Guardian Partners Inc. (Re), 2024 CanLII 20628

March 14, 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

Guardian Partners Inc. (the Filer)

AND

the top funds

(as defined below)

DECISION

Background

The principal regulator of the Jurisdiction has received an application from the Filer, the Filer’s affiliates, I₃ Alternative Strategy Fund (the Initial Top Fund) and any other existing or future mutual fund that is not and will not be a reporting issuer, that is or will be organized under the laws of a jurisdiction of Canada, and that is, or will be, managed by the Filer or an affiliate of the Filer, and that invests or will invest in underlying funds (the Underlying Funds) as part of its investment strategy (the Future Top Funds and together with the Initial Top Fund, the Top Funds), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation), to request relief from section 2.2, section 2.4, paragraph 5.1(2)(a) and paragraph 5.1(2)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) on behalf of the Filer.

The Filer, the Filer’s affiliates and the Top Funds, request a decision, pursuant to section 17.1 of NI 81-106, exempting the Top Funds from:

(a) the requirement in section 2.2 of NI 81-106 that the Top Funds file their audited annual financial statements and auditor’s report (the Annual Financial Statements) on or before the 90^th day after the Top Funds’ most recently completed financial year (the Annual Filing Deadline);

(b) the requirement in paragraph 5.1(2)(a) of NI 81-106 that the Top Funds deliver to securityholders their Annual Financial Statements by the Annual Filing Deadline (the Annual Delivery Requirement);

(c) the requirement in section 2.4 of NI 81-106 that the Top Funds file their unaudited interim financial statements (the Interim Financial Statements) on or before the 60^th day after the Top Funds’ most recently completed interim period (the Interim Filing Deadline); and

(d) the requirement in paragraph 5.1(2)(b) of NI 81-106 that the Top Funds deliver to securityholders their Interim Financial Statements by the Interim Filing Deadline (the Interim Delivery Requirement),

(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 (the Principal Regulator) for this application as the head office of the Filer is located in Ontario, 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 each of the other provinces and territories of Canada (the Other Jurisdictions and, together with the Jurisdiction, the Canadian Jurisdictions).

Definitions

Unless expressly defined herein, terms used have the respective meanings given to them in MI 11-102, National Instrument 14-101 Definitions, National Instrument 81-102 Investment Funds and NI 81-106.

Representations

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

The Filer

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

2. The Filer is registered in the categories of investment fund manager, portfolio manager and exempt market dealer in each of Ontario, Québec and Newfoundland & Labrador, and in the categories of portfolio manager and exempt market dealer in each of the remaining Canadian Jurisdictions.

3. The Filer or an affiliate of the Filer is, or will be, the investment fund manager and/or portfolio manager of each Top Fund.

4. The Filer, an affiliate of the Filer or a third party is or will act as trustee or general partner of each Top Fund.

5. 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 Top Funds

6. The Initial Top Fund is an investment fund established as a trust under the laws of Ontario. Each Future Top Fund will be organized as a limited partnership, trust or class of shares of a corporation under the laws of Ontario or of another jurisdiction of Canada.

7. Each of the Top Funds will be a "mutual fund" for purposes of the securities legislation of Ontario.

8. Securities of the Initial Top Fund are, and each Future Top Fund will be, offered for sale to qualified investors in one or more Canadian Jurisdictions pursuant to an exemption from the prospectus requirements, including the accredited investor exemption under National Instrument 45-106 Prospectus Exemptions or equivalent.

9. None of the Top Funds is, or will be, a reporting issuer in any of the Canadian Jurisdictions.

10. The Initial Top Fund has, and it is currently anticipated that each Future Top Fund will have, a financial year-end of December 31.

11. Each Top Fund’s investment objective is to invest, or will be achieved by investing, in Underlying Funds, which may pursue a variety of investment strategies.

12. The investment objective of the Initial Top Fund is to seek to outperform the Equity Alternative Benchmark (defined as a cumulative index with monthly returns equal to 0.50 X monthly returns of the MSCI World Index ) over a full business cycle – without assuming a meaningful incremental increase in risk – measured by comparative probability of a permanent loss of capital to that of the Equity Alternative Benchmark, through investment in alternative strategies including investment in (i) focused or niche long-only public equities and (ii) Underlying Funds, as well as direct investment in securities of any kind including financial instruments or derivatives.

13. The Initial Top Fund, through its investment in the Underlying Funds, will seek to generate attractive risk-adjusted returns which are differentiated and complementary to traditional equities and fixed income securities through investment in alternative strategies including, but not limited to, investment in focused or niche long-only public equities, hedge funds, commodity pools or other private or public investment vehicles, investment companies, managed accounts, funds of funds, exchange traded funds, or other investment entities that may invest or trade in securities of any kind, as well as direct investment in securities of any kind including financial instruments or derivatives.

14. The Underlying Funds will be managed by the Filer, an affiliate of the Filer or a third party.

15. The Filer believes that the Top Funds’ investment in the Underlying Funds offers benefits not available through a direct investment in the investment vehicles, companies, other issuers or assets held by the relevant Underlying Fund(s).

16. Securities of the Top Funds will be typically redeemable at various intervals, as will securities of certain Underlying Funds. As each Top Fund has a medium- to long-term investment horizon, each Top Fund will be able to manage its own liquidity requirements taking into consideration the frequency at which securities of the Underlying Funds may be redeemed.

17. The net asset value of each Top Fund will be calculated no less frequently than monthly. Securityholders of each Top Fund will be provided with the net asset value of the Top Fund on a no less frequently than monthly basis.

18. Certain holdings of each Top Fund invested in securities of the Underlying Funds may be disclosed in the Top Fund’s Annual Financial Statements and Interim Financial Statements.

The Underlying Funds

19. The Underlying Funds may be domiciled in Canada, the Cayman Islands or other international jurisdictions.

20. The Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines. Currently, each of the Underlying Funds held by the Initial Top Fund has a financial year-end of December 31 except for one such Underlying Fund, which has a financial year-end of September 30. Therefore, in most cases, the Top Funds will not be able to obtain the finalized financial statements of the Underlying Funds prior to the Annual Filing Deadline or the Interim Filing Deadline for filing the Financial Statements and, in all cases, no sooner than other investors in the Underlying Funds receive the financial statements of the Underlying Funds. The Filer expects this timing delay in the completion of the Annual Financial Statements and the Interim Financial Statements of each Top Fund to occur every year for the foreseeable future.

21. All of the Underlying Funds currently invested in by the Initial Top Fund are managed by entities unrelated to the Filer (the Third-Party Underlying Funds). Approximately 57% of the Third-Party Underlying Funds currently invested in by the Initial Top Fund have up to 6 months from their year end to provide audited financial statements.

22. The offering memorandum of each Top Fund that will be provided to prospective investors will disclose, or such investors will be otherwise notified, that: (i) the Annual Financial Statements for such Top Fund will be delivered to each investor within 183 days of such Top Fund’s financial year end; and (ii) the Interim Financial Statements for such Top Fund will be delivered to each investor within 90 days following the end of each interim period of such Top Fund.

23. The Filer will notify securityholders of the Top Funds that it has received and intends to rely on relief from the Annual Filing Deadline and Annual Delivery Requirement and the Interim Filing Deadline and the Interim Delivery Requirement.

Financial Statement Filing and Delivery Requirements

24. Section 2.2 and paragraph 5.1(2)(a) of NI 81-106 require a Top Fund to file and deliver its Annual Financial Statements by the Annual Filing Deadline. As each Top Fund’s financial year-end is, or is currently anticipated to be, December 31, such Top Funds will have a filing and delivery deadline of March 31 in a non-leap year.

25. Section 2.4 and paragraph 5.1(2)(b) of NI 81-106 require a Top Fund to file and deliver its Interim Financial Statements by the Interim Filing Deadline. As each Top Fund’s interim period-end is, or is currently anticipated to be, June 30, such Top Funds will have an interim filing and delivery deadline of August 29 in a non-leap year.

26. Section 2.11 of NI 81-106 provides an exemption from the filing requirements of the Annual Financial Statements and the Interim Financial Statements if, among other things, the Top Fund delivers such statements in accordance with Part 5 of NI 81-106 by the Annual Filing Deadline and the Interim Filing Deadline, as applicable.

27. As noted above, the Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines. The Top Funds and the Underlying Funds may have financial reporting deadlines that are not aligned with the filing and delivery deadlines contemplated by NI 81-106 and that are applicable to the Top Funds. In addition, even if such reporting deadlines are aligned, they do not allow for sufficient time for the Filer, the Top Funds and the auditor of the Top Funds, as applicable, to prepare the applicable financial statements and reports in a manner to meet the deadlines set out in NI 81-106.

28. In order to formulate an opinion on the financial statements of each Top Fund, the Top Fund’s auditor requires audited financial statements of its respective Underlying Fund(s) in order to audit the information contained in the Top Fund’s Annual Financial Statements.

29. The auditors of the Initial Top Fund have advised the Filer that they will be unable to express an unmodified audit opinion in accordance with subsection 2.7(2) of NI 81-106 if the audited financial statements of the Underlying Funds are not completed and available to the respective Top Fund sufficiently in advance of the Annual Filing Deadline and the Annual Delivery Requirement.

30. With respect to Underlying Funds managed by the Filer or an affiliate of the Filer, the added costs associated with having such Underlying Funds change their financial reporting deadlines or pay for expedited auditing services in order to provide their financial statements at an earlier date outweigh the expected benefit to the unitholders of the Top Funds.

31. Each Top Fund therefore seeks an extension of the Annual Filing Deadline and the Annual Delivery Requirement to permit delivery within 183 days of such Top Fund’s most recently completed financial year-end, to enable the Top Fund’s auditors to first receive the audited annual financial statements and auditor’s reports of the relevant Underlying Funds so as to be able to prepare such Top Fund’s Annual Financial Statements.

32. Each Top Fund seeks an extension of the Interim Filing Deadline and the Interim Delivery Requirement to permit delivery within 90 days of such Top Fund’s most recently completed interim period, to enable the Top Fund to first receive the interim financial reports of the relevant Underlying Funds so as to be able to determine the net asset value of the relevant Underlying Funds and prepare such Top Fund’s Interim Financial Statements.

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 for so long as:

1. The Top Fund has a financial year ended December 31.

2. The Top Fund’s investment strategy is to primarily invest the Top Fund’s investable assets in securities of one or more Underlying Funds whose investment objectives are compatible with the Top Fund’s investment objectives.

3. The Top Fund invests the majority of its assets in Underlying Funds.

4. No less than 25% of the total assets of the Top Fund at the time the Top Fund makes the initial investment decision in the Underlying Fund(s), are invested in investment entities that have financial reporting periods that end on December 31 of each year and are subject to laws of their jurisdictions, or applicable exemptive relief, that require that their annual financial statements be delivered within 183 days of their financial year ends and interim financial statements be delivered within 90 days of their most recent interim period.

5. The offering memorandum provided to prospective investors regarding the Top Fund discloses that:

a. the Annual Financial Statements for the Top Fund will be filed and delivered on or before the 183^rd day after the Top Fund’s most recently completed financial year; and

b. the Interim Financial Statements for the Top Fund will be filed and delivered on or before the 90^th day after the Top Fund’s most recently completed interim period, subject to regulatory approval.

6. The Top Fund notifies its securityholders that the Top Fund has received and intends to rely on relief from the filing and delivery requirements under section 2.2, section 2.4, paragraph 5.1(2)(a) and paragraph 5.1(2)(b) of NI 81-106.

7. The Top Fund is not a reporting issuer in any jurisdiction of Canada, and the Filer has the necessary registrations to carry out its operations in each jurisdiction of Canada in which it operates.

8. The conditions in section 2.11 of NI 81-106 will be met, except for subsection 2.11(b), and:

a. the Annual Financial Statements will be delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 183^rd day after the Top Fund’s most recently completed financial year; and

b. the Interim Financial Statements will be delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 90^th day after the Top Fund’s most recently completed interim period.

9. This Exemption Sought terminates within one year of the coming into force of any amendment to NI 81-106 or other rule that modifies how the Annual Filing Deadline, Annual Delivery Requirement, Interim Filing Deadline or Interim Delivery Requirement applies in connection with mutual funds under the Legislation.

“Darren McKall”

Darren McKall

Investment Funds and Structured Products Branch

Ontario Securities Commission

Application # 2023/0625

SEDAR+ # 06062125