Horizons ETFs Management (Canada) Inc. (Re), 2021 CanLII 39031

January 26, 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

HORIZONS ETFS MANAGEMENT (CANADA) INC.

(the Filer)

AND

IN THE MATTER OF

HORIZONS ACTIVE EMERGING MARKETS DIVIDEND ETF

AND HORIZONS ACTIVE US DIVIDEND ETF (the Proposed Merging Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Proposed Merging Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) that the time limits for the renewal of the prospectus of each Proposed Merging Fund dated January 29, 2020 (together, the Prospectus) be extended to the time limits that would apply if the lapse date was April 29, 2021 (the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (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.

Representations

This decision is based on the following facts represented by the Filer.

1. The Filer is a corporation incorporated under the laws of Canada. The Filer’s head office is located in Toronto, Ontario.

2. The Filer is registered as a portfolio manager in Alberta, British Columbia, Ontario and Québec, an exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan, a commodity trading manager and a commodity trading adviser in Ontario and an investment fund manager in each of Ontario, Québec and Newfoundland and Labrador. The Filer is the investment fund manager of the Funds.

3. Each Proposed Merging Fund is an exchange-traded mutual fund (ETF) established under the laws of Ontario and a reporting issuer, as defined in the securities legislation of each of the Jurisdictions, subject to National Instrument 81-102 Investment Funds (NI 81-102).

4. Securities of the Proposed Merging Funds trade on the Toronto Stock Exchange.

5. Neither the Filer nor any of the Funds (as defined below) is in default of securities legislation in any of the Jurisdictions.

6. The Proposed Merging Funds currently distribute securities in the Jurisdictions under the Prospectus.

7. Pursuant to subsection 62(1) of the Act, the lapse date of the Prospectus is January 29, 2021 (the Lapse Date). Accordingly, if a new prospectus for each Proposed Merging Fund is not otherwise filed and receipted by the Lapse Date, under subsection 62(2) of the Act, the distribution of securities of each Proposed Merging Fund would have to cease on the Lapse Date unless: (i) each Proposed Merging Fund files a pro forma prospectus at least 30 days prior to the Lapse Date (December 30, 2020); (ii) the final prospectus for the Proposed Merging Funds is filed no later than 10 days after the Lapse Date; and (iii) a receipt for the final prospectus of the Proposed Merging Funds is obtained within 20 days of the Lapse Date.

8. Management of the Filer would like to merge the Proposed Merging Funds into the Horizons Active Global Dividend ETF, another ETF managed by the Filer subject to NI 81-102 (the Continuing Fund, together with the Proposed Merging Funds, the Funds) (the Proposed Merger).

9. The Prospectus is currently included in a multi-fund prospectus dated January 29, 2020 that also includes the prospectuses of other ETFs managed by the Filer, including the Continuing Fund. The Proposed Merging Funds were not included in the pro forma filing for the renewal of the multi-fund prospectus in anticipation of the application for this decision.

10. The Independent Review Committee of the Proposed Merging Funds has considered the Proposed Merger with respect to conflict of interest issues and determined that the Proposed Merger, if implemented, will achieve a fair and reasonable result for the Proposed Merging Funds and investors in the Proposed Merging Funds.

11. In January 2021, management of the Filer currently intends, subject to the approval of the board of directors of the Filer, for the Filer to issue a press release and file a material change report and subsequently file amendments on SEDAR to the Prospectus and ETF Facts of the Proposed Merging Funds announcing that it is proposing to merge each Proposed Merging Fund into the Continuing Fund upon receiving regulatory and unitholder approval.

12. A special meeting of the unitholders of each Proposed Merging Fund is scheduled, subject to the approval of the board of directors of the Filer, to be held in March 2021 to consider the Proposed Merger. It is expected that upon receiving all required approvals, the Proposed Merger would occur as soon as reasonably practicable thereafter (the Effective Date).

13. If the Proposed Merger is implemented, the Proposed Merging Funds will be wound up as soon as possible after the Effective Date. Accordingly, in the opinion of the Filer, it would be unduly costly to file renewal documents for the Proposed Merging Funds for the approximately 60-day period prior to the Effective Date.

14. The Filer wishes to continue to distribute securities of the Proposed Merging Funds during the period from the Lapse Date to the date of implementation of the Proposed Merger, in order to permit designated brokers and dealers of the Proposed Merging Funds to continue to purchase securities of the Proposed Merging Funds under the Prospectus and post accurate bid-ask prices on the secondary market.

15. In the event that the Proposed Merger does not receive all requisite approvals, the Requested Relief would provide the Filer with sufficient time to allow for the filing of a pro forma and final prospectus and ETF Facts documents for the Proposed Merging Funds, in order to permit such Proposed Merging Funds to remain in continuous distribution.

16. There have been no material changes in the affairs of each Proposed Merging Fund since the date of the Prospectus. Accordingly, the Prospectus and current ETF Facts of each Proposed Merging Fund represent current information regarding such Proposed Merging Fund.

17. Given the disclosure obligations of the Filer and the Proposed Merging Funds, should any material change in the business, operations or affairs of a Proposed Merging Fund occur, the Prospectus and current ETF Facts of the Proposed Merging Fund will be amended as required under the Legislation.

18. In accordance with securities legislation, new investors of a Proposed Merging Fund will receive delivery of the most recently filed ETF Facts of the Proposed Merging Fund. The current Prospectus will remain available to investors upon request.

19. The Requested Relief will not affect the accuracy of the information contained in the Prospectus or other disclosure documents of the Proposed Merging Funds and will therefore not be prejudicial to the public interest.

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.

“Darren McKall”

Darren McKall

Manager, Investment Funds and Structured Products

Ontario Securities Commission

Application # 2021/0005