December 10, 2024

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

BAILLIE GIFFORD OVERSEAS LIMITED

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting an exemption from the prohibitions contained in sections 13.5(2)(b)(ii) and 13.5(2)(b)(iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit in specie subscriptions and redemptions (each such subscription or redemption, an In Specie Transfer) by:

(i) a Managed Account (as defined below) in relation to a Fund (as defined below); and

(ii) a Fund in relation to another Fund.

(the Exemption Sought).

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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta, Manitoba, Newfoundland and Labrador, Québec and Saskatchewan (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 Definitions, National Instrument 81-102 Investment Funds (NI 81-102) and NI 31-103 have the same meanings if used in this decision, unless otherwise defined. Additionally, the following terms shall have the following meanings:

"Clients" means individuals, private holding companies, pension plans, endowments, trusts, insurance companies, corporations, mutual funds and other entities to whom the Filer offers, or may offer, discretionary portfolio management services through a Managed Account.

"Discretionary Management Agreement" means a written agreement between the Filer and a Client seeking discretionary portfolio management or related services.

"Funds" means, collectively, each existing and any future investment fund

(i) that is not a reporting issuer in Canada,

(ii) the securities of which are distributed in Canada on a private placement basis pursuant to available prospectus exemptions, and

(iii) for which the Filer acts, or will act, as portfolio adviser and for which the Filer, or an affiliate of the Filer, acts or will act, as investment fund manager.

"Fund Securities" means units or shares of any of the Funds.

"Managed Account" means an account managed by the Filer for a Client that is not a "responsible person" as defined in section 13.5 of NI 31-103 and over which the Filer has discretionary authority.

Representations

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

The Filer

The Filer is a corporation incorporated under the laws of the United Kingdom with its head office in Edinburgh, Scotland.
The Filer is registered as (i) a portfolio manager in Alberta, Manitoba, Newfoundland and Labrador, Ontario, Québec and Saskatchewan and (ii) an exempt market dealer in each of the provinces and territories of Canada. The Filer also relies on the exemption from the investment fund manager registration requirements set out in section 4 of Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Managers in each of Ontario, Québec and Newfoundland and Labrador.
The Filer is authorized in the United Kingdom by the Financial Conduct Authority and is also registered as an investment adviser with the U.S. Securities and Exchange Commission.
The Filer is not a reporting issuer in any jurisdiction of Canada and is not in default of securities legislation of any jurisdiction of Canada.

The Funds

Each of the Funds is, or will be, organized as a limited partnership, a corporation or a trust established under the laws of Ontario, another province or territory of Canada, or a jurisdiction outside Canada.
Each Fund is not, or will not be, a reporting issuer under the laws of any province or territory of Canada.
Each Fund meets, or will meet, the definition of 'investment fund' in the Securities Act (Ontario).
The Filer acts, or will act, as the portfolio adviser of each of the Funds. The Filer, or an affiliate of the Filer, will act as the investment fund manager of each of the Funds.
The Funds are not in default of securities legislation in any province or territory of Canada.

The Managed Accounts

The Filer offers discretionary portfolio management services to Clients seeking wealth management or related services under Discretionary Management Agreements between the Clients and the Filer.
Pursuant to the Discretionary Management Agreement entered into with each Client, the Client appoints the Filer to act as portfolio adviser in connection with an investment portfolio held in a Managed Account of the Client with full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent or instructions of the Client to execute the trade.
The Filer may, where authorized under the applicable Discretionary Management Agreement, from time to time, invest the assets in a Client's Managed Account in securities of any one or more of the Funds in order to give such Client the benefit of asset diversification and economies of scale regarding minimum commission charges on portfolio trades, and generally to facilitate portfolio management.

In Specie Transfers

The Filer may wish to, or otherwise be required to, deliver portfolio securities held in a Managed Account or Fund to a Fund in respect of a purchase of Fund Securities, and may wish to, or otherwise be required to, receive portfolio securities from a Fund in respect of a redemption of Fund Securities by a Managed Account or Fund.
As the Filer is, or will be, the registered portfolio adviser of the Funds and the Managed Accounts that purchase or redeem Fund Securities pursuant to an In Specie Transfer, the Filer would be considered a "responsible person" within the meaning of NI 31-103 in respect of such Funds and Managed Accounts, and any affiliate of the Filer that has access to, or participates in formulating, an investment decision on behalf of such Funds or Managed Accounts would be a "responsible person" within the meaning of NI 31-103 in respect of such Funds and Managed Accounts.
As the Filer is, or may be, the trustee of a Fund which is organized as a trust, each such Fund may be an "associate" of the Filer, and accordingly, absent the grant of the Exemption Sought, the Filer may be precluded by section 13.5(2)(b)(ii) of NI 31-103 from effecting In Specie Transfers. As the Filer is, or will be, the portfolio adviser of the Funds, absent the grant of the Exemption Sought, the Filer may be precluded by section 13.5(2)(b)(iii) of NI 31-103 from effecting In Specie Transfers.
The Filer submits that effecting the In Specie Transfers will allow the Filer to manage each asset class more effectively and reduce transaction costs for the Clients and the Funds. For example, In Specie Transfers reduce market impact costs, which can be detrimental to the Clients and/or the Funds, and may provide access to a broader range of securities. In Specie Transfers also allow a portfolio adviser to retain within its control institutional-size blocks of portfolio securities that otherwise would need to be broken and re-assembled.
Prior to engaging in In Specie Transfers on behalf of a Managed Account, each Discretionary Management Agreement or other documentation will contain the authorization of the Client for the Filer, as portfolio adviser of the Managed Account, to engage in In Specie Transfers.
The only cost which may be incurred by a Managed Account or a Fund for an In Specie Transfer is a nominal administrative charge levied by the custodian of the relevant Fund for recording the trades and any commission charged by the dealer executing the trade.
The Filer or an affiliate of the Filer, as investment fund manager of the Funds, will value the securities transferred under an In Specie Transfer on the same valuation day on which the purchase price or redemption price of the Fund Securities of a Fund is determined. With respect to the purchase of Fund Securities of a Fund, the securities transferred to a Fund under an In Specie Transfer in satisfaction of the purchase price of those Fund Securities will be valued as if the securities were portfolio assets of the Fund, as contemplated by section 9.4(2)(b)(iii) of NI 81-102. With respect to the redemption of Fund Securities of a Fund, the securities transferred to a Managed Account or Fund in satisfaction of the redemption price of those Fund Securities will have a value equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price of the Fund Securities of the Fund, as contemplated by section 10.4(3)(b) of NI 81-102.
Should any In Specie Transfer contemplated by the Exemption Sought involve the transfer of any "illiquid asset" (as defined in NI 81-102), such illiquid asset will be transferred on a pro rata basis and the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller, immediately before effecting the In Specie Transfer. The Filer will not cause any Fund or Managed Account to engage in an In Specie Transfer if the applicable Fund is not in compliance with the portfolio restrictions on the holding of illiquid assets described in section 2.4 of NI 81-102.
In Specie Transfers will be subject to (i) compliance with the written policies and procedures of the Filer respecting In Specie Transfers that are consistent with applicable securities legislation, and (ii) the oversight of the Filer's Chief Compliance Officer, to ensure that the transaction represents the business judgment of the Filer acting in its discretionary capacity with respect to the Fund and the Managed Account, uninfluenced by considerations other than the best interests of the Fund and the Managed Account.

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 Exemption Sought is granted provided that:

(a) If the transaction is the purchase of Fund Securities of a Fund by a Managed Account:

(ii) the Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Managed Account;

(iii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund, and consistent with the Fund's investment objectives;

(iv) the value of the portfolio securities sold to the Fund by the Managed Account is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Fund and the value assigned to such securities;

(b) If the transaction is the redemption of Fund Securities of a Fund by a Managed Account:

(ii) the portfolio securities are acceptable to the Filer as portfolio adviser of the Managed Account and consistent with the Managed Account's investment objectives;

(iii) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;

(iv) the holder of the Managed Account has not provided notice to terminate its Discretionary Management Agreement with the Filer; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Managed Account and the value assigned to such securities;

(c) If the transaction is the purchase of Fund Securities of a Fund by a Fund:

(i) the Fund would, at the time of payment, be permitted to purchase the portfolio securities;

(ii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund and consistent with the Fund's investment objectives; and

(iii) the value of the portfolio securities is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund;

(d) If the transaction is the redemption of Fund Securities of a Fund by a Fund:

(i) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund and consistent with the Fund's investment objectives; and

(ii) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price of the Fund;

(e) Each Fund keeps written records of all In Specie Transfers in a financial year of the Fund, reflecting details of the portfolio securities delivered to and by the Fund and the value assigned to such securities, for five years after the end of the financial year with the most recent two years in a reasonably accessible place;

(f) The Filer does not receive any compensation in respect of any sale or redemption of Fund Securities of a Fund and, in respect of any delivery of portfolio securities further to an In Specie Transfer, the only charge paid by a Fund or Managed Account, if any, is a nominal administrative charge levied by the custodian for recording the trade and any commission charged by the dealer (if any) executing the trade.

(g) If the In Specie Transfer involves the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller immediately before effecting the In Specie Transfer.

"Darren McKall"

Darren McKall

Investment Management Division Ontario Securities Commission

Application #2024/0545

Baillie Gifford Overseas Limited (Re), 2024 CanLII 122071

Case Summary

Background

(i) a Managed Account (as defined below) in relation to a Fund (as defined below); and

(ii) a Fund in relation to another Fund.

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

(ii) 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 each of Alberta, Manitoba, Newfoundland and Labrador, Québec and Saskatchewan (together with the Jurisdiction, the Jurisdictions).

Interpretation

(i) that is not a reporting issuer in Canada,

(ii) the securities of which are distributed in Canada on a private placement basis pursuant to available prospectus exemptions, and

(iii) for which the Filer acts, or will act, as portfolio adviser and for which the Filer, or an affiliate of the Filer, acts or will act, as investment fund manager.

Representations

Decision

(a) If the transaction is the purchase of Fund Securities of a Fund by a Managed Account:

(ii) the Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Managed Account;

(iii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund, and consistent with the Fund's investment objectives;

(iv) the value of the portfolio securities sold to the Fund by the Managed Account is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Fund and the value assigned to such securities;

(b) If the transaction is the redemption of Fund Securities of a Fund by a Managed Account:

(ii) the portfolio securities are acceptable to the Filer as portfolio adviser of the Managed Account and consistent with the Managed Account's investment objectives;

(iii) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;

(iv) the holder of the Managed Account has not provided notice to terminate its Discretionary Management Agreement with the Filer; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Managed Account and the value assigned to such securities;

(c) If the transaction is the purchase of Fund Securities of a Fund by a Fund:

(i) the Fund would, at the time of payment, be permitted to purchase the portfolio securities;

(ii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund and consistent with the Fund's investment objectives; and

(iii) the value of the portfolio securities is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund;

(d) If the transaction is the redemption of Fund Securities of a Fund by a Fund:

(g) If the In Specie Transfer involves the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller immediately before effecting the In Specie Transfer.

Background

(i) a Managed Account (as defined below) in relation to a Fund (as defined below); and

(ii) a Fund in relation to another Fund.

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

(ii) 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 each of Alberta, Manitoba, Newfoundland and Labrador, Québec and Saskatchewan (together with the Jurisdiction, the Jurisdictions).

Interpretation

(i) that is not a reporting issuer in Canada,

(ii) the securities of which are distributed in Canada on a private placement basis pursuant to available prospectus exemptions, and

(iii) for which the Filer acts, or will act, as portfolio adviser and for which the Filer, or an affiliate of the Filer, acts or will act, as investment fund manager.

Representations

Decision

(a) If the transaction is the purchase of Fund Securities of a Fund by a Managed Account:

(i) the Filer obtains the prior written consent of the Client of the Managed Account before it engages in any In Specie Transfer in connection with the purchase of Fund Securities of the Fund and such consent has not been revoked;

(ii) the Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Managed Account;

(iii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund, and consistent with the Fund's investment objectives;

(iv) the value of the portfolio securities sold to the Fund by the Managed Account is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Fund and the value assigned to such securities;

(b) If the transaction is the redemption of Fund Securities of a Fund by a Managed Account:

(i) the Filer obtains the prior written consent of the Client of the Managed Account to the payment of redemption proceeds in the form of an In Specie Transfer;

(ii) the portfolio securities are acceptable to the Filer as portfolio adviser of the Managed Account and consistent with the Managed Account's investment objectives;

(iii) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;

(iv) the holder of the Managed Account has not provided notice to terminate its Discretionary Management Agreement with the Filer; and

(v) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Managed Account and the value assigned to such securities;

(c) If the transaction is the purchase of Fund Securities of a Fund by a Fund:

(i) the Fund would, at the time of payment, be permitted to purchase the portfolio securities;

(ii) the portfolio securities are acceptable to the Filer, as portfolio adviser of the Fund and consistent with the Fund's investment objectives; and

(iii) the value of the portfolio securities is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund;

(d) If the transaction is the redemption of Fund Securities of a Fund by a Fund:

(g) If the In Specie Transfer involves the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller immediately before effecting the In Specie Transfer.