RBC Global Asset Management Inc. (Re), 2024 CanLII 46510

May 22, 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 RBC GLOBAL ASSET MANAGEMENT INC. (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of RBC QUBE Market Neutral World Equity Fund and RBC QUBE Market Neutral World Equity Fund (CAD Hedged) (collectively, the Funds), for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Funds from:

(a) Subsection 15.3(2), paragraph 15.3(4)(c), subparagraph 15.6(1)(a)(i), and paragraphs 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) of National Instrument 81-102 Investment Funds (NI 81-102) to permit each of the Funds to include its past performance data in sales communications notwithstanding that:

(i) the past performance data will relate to a period prior to the Fund offering its units under a simplified prospectus; and

(ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months;

(b) Paragraph 15.1.1(a) of NI 81-102 and Items 2 and 4 of Appendix F Investment Risk Classification Methodology to NI 81-102 (the Risk Classification Methodology) to permit each of the Funds to include its past performance data in determining its investment risk level in accordance with the Risk Classification Methodology;

(c) Paragraph 15.1.1(b) of NI 81-102, Item 4(2)(a) and Instruction (1) of Item 4 of Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3) to permit each of the Funds to disclose its risk level as determined by including its past performance data in accordance with the Risk Classification Methodology;

(d) Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1), to permit each of the Funds to use its past performance data to calculate its investment risk rating in its simplified prospectus;

(e) Items 5(2), 5(3) and 5(4) and Instruction (1) of Part I of Form 81-101F3 in respect of the requirement to comply with subsection 15.3(2), paragraph 15.3(4)(c), subparagraph 15.6(1)(a)(i), and paragraphs 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) of NI 81-102 to permit each of the Funds to include in its fund facts documents, the past performance data of the Fund notwithstanding that such performance data relates to a period prior to the Fund offering its units under a simplified prospectus and that the Fund has not distributed its units under a simplified prospectus for 12 consecutive months;

(f) Section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and

(g) Items 3.1(7), 4.1(1) in respect of the requirement to comply with subsection 15.3(2) and paragraph 15.3(4)(c) of NI 81-102, items 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1 to permit each of the Funds to include in its annual and interim management reports of fund performance (MRFP) the past performance data and financial highlights of the Fund notwithstanding that such performance data and financial highlights relate to a period prior to the Fund offering its units under a simplified prospectus.

(collectively, the Requested Relief).

Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11- 102 Passport System (Ml 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Capitalized terms used herein have the meaning ascribed thereto below (or in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102, as applicable) unless otherwise defined in this Decision.

Representations

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

The Filer

1. The Filer is a corporation formed by amalgamation under the federal laws of Canada and its head office is located in Toronto, Ontario.

2. The Filer is an indirect, wholly-owned subsidiary of Royal Bank of Canada.

3. The Filer is registered as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer under the securities legislation of each Jurisdiction, is registered as an investment fund manager in each of British Columbia, Ontario, Québec and Newfoundland and Labrador and is also registered in Ontario as a commodity trading manager.

4. The Filer is the investment fund manager of each of the Funds.

5. The Filer is not in default of securities legislation in any of the Jurisdictions.

The Funds

6. Each Fund is an open-ended mutual fund established as a trust under the laws of the Province of British Columbia.

7. The Filer established the Funds on February 27, 2015. Since the commencement of operations of the Funds, the units of the Funds have been distributed only to qualified investors by means of the prospectus exemptions in National Instrument 45-106 Prospectus Exemptions.

8. Each Fund currently consists of three classes of units being Series A units, Series F units and Series O units, which Series A units were first offered for sale on August 31, 2017 and Series F units and Series O units were first offered for sale on February 27, 2015 (each, an Initial Effective Date).

9. None of the Funds are currently in default of securities legislation in any of the Jurisdictions.

10. The Filer anticipates filing a simplified prospectus and fund facts (collectively, the Disclosure Documents) in order to qualify the units of the Funds for distribution to the public and that upon issuance of a final receipt for the Disclosure Documents, each of the Funds will be a reporting issuer in each of the Jurisdictions.

11. Subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities, the Funds will become subject to the requirements of NI 81-102 that relate to alternative mutual funds and the requirements of NI 81-106 that apply to investment funds that are reporting issuers.

12. The investment objective of each of the Funds is set out below:

Fund

Investment Objective

RBC QUBE Market Neutral World Equity Fund

The Fund seeks to provide consistent absolute returns that are substantially independent of the performance of the global equity market.

RBC QUBE Market Neutral World Equity Fund (CAD Hedged)

The Fund seeks to provide consistent absolute returns that are substantially independent of the performance of the global equity market by investing primarily in units of RBC QUBE Market Neutral World Equity Fund, while seeking to minimize exposure to currency fluctuations between the U.S. and Canadian dollars.

13. Each Fund will, after it becomes a reporting issuer, be managed in a manner which is substantially similar to the manner in which it was managed during the period commencing as of the Initial Effective Date until the date on which it becomes a reporting issuer. At the time each Fund becomes a reporting issuer:

(a) no material changes will be made to its fundamental investment objective(s);

(b) its fees will not change; and

(c) its day-to-day administration will not change, other than to comply with additional regulatory requirements associated with being a reporting issuer (none of which impact the portfolio management of each Fund), subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities.

14. Subject to the exemptions that have been granted by the applicable securities regulatory authorities, each Fund has complied with the investment restrictions and practices contained in NI 81-102, that relate to alternative mutual funds, since inception.

Reasons for the Requested Relief

15. The Filer proposes that the past performance data for the time period between the Initial Effective Date and the date on which the Funds have received a final receipt for the Disclosure Documents, which represents the actual performance data for the units of the Funds (the Performance Period) be used as the past performance data of the units of the Funds during such period. The only difference in performance between the Series A units, Series F units and Series O units of a Fund since the Initial Effective Date would have been due to the different management fees paid by each such class of units of each of the Funds, as the same fixed administration fee is charged to each class of units to pay for certain operating expenses of each of the Funds.

16. The Filer proposes to present each Fund’s past performance data for the time period commencing as of the Initial Effective Date, including as set out above in paragraph 15, as the performance data of the Series A units, Series F units and Series O units of the Fund in the sales communications relating to such series of units of the Fund. Without the Requested Relief, the sales communications pertaining to each of the Funds would not be permitted to include past performance data of the Fund that relates to a period prior to the Fund becoming a reporting issuer, and each Fund would not be permitted to provide past performance data in its sales communications until it has distributed securities under a simplified prospectus for at least 12 consecutive months.

17. The Filer proposes to use each Fund’s past performance data for the time period commencing as of the Initial Effective Date to determine the investment risk level of the Series A units, Series F units and Series O units of the Fund and to disclose that investment risk level in its Disclosure Documents for each such series of units of the Fund. Without the Requested Relief, the Filer, in determining and disclosing each Fund’s investment risk level in its Disclosure Documents for the Series A units, Series F units and Series O units of the Fund would not be permitted to use the past performance data of the Fund that relates to a period prior to the Fund becoming a reporting issuer.

18. The Filer proposes to include in the fund facts for each series of units of each of the Funds, the past performance data for the time period commencing as of the Initial Effective Date in the charts required by items 5(2), 5(3) and 5(4) of Form 81-101F3, under the sub-headings “Year-by-year returns”, “Best and worst 3-month returns” and “Average return”, respectively, related to the periods prior to the Fund becoming a reporting issuer in each of the Jurisdictions. Without the Requested Relief, the Funds would not be permitted to include in their fund facts, past performance data that relates to a period prior to such Fund becoming a reporting issuer.

19. As a reporting issuer, each of the Funds will be required under NI 81-106 to prepare and send management reports of fund performance (MRFPs) to all holders of its units on semi-annual basis. Without the Requested Relief, the Funds would not be permitted to include in their MRFPs, financial highlights and the past performance data of the Funds that relates to a period prior to a Fund becoming a reporting issuer.

20. The past performance data and other financial data of the Funds for the time period commencing as of the Initial Effective Date and before a Fund became a reporting issuer is significant and meaningful information for existing and prospective investors of units of the Funds.

21. The Filer believes that reference to the performance data of a Fund for the period prior to the Fund becoming a reporting issuer would not be misleading to investors provided that the Fund includes appropriate disclaimers to such effect.

22. The financial statements for each of the Funds for the period before a Fund became a reporting issuer will be posted on the Fund’s website and the Filer will deliver a copy of such financial statements to any investor upon request.

23. Any sales communications, Disclosure Documents and MRFPs that contain performance data of the units of a Fund relating to a period of time prior to when the Fund was a reporting issuer will disclose that: (a) the Fund was not a reporting issuer during such period, (b) the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer and (c) the Filer obtained exemptive relief on behalf of the Fund to permit the Fund to disclose performance data in respect of its units relating to a period prior to when the Fund was a reporting issuer. Any MRFP shall also disclose that the financial statements of the Fund for the period prior to when the Fund was a reporting issuer are posted and available on the Fund’s website.

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 provided that:

(a) any sales communication, fund facts documents and MRFP that contains past performance data of the units of a Fund relating to a period of time prior to when the Fund was a reporting issuer discloses that:

(i) the Fund was not a reporting issuer during such period;

(ii) the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer;

(iii) the Filer obtained exemptive relief on behalf of the Fund to permit the disclosure of past performance data of the units of the Fund relating to a period prior to when the Fund was a reporting issuer; and

(iv) with respect to any MRFP, the financial statements of the Fund for such period are posted on the Filer’s website and are available to investors upon request; and

(b) the Filer posts the financial statements of the Fund since the Initial Effective Dates on each Fund’s designated website and delivers those financial statements to investors upon request.

“Darren McKall”

Darren McKall, Manager

Investment Management

Ontario Securities Commission

Application # 2023/0630

SEDAR+ #6063529