the 12th month following the Trust’s failure to pay the Indicated Yield in full on the SLEECS – Series B, unless the Trust first pays such Indicated Yield (or the unpaid portion thereof) to holders of SLEECS – Series B;

“Dividends” means cash dividends declared in the ordinary course by (i) SLA on the SLA Class B Preferred Shares Series A or on the Public Preferred Shares, if any such shares are outstanding, or (ii) SLF on the SLF Preferred Shares, if any such shares are outstanding, and on the SLF Common Shares;

“Early Redemption Price” means a price per SLEECS – Series B calculated to provide an annual yield thereon to June 30, 2032;

“Form 44-101F1” means Form 44-101F1 Short Form Prospectus Distributions of NI 44-101;

“full and unconditional credit support” has the meaning given to such term in National Instrument 41-101 General Prospectus Requirements;

“Holder Exchange Right” means the right of holders of SLEECS — Series B to exchange their SLEECS — Series B for SLA Preferred Shares Series X;

“ICA” means the Insurance Companies Act (Canada);

“Indicated Yield” means each fixed, semi-annual, non-cumulative cash distribution distributed to holders of a particular series of SLEECS;

“Insider Reporting Requirements” means the requirements for an insider of a reporting issuer to file:

(a) insider reports required by section 107 of the Act and sections 3.2 and 3.3 of NI 55-104 in respect of securities of the reporting issuer; and

(b) insider reports required under any provisions of securities legislation of any of the provinces or territories of Canada substantially similar to section 107 of the Act and sections 3.2 and 3.3 of NI 55-104 in respect of securities of the reporting issuer;

“Interim Certificates” has the meaning given to such term in NI 52-109;

“Interim Filings” means an issuer’s interim financial reports and interim MD&A filed pursuant to NI 51-102;

“Jurisdictions” means each of the provinces and territories of Canada;

“Liquidation Preference” means any amount to which holders of a particular class or series of SLA Preferred Shares are entitled in priority to any amounts which may be payable in respect of any class of shares of SLA which rank junior to such class or series in the event of a distribution of assets upon the liquidation, dissolution or winding-up of SLA;

“MD&A” means management’s discussion and analysis of the financial condition and results of operations;

“Net Distributable Funds” means, at any time, the amount by which the sum of (i) income and gains derived by the Trust and the Trust Assets, and (ii) amounts received by the Trust from SLA that are designated by SLA as such, in each case that have not previously been distributed to holders of SLEECS or the holder of the Special Trust Securities, exceeds expenses of the Trust and any required liability for expenses established by the Trust;

“New Debt Guarantee” has the meaning given to such term in paragraph 32;

“NI 44-101” means National Instrument 44-101 Short Form Prospectus Distributions;

“NI 44-102” means National Instrument 44-102 Shelf Distributions;

“NI 45-106” means National Instrument 45-106 Prospectus and Registration Exemptions;

“NI 51-102” means National Instrument 51-102 Continuous Disclosure Obligations;

“NI 52-109” means National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings;

“NI 55-102” means National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI);

“NI 55-104” means National Instrument 55-104 Insider Reporting Requirements and Exemptions;

“Preferred Share Guarantee” means the subordinated preferred share guarantee dated November 15, 2007 by SLF of the amount of any declared and unpaid dividends on the SLA Preferred Shares, the Redemption Price of the SLA Preferred Shares, and the Liquidation Preference of the SLA Preferred Shares, as amended and restated on January 12, 2012 and January 13, 2017;

“Prospectus Disclosure Requirements” means the requirements contained in section 6 (Earnings Coverage Ratio) and section 11.1, other than section 11.1(1)(5), (Incorporation by Reference) of Form 44-101F1 that issuers must satisfy to distribute securities pursuant to a short form prospectus or a base shelf prospectus, as applicable;

“Prospectus Qualification Requirements” means the requirements contained in Part 2 of NI 44-101 and Part 2 of NI 44-102 that issuers must satisfy to distribute securities pursuant to a short form prospectus or a base shelf prospectus, as applicable;

“Public Preferred Shares” means, at any time, preferred shares of SLA which, at that time (i) have been issued to the public (excluding any preferred shares of SLA held beneficially by affiliates of SLA), (ii) are listed on a recognized stock exchange, and (iii) have an aggregate liquidation entitlement of at least $200 million;

“Redemption Price” means the amount payable by SLA following presentation and surrender of any SLA Preferred Shares which have been redeemed by SLA or which are then redeemable by the holder pursuant to the terms of such SLA Preferred Shares;

“Regular Distribution Date” means a Distribution Date except (i) if SLA fails to declare Dividends on the SLA Class B Non-Cumulative Preferred Shares Series A or (ii) if there are Public Preferred Shares outstanding, SLA fails to declare Dividends on any of the Public Preferred Shares in accordance with their respective terms, in either case, during the Dividend Reference Period;

“Resulting SLA Preferred Shares” has the meaning given to such term in paragraph 10;

“SEDAR” means the System for Electronic Document Analysis and Retrieval;

“Series B Share Exchange Agreement” means the share exchange agreement between the Trust, SLF, SLA and CIBC Mellon Trust Company, as exchange trustee, with respect to the SLEECS — Series B;

“SLA 6.30% Subordinated Debentures” means the $150,000,000 principal amount of 6.30% subordinated debentures of SLA due 2028;

“SLA B Debenture” means the senior debenture issued by SLA to the Trust in respect of the SLEECS — Series B;

“SLA Dividend Restricted Shares” means the Public Preferred Shares;

“SLA Preferred Shares” means the Class A Shares, Class B Shares, Class C Shares, Class D Shares and Class E Shares of SLA outstanding from time to time, in each case of any series, whether or not such shares are outstanding as of the date hereof, other than shares issued to and held by SLF or its Affiliates;

“SLA Preferred Shares Series V” means the Class A Shares — Series V of SLA;

“SLA Preferred Shares Series W” means the Class A Shares — Series W of SLA;

“SLA Preferred Shares Series X” means the Class A Shares — Series X of SLA;

“SLA Subordinated Debentures” means any non-convertible debt securities issued by SLA and outstanding in the future (other than (i) debt securities issued to and held by SLF or its Affiliates, (ii) debt securities issued to the types of entities described in section 13.4(2)(c)(iii) of NI 51-102, and (iii) debt securities issued under exemptions from the prospectus requirement in section 2.35 of NI 45-106);

“SLEECS” means the Sun Life ExchangEable Capital Securities of the Trust;

“SLEECS Redemption Price” means $1,000 per SLEECS – Series B, together with any Unpaid Indicated Yield to the date of redemption;

“SLEECS — Series B Prospectus” means the final prospectus of the Trust dated June 18, 2002;

“SLF” means Sun Life Financial Inc.;

“SLF Common Shares” means common shares of SLF;

“SLF Dividend Restricted Shares” means, collectively the SLF Preferred Shares and SLF Common Shares;

“SLF Guarantees” means collectively, the Debt Guarantee, any New Debt Guarantee and the Preferred Share Guarantee;

“SLF Preferred Shares” means, collectively, the outstanding Class A Shares and Class B Shares of SLF from time to time;

“Special Trust Securities” means the Special Trust Securities of the Trust;

“summary financial information” has the meaning given to such term in NI 51-102;

“Sun Life Debenture” means a senior debenture issued in respect of the SLEECS – Series B by SLA, together with other senior debentures of SLA held by the Trust from time to time;

“Superintendent” means the Superintendent of Financial Institutions (Canada);

“Triggering Event” means if SLA:

(a) fails to make full payment of any dividend declared on any SLA Preferred Shares on the date required for such payment;

(b) fails to make full payment of the Redemption Price when due; or

(c) becomes subject to a winding-up order (as defined in the WURA or any order of similar effect made under applicable laws for the winding-up, liquidation or dissolution of SLA);

“Trust Assets” means the Sun Life Debentures and any securities into which the Sun Life Debentures are converted, cash, amounts receivable from third parties and other eligible investments;

“Trust Securities” means the Special Trust Securities and the SLEECS;

“TSX” means the Toronto Stock Exchange;

“Unpaid Indicated Yield” means, at any time, the sum of the Accumulated Unpaid Indicated Yield and the Current Indicated Yield; and

“WURA” means the Winding-up and Restructuring Act (Canada).

Representations

This decision is based on the following facts represented by the Filers:

SLF

1. SLF was incorporated on August 5, 1999 under the ICA and became the sole shareholder of SLA in 2000 pursuant to SLA’s demutualization. SLF is a reporting issuer or the equivalent in each province and territory of Canada that provides for a reporting issuer regime and is not, to the best of its knowledge, in default of any applicable requirement under the securities legislation of the Jurisdictions. SLF’s head office is located in Ontario.

2. SLF’s authorized capital consists of unlimited numbers of Class A Shares and Class B Shares, each issuable in series, and an unlimited number of Common Shares.

3. As of June 30, 2021, SLF had outstanding 585,613,843 Common Shares, 16,000,000 Class A Shares Series 1, 13,000,000 Class A Shares Series 2, 10,000,000 Class A Shares Series 3, 12,000,000 Class A Shares Series 4, 10,000,000 Class A Shares Series 5, 6,217,331 Class A Shares Series 8R, 4,982,669 Class A Shares Series 9QR, 6,919,928 Class A Shares Series 10R, 1,080,072 Class A Shares Series 11QR, 12,000,000 Class A Shares Series 12R and 1,000,000 Class A Shares Series 14. As of June 30, 2021, SLF also had outstanding one series of senior unsecured debentures in an aggregate principal amount of $300,000,000, seven series of subordinated unsecured debentures in an aggregate principal amount of $4,433,000,000 and one series of limited recourse capital notes (subordinated indebtedness) in the aggregate principal amount of $1,000,000,000.

4. SLF is qualified to use the short form prospectus system provided by NI 44-101.

SLA

5. SLA was formed by the amalgamation of its predecessor, Sun Life Assurance Company of Canada, and Clarica Life Insurance Company on December 31, 2002 and its governing statute is the ICA. SLA is a reporting issuer or the equivalent in each province and territory of Canada that provides for a reporting issuer regime and is not, to the best of its knowledge, in default of any applicable requirement under the securities legislation of the Jurisdictions. SLA’s head office is located in Ontario.

6. SLA’s authorized capital consists of unlimited numbers of Class A Shares, Class B Shares, Class C Shares, Class D Shares and Class E Shares, each issuable in series, and an unlimited number of common shares.

7. As of December 31, 2020, SLA had outstanding 427,179,546 common shares, 40,000 Class B Shares — Series A, 28,000,000 Class C Shares — Series 1, 14,000,000 Class C Shares — Series 2, 29,669,000 Class C Shares — Series 10, 14,000,000 Class C Shares — Series 11, 50,000,000 Class C Shares — Series 12 and 32,000,000 Class C Shares — Series 14, all of which are held by SLF. None of SLA’s outstanding shares are SLA Dividend Restricted Shares or Public Preferred Shares.

8. SLA has created and authorized the issuance of up to 8,000,000 SLA Preferred Shares Series W and 8,000,000 SLA Preferred Shares Series X for issuance if the Holder Exchange Right is exercised or the Automatic Exchange is triggered. The terms of these shares each provide, among other things, that they are exchangeable at the option of the holder into Common Shares of SLF in certain circumstances and after certain dates.

9. As of December 31, 2020, SLA had outstanding (i) senior and subordinated debentures in the aggregate principal amount of $200,000,000 all held by affiliates of SLA, and (ii) one series of publicly-held subordinated debentures in the aggregate principal amount of $150,000,000 (the SLA 6.30% Subordinated Debentures).

10. SLA satisfies each of the alternative qualification criteria listed in sections 2.4 and 2.5 of NI 44-101, other than sections 2.4(1)(a), 2.5(a) and 2.4(1). SLA will not satisfy the requirements under sections 2.4(1)(a) and 2.5(a) because the Preferred Share Guarantee is not a full and unconditional guarantee (as discussed below). In addition, SLA will not satisfy the requirements under section 2.4(1) for distributions of rate reset SLA Preferred Shares because rate reset SLA Preferred Shares will be convertible into another series of SLA Preferred Shares (the “Resulting SLA Preferred Shares”).

The Trust

11. The Trust is an open-end trust established under the laws of Ontario by The Canada Trust Company as trustee pursuant to a declaration of trust dated as of August 9, 2001. The Trust is a reporting issuer or the equivalent in each province and territory of Canada that provides for a reporting issuer regime and is not, to the best of its knowledge, in default of any applicable requirement under the securities legislation of the Jurisdictions.

12. The capital of the Trust consists of an unlimited number of units divided into one class of voting Special Trust Securities issuable in series and one class of non-voting SLEECS issuable in series.

13. As of December 31, 2020, the outstanding Trust Securities consisted of 2,000 Special Trust Securities, and 200,000 SLEECS — Series B. The outstanding Special Trust Securities are all held by SLA. The outstanding SLEECS — Series B were issued pursuant to a public offering in June 2002 and are not listed on any exchange. All of the outstanding SLEECS — Series A were redeemed by the Trust on December 31, 2011.

14. The Trust is a special purpose issuer established solely for the purpose of offering the SLEECS in order to provide SLA (and, indirectly, SLF) with a cost-effective means of raising capital for Canadian insurance company regulatory purposes by creating and selling the Trust Securities and acquiring and holding trust assets. The trust assets consist primarily of the SLA B Debenture. The Trust used the proceeds of the offering of SLEECS — Series B to purchase the SLA B Debenture. The SLA B Debenture generates income for distribution to holders of the Trust Securities on a semi-annual, non-cumulative basis.

15. The Trust does not have any material assets other than the SLA B Debenture. The Trust Securities are the only outstanding securities of the Trust. The Trust has no material liabilities other than the Credit Facilities. The purpose of the Credit Facilities was to provide the Trust with funds to settle the expenses incurred at the time of issuance. As of December 31, 2020 an aggregate of $3.9 million was outstanding under the Credit Facilities.

16. The SLA B Debenture bears interest that is distributed to holders of SLEECS — Series B, by way of payment of the Indicated Yield and any excess net income, after such distributions are made, is distributed to SLA as the holder of the Special Trust Securities.

17. The Indicated Yield payable on the SLEECS — Series B is $35.465 per $1,000 initial issue price, which is equivalent to an annual yield of 7.093% and which corresponds to the interest rate payable on the SLA B Debenture.

18. The SLEECS —Series B may be exchanged for SLA Preferred Shares Series W or SLA Preferred Shares Series X in certain circumstances.

19. The Trust will not pay the Indicated Yield on the SLEECS — Series B if:

(a) SLA has Public Preferred Shares outstanding and fails to declare Dividends on any of the Public Preferred Shares in accordance with their respective terms; or

(b) SLA fails to declare Dividends on its Class B Shares — Series A,

in either case, in the Dividend Reference Period.

20. Pursuant to the Series B Share Exchange Agreement, SLF and SLA have agreed, for the benefit of the holders of SLEECS — Series B, that if the Trust fails, on any applicable Distribution Date, to pay the Indicated Yield on the SLEECS — Series B:

(a) SLA will not pay Dividends on the SLA Dividend Restricted Shares; or

(b) if SLA Dividend Restricted Shares are not outstanding, SLF will not pay Dividends on the SLF Dividend Restricted Shares,

in either case until a specific period of time has elapsed unless the Trust first pays such Indicated Yield (or the unpaid portion thereof) to holders of the SLEECS — Series B.

21. Pursuant to the terms of the SLEECS — Series B and the Series B Share Exchange Agreement, the SLEECS — Series B:

(a) may be exchanged at the option of a holder for SLA Preferred Shares Series X pursuant to the Holder Exchange Right; and

(b) will be automatically exchanged for SLA Preferred Shares Series W pursuant to the Automatic Exchange.

Upon the exercise of the Holder Exchange Right or the triggering of the Automatic Exchange, the Trust will convert the corresponding principal amount of the SLA B Debenture into SLA Preferred Shares Series X or SLA Preferred Shares Series W, as the case may be.

22. The SLA Preferred Shares Series X and SLA Preferred Shares Series W will be redeemable after certain dates, at the option of SLA and subject to regulatory approval, by the payment of a cash amount or by the delivery of Common Shares of SLF.

23. On any Distribution Date the Trust has the right, subject to regulatory approval and on not less than 30 nor more than 60 days’ prior written notice, to redeem the SLEECS —Series B at the greater of the SLEECS Redemption Price and the Early Redemption Price, if the SLEECS — Series B are redeemed prior to June 30, 2032, and at the SLEECS Redemption Price if the SLEECS — Series B are redeemed on or after June 30, 2032.

24. SLA, as the holder of the Special Trust Securities, may require the termination of the Trust, subject to regulatory approval, provided that holders of SLEECS — Series B receive the Early Redemption Price or the SLEECS Redemption Price, as applicable.

25. Upon the occurrence of certain regulatory or tax events affecting SLA or the Trust, the Trust has an additional right, subject to regulatory approval and on not less than 30 nor more than 90 days’ prior written notice, to redeem at any time all but not less than all of the SLEECS — Series B at the Early Redemption Price if the SLEECS — Series B are redeemed prior to June 30, 2032 and at the SLEECS Redemption Price if the SLEECS — Series B are redeemed on or after June 30, 2032.

26. In certain circumstances, including at a time when SLA’s financial condition is deteriorating or proceedings for the winding-up of SLA have been commenced, the SLEECS — Series B will be automatically exchanged for SLA Preferred Shares Series W without the consent of the holders.

27. The return to holders of SLEECS is dependent on the financial condition of SLA rather than the Trust. Holders of SLEECS are ultimately concerned about the affairs and financial performance of SLA as opposed to that of the Trust.

28. The SLEECS are treated for insurance regulatory capital purposes as if they are SLA Preferred Shares and, as a result, if any circumstance arose where the solvency or financial strength of SLA was threatened, the Superintendent would be expected to move to ensure that the Automatic Exchange is triggered prior to the occurrence of any potential insolvency event at SLA.

29. The Special Trust Securities entitle the holder thereof (i.e. SLA) to, among other things: (a) vote in respect of certain matters regarding the Trust; (b) on any Regular Distribution Date, receive the Net Distributable Funds, if any, of the Trust remaining after payment of the Indicated Yield on all SLEECS; and (c) in the event of a termination of the Trust, participate pari passu with the holders of the SLEECS, in the distribution of the remaining property of the Trust, after discharge of the obligations of the Trust to creditors. In addition, upon prior approval of the Superintendent, the Trust may redeem part, or all if there are no SLEECS outstanding, of the Special Trust Securities.

SLF Guarantees

30. Concurrent with receipt of the 2017 Order, SLA amended and restated the Debt Guarantee and the Preferred Share Guarantee.

31. Under the Debt Guarantee, holders of the SLA 6.30% Subordinated Debentures are entitled to receive payment from SLF within 15 days of any failure by SLA to make a payment due under the SLA 6.30% Subordinated Debentures.

32. SLF will provide a guarantee similar to the Debt Guarantee in respect of any SLA Subordinated Debentures (any such guarantee referred to as the “New Debt Guarantee”).

33. The Debt Guarantee provides, and any New Debt Guarantee will provide, full and unconditional credit support in respect of, respectively, the SLA 6.30% Subordinated Debentures and any SLA Subordinated Debentures. The SLA 6.30% Subordinated Debentures are, and any SLA Subordinated Debentures will be, Designated Credit Support Securities.

34. The Preferred Share Guarantee applies in respect of any SLA Preferred Shares outstanding from time to time, including SLA Preferred Shares issued upon a conversion of SLEECS — Series B pursuant to the Holder Exchange Right or the Automatic Exchange.

35. The amount payable by SLF under the Preferred Share Guarantee is limited such that the claims of holders of the SLA Preferred Shares under the Preferred Share Guarantee, in effect, rank equally with the claims of holders of the corresponding class of SLF Preferred Shares. To accomplish this, the Preferred Share Guarantee provides that if a Triggering Event occurs, SLF will pay the Deficiency Payment to SLA in trust for the benefit of holders of SLA Preferred Shares outstanding as of the Triggering Event.

36. The Preferred Share Guarantee ranks subordinate to any and all outstanding liabilities of SLF unless otherwise provided by the terms of the instrument creating or evidencing any such liability. However, since the Preferred Share Guarantee is a debt obligation of SLF and, therefore, ranks ahead of the claims of holders of the SLF Preferred Shares, the calculation of the amount payable under the Preferred Share Guarantee is subject to reduction such that on the distribution of assets upon a winding-up of SLF, claims under the Preferred Share Guarantee will, in effect, rank equally with the claims of holders of the SLF Preferred Shares. Otherwise, the Preferred Share Guarantee would negatively impact the capital treatment of the SLA Preferred Shares for insurance regulatory purposes.

37. The New Debt Guarantee and the Preferred Share Guarantee, as applicable, will be described in the prospectus or prospectus supplement filed by SLA in connection with a distribution of SLA Subordinated Debentures or SLA Preferred Shares.

Termination of Guarantees

38. Each of the SLF Guarantees will terminate (except in respect of any demand previously made on the guarantor) upon the earlier to occur of:

(a) unless SLF and SLA agree to the contrary, the date that no SLA securities which are the subject of such guarantee (or securities or rights convertible into, exchangeable for or carrying rights to acquire such securities, including, in the case of the Preferred Share Guarantee, SLEECS) are outstanding;

(b) the date that SLF no longer owns all of the outstanding common shares of SLA;

(c) the date that the relief contemplated by this decision is no longer available to SLA; and

(d) the date SLA commences filing its own Continuous Disclosure Filings with the securities regulatory authority in each province and territory in Canada,

provided that SLF may not terminate the Preferred Share Guarantee in respect of the SLA Preferred Shares Series V, the SLA Preferred Shares Series W and the SLA Preferred Shares Series X pursuant to clauses (b), (c) or (d) above at any time after the occurrence of an Automatic Exchange or during a period when SLA has failed to make full payment when due of any dividend declared on any SLA Preferred Shares or has failed to make full payment when due of the Redemption Price and, in either case, such failure has not been remedied by the payment of such amounts in full by SLA or SLF.

Requested Relief

39. The requested relief is to replace the 2017 Order with this order.

40. The relief requested is substantially similar to the Credit Support Issuer Exemptions.

41. Section 13.4(2) of NI 51-102 provides an automatic exemption from the Continuous Disclosure Requirements for a Credit Support Issuer provided that certain conditions are satisfied. SLA will be able to satisfy each of the criteria of section 13.4(2) of NI 51-102 other than the requirement set out in section 13.4(2)(c) due to the terms of the Preferred Share Guarantee.

42. The Preferred Share Guarantee is structured such that, in a circumstance where SLA fails to make payment for 15 days of either declared dividends or the Redemption Price, or there exists insufficient assets to pay the Liquidation Preference upon the liquidation or winding-up of SLA, and at such time a winding-up order has been made in respect of SLF, payment of such amounts to holders of the SLA Preferred Shares will not be made until the final distribution of surplus of SLF, if any, to shareholders of SLF pursuant to section 95(1) of the WURA. This provision of the Preferred Share Guarantee is necessary in order to preserve the appropriate priority of claims (i.e., so claims of holders of the SLA Preferred Shares under the Preferred Share Guarantee do not rank ahead of the claims of holders of SLF Preferred Shares by virtue of such claims crystallizing earlier). In circumstances where SLF is not the subject of a winding-up order, payment will be made on the date immediately following the 15-day period permitted for the payment of dividends and the Redemption Price and, in the case of the Liquidation Preference, the later of:

(a) the date of the final distribution of property of SLA to creditors pursuant to section 93 of the WURA; and

(b) the date of the final distribution of surplus of SLA to shareholders, if any, pursuant to section 95(1) of the WURA.

43. The only outstanding securities of SLA that will not satisfy the criteria of section 13.4(2)(c) of NI 51-102 are the SLA Preferred Shares because the Preferred Share Guarantee is not a full and unconditional guarantee as required to comply with the definition of Designated Credit Support Securities. In addition, SLA Preferred Shares that are convertible into Resulting SLA Preferred Shares will not satisfy the condition in section 13.4(2)(c) of NI 51-102 because such SLA Preferred Shares will not be non-convertible preferred shares as required by the definition of “designated credit support securities” in section 13.4(1) of NI 51-102.

44. The Trust is not able to rely on section 13.4 of NI 51-102 due to the fact that the SLEECS cannot be guaranteed by SLF without adverse consequences on the capital treatment for Canadian insurance company regulatory purposes.

45. Section 8.5 of NI 52-109 provides an automatic exemption from the Certification Requirements for a Credit Support Issuer provided that it qualifies for, and is in compliance with, the requirements and conditions set out in section 13.4(2) of NI 51-102. For the reasons described above, neither SLA nor the Trust meet all of the conditions of section 13.4(2) of NI 51-102.

Liability for Secondary Market Disclosure

46. SLF has delivered to the Ontario Securities Commission and has filed on its SEDAR profile an undertaking that provides as follows:

(a) for as long as SLA and the Trust qualify for the Continuous Disclosure Exemption, SLF will be considered a “responsible issuer” for the purposes of determining its liability under Part XXIII.1 of the Securities Act (Ontario) as if the SLEECS were an “issuer’s security” of SLF for the purposes of such part; and

(b) for the avoidance of doubt, pursuant to the definition of “issuer’s security” in section 138.1 of the Securities Act (Ontario), the SLA Preferred Shares, the SLA Subordinated Debentures and Designated Credit Support Securities of SLA guaranteed by SLF constitute issuer’s securities of SLF for purposes of determining its liability under Part XXIII.1 of the Securities Act (Ontario).

Insider Reporting Exemption of SLA

47. Section 13.4(3) of NI 51-102 provides an exemption from the requirement to file an insider profile under NI 55-102 and from the Insider Reporting Requirements for an insider of a Credit Support Issuer in respect of securities of the Credit Support Issuer provided that certain conditions are satisfied. With the SLF Guarantees, SLA will satisfy each of the conditions of section 13.4(3) of NI 51‑102, other than the requirement set out in section 13.4(3)(a), which requires SLA to comply with section 13.4(2)(c) of NI 51-102.

Prospectus Qualification Exemption and Prospectus Disclosure Exemption of SLA

48. The Prospectus Qualification Exemption is substantially similar to (i) the alternative qualification criteria for issuers of guaranteed non-convertible debt securities, preferred shares and cash settled derivatives under sections 2.4 of NI 44-101 and NI 44-102; and (ii) the alternative qualification criteria for issuers of guaranteed convertible debt securities or preferred shares under sections 2.5 of NI 44-101 and NI 44-102. With the SLF Guarantees, SLA will satisfy each of the conditions of sections 2.4 and 2.5 of NI 44-101 and NI 44-102, other than (i) the requirement set out in sections 2.4(1)(a) and 2.5(a) of NI 44-101 that the Preferred Share Guarantee be full and unconditional; and (ii) in connection with a distribution of rate reset SLA Preferred Shares, the requirement set out in section 2.4(1) of NI 44-101 that the SLA Preferred Shares be non-convertible.

49. The SLA Preferred Shares will not satisfy the conditions in sections 2.4(1)(a) and 2.5(a) of NI 44-101, as applicable, because the Preferred Share Guarantee is not a full and unconditional guarantee, as described in paragraph 42.

50. The Prospectus Disclosure Exemption is substantially similar to the relief available under section 13.2 of Form 44-101F1. With the Preferred Share Guarantee, SLA will satisfy each of the conditions of section 13.2 of Form 44-101F1, other than (i) the requirement set out in section 13.2(a) of Form 44-101F1; and (ii) in connection with a distribution of rate reset SLA Preferred Shares, the requirement set out in section 13.2(c) of Form 44-101F1. SLA will not satisfy the condition in section 13.2(a) of Form 44-101F1 because the Preferred Share Guarantee is not a full and unconditional guarantee, as described in paragraph 42. In addition, in connection with a distribution of rate reset SLA Preferred Shares, SLA will not satisfy the condition in section 13.2(c) of Form 44-101F1 that the SLA Preferred Shares be non-convertible.

51. At the time of the filing of any short form prospectus or prospectus supplement in connection with offerings of SLA Preferred Shares:

(a) the prospectus will be prepared in accordance with the short form prospectus requirements of NI 44-101 and, if applicable, NI 44-102, other than the Prospectus Disclosure Requirements, except as permitted by the Legislation;

(b) SLA will comply with all of the filing requirements and procedures set out in NI 44-101 and, if applicable, NI 44-102, other than the Prospectus Qualification Requirements, except as permitted by the Legislation;

(c) the prospectus will incorporate by reference the documents of SLF set forth under Item 11.1 of Form 44-101F1;

(d) the prospectus disclosure required by Item 11 (other than 11.1(1)(5) of Form 44-101F1 in respect of SLA) will be addressed by incorporating by reference SLF’s public disclosure documents referred to in paragraph 51(c) above;

(e) SLF will satisfy all of the criteria in section 2.2 of NI 44-101 and SLA will satisfy the criteria in section 2.2 of NI 44-101 other than sections 2.2(c), (d) and (e); and

(f) SLF and SLA will comply with each condition of section 13.2 of Form 44-101F1 in effect as of the date of this decision, other than paragraphs 13.2(a) and (c).

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for it to make the decision.

The decision of the principal regulator under the Legislation is that a Continuous Disclosure Exemption be granted to SLA provided that:

(a) SLF and SLA continue to be regulated by the Office of the Superintendent of Financial Institutions (Canada) or any successor;

(b) SLF remains the beneficial owner of all the outstanding voting securities (as defined in the Legislation) of SLA;

(c) SLF and SLA remain reporting issuers or the equivalent thereof under the Legislation;

(d) SLF continues to provide the Debt Guarantee in respect of the SLA 6.30% Subordinated Debentures that are outstanding;

(e) SLF provides the New Debt Guarantee in respect of any SLA Subordinated Debentures that are outstanding;

(f) SLF continues to provide the Preferred Share Guarantee until such date as of which no SLA Preferred Shares (or securities or rights convertible or exchangeable for or carrying rights to acquire SLA Preferred Shares, including SLEECS) are outstanding;

(g) SLF complies with the requirements of the Legislation and the requirements of the TSX in respect of making public disclosure of material information on a timely basis;

(h) SLF immediately issues in Canada and files any news release that discloses a material change in its affairs;

(i) SLF concurrently sends to all holders of SLA Subordinated Debentures and SLA 6.30% Subordinated Debentures, in the manner and at the time required by the Legislation and the TSX, all disclosure materials that are sent to holders of similar debt of SLF;

(j) SLF concurrently sends to all holders of guaranteed SLA Preferred Shares, and to holders of SLEECS, in the manner and at the time required by the Legislation and the TSX, all disclosure materials that are sent to holders of similar SLF Preferred Shares;

(k) SLF files, for the periods covered by any annual or interim financial statements of SLF, in or with such SLF financial statements, consolidating summary financial information for SLF presented with a separate column for each of the following:

(i) SLF;

(ii) SLA;

(iii) any other subsidiaries of SLF on a combined basis;

(iv) consolidating adjustments; and

(v) the total consolidated amounts;

(l) SLA immediately issues in Canada a news release and files a material change report for all material changes in respect of the affairs of SLA that are not also material changes in the affairs of SLF;

(m) SLA files its audited annual financial statements (prepared in compliance with section 331 of the ICA) concurrently with the filing of such financial statements with the Superintendent in compliance with section 335 of the ICA;

(n) no person or company other than SLF provides a guarantee or alternative credit support (as defined in NI 51-102) for the payments to be made under any issued and outstanding securities of SLA;

(o) SLA does not issue or have outstanding any securities other than Designated Credit Support Securities, securities issued to and held by SLF or its Affiliates, debt securities issued to the types of entities described in section 13.4(2)(c)(iii) of NI 51-102, securities issued under exemptions from the prospectus requirement in section 2.35 of NI 45-106, or SLA Preferred Shares that are subject to the Preferred Share Guarantee;

(p) SLA files a notice indicating it is relying on the Continuous Disclosure Filings of SLF and setting out where those documents can be found for viewing in electronic format;

(q) SLF and SLA continue to comply with each condition in section 13.4(2) of NI 51-102 in effect as of the date of this decision, other than the condition in paragraph 13.4(2)(c); and

(r) such Continuous Disclosure Exemption will cease to apply three months after the coming into force of any substantive amendments to section 13.4(2) of NI 51-102 that materially adversely affect the Continuous Disclosure Exemption.

The further decision of the principal regulator under the Legislation is that a Continuous Disclosure Exemption be granted to the Trust provided that:

(a) SLA qualifies for the relief contemplated by, and SLF and SLA are in compliance with the requirements and conditions set out in, SLA’s Continuous Disclosure Exemption;

(b) for so long as any SLEECS are outstanding, SLF and SLA continue to provide the Dividend Stopper Undertaking;

(c) the Trust does not issue or have outstanding any securities other than SLEECS – Series B and Special Trust Securities;

(d) the Trust does not carry on any operating activity other than in connection with the administration and repayment of the Trust Securities;

(e) the Trust does not have any material assets other than the SLA B Debenture, has minimal assets, operations, revenues or cash flows other than those related to the SLA B Debenture or the issuance, administration and repayment of the Trust Securities and has no material liabilities other than the Credit Facilities;

(f) the Trust immediately issues in Canada a news release and files a material change report for all material changes in respect of the affairs of the Trust that are not also material changes in the affairs of SLF or SLA;

(g) all of the outstanding Special Trust Securities are beneficially owned by SLA or any of its Affiliates and all of the outstanding voting securities (as defined in the Legislation) of SLA or of its Affiliates which own the Special Trust Securities are beneficially owned by SLF;

(h) the Trust files a notice indicating it is relying on the Continuous Disclosure Filings of SLF and setting out where those documents can be found for viewing in electronic format;

(i) at any time that the Trust is not exempt from making such payment, the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the continuous disclosure documents under NI 51-102;

(j) at any time SLA is not exempt from filing such documents, SLA concurrently sends to all holders of the SLEECS all disclosure materials that are sent to holders of SLA Preferred Shares in the manner and at the time required by the Legislation;

(k) SLA, as holder of the Special Trust Securities, will not propose changes to the terms and conditions of any outstanding SLEECS that would result in the SLEECS being exchangeable for securities other than the SLA Preferred Shares;

(l) in any circumstances where the SLEECS are voting, the Trust will comply with Part 9 of NI 51-102;

(m) (i) SLEECS – Series B may be exchanged, at the option of the holder pursuant to the Holder Exchange Right or automatically without the consent of the holder in certain circumstances pursuant to the Automatic Exchange, for SLA Preferred Shares and (ii) the Preferred Share Guarantee applies to SLA Preferred Shares, including the SLA Preferred Shares issuable upon exercise of the Holder Exchange Right or pursuant to an Automatic Exchange; and

(n) such Continuous Disclosure Exemption will cease to apply three months after the coming into force of any substantive amendments to section 13.4(2) of NI 51-102 that materially adversely affect the Continuous Disclosure Exemption.

The further decision of the principal regulator under the Legislation is that a Certification Exemption be granted to SLA provided that:

(a) SLA qualifies for the relief contemplated by, and SLF and SLA are in compliance with the requirements and conditions set out in, SLA’s Continuous Disclosure Exemption; and

(b) SLA and the Trust are not required to file, and do not file, their own Annual Filings and Interim Filings.

The further decision of the principal regulator under the Legislation that a Certification Exemption be granted to the Trust provided that:

(a) the Trust qualifies for the relief contemplated by, and SLF, SLA and the Trust are in compliance with the requirements and conditions set out in, the Trust’s Continuous Disclosure Exemption; and

(b) the Trust is not required to file, and does not file, its own Annual Filings and Interim Filings.

The further decision of the principal regulator under the Legislation is that the Insider Profile Exemption be granted to insiders of SLA provided that:

(a) SLA qualifies for the relief contemplated by, and SLF and SLA are in compliance with, the requirements and conditions set out in SLA’s Continuous Disclosure Exemption;

(c) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning SLF before the material facts or material changes are generally disclosed;

(d) the insider is not an insider of SLF in any capacity other than by virtue of being an insider of SLA; and

(e) if the insider is SLF, SLF does not beneficially own any Designated Credit Support Securities issued by SLA, SLA Subordinated Debentures, SLA Preferred Shares or SLEECS.

The decision of the principal regulator under the Legislation is that the Insider Reporting Exemption be granted to insiders of SLA provided that:

(a) SLA qualifies for the relief contemplated by, and SLF and SLA are in compliance with, the requirements and conditions set out in SLA’s Continuous Disclosure Exemption; and

(b) the insider qualifies for the relief contemplated by the Insider Profile Exemption.

The further decision of the principal regulator under the Legislation is that the Prospectus Qualification Exemption and Prospectus Disclosure Exemption be granted to SLA, provided that:

(a) SLA qualifies for the relief contemplated by, and SLF and SLA are in compliance with the requirements and conditions set out in SLA’s Continuous Disclosure Exemption;

(b) SLA and SLF, as applicable, comply with paragraph 51 above;

(c) any short form prospectus or prospectus supplement of SLA is in respect of an offering of SLA Preferred Shares that are subject to the Preferred Share Guarantee;

(d) on completion of any offering of SLA Preferred Shares, the SLA Preferred Shares are only convertible into Resulting SLA Preferred Shares or into securities of SLF;

(e) SLA includes in the short form prospectus or prospectus supplement for the periods covered by any annual or interim financial statements of SLF included in the short form prospectus or prospectus supplement consolidating summary financial information for SLF presented with a separate column for each of the following:

(i) SLF;

(ii) SLA;

(iii) any other subsidiaries of SLF on a combined basis;

(iv) consolidating adjustments; and

(v) the total consolidated amounts;

(f) such Prospectus Qualification Exemption will cease to apply three months after the coming into force of any substantive amendments to sections 2.4 or 2.5 of NI 44-101 that materially adversely affect the Prospectus Qualification Exemption; and

(g) such Prospectus Disclosure Exemption will cease to apply three months after the coming into force of any substantive amendments to section 13.2 of Form 44-101F1 that materially adversely affect the Prospectus Disclosure Exemption.

This decision shall expire 30 days after the date that a material adverse change occurs in the representations of SLF, SLA or the Trust in this decision.

The further decision of the principal regulator is that the 2017 Order is revoked by this decision.

As to the Exemption Sought (other than from the Insider Reporting Requirements in the Act).

“Jo-Anne Matear”

Jo-Anne Matear Manager, Corporate Finance Ontario Securities Commission

As to the Exemption Sought from the Insider Reporting Requirements in the Act.

“Lawrence Haber” “Frances Kordyback”

Lawrence Haber Commissioner Ontario Securities Commission

Frances Kordyback Commissioner Ontario Securities Commission