September 3, 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 PICTON MAHONEY ASSET MANAGEMENT (the Filer)
AND
PICTON MAHONEY FORTIFIED CORE BOND FUND
(the Core Bond Fund)
AND
PICTON MAHONEY FORTIFIED ACTIVE EXTENSION ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED MARKET NEUTRAL ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED MULTI-STRATEGY ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED INCOME ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED LONG SHORT ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED SPECIAL SITUATIONS ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED ALPHA ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED ARBITRAGE ALTERNATIVE FUND, PICTON MAHONEY FORTIFIED ARBITRAGE PLUS ALTERNATIVE FUND AND PICTON MAHONEY FORTIFIED INFLATION OPPORTUNITIES ALTERNATIVE FUND
(collectively, the Existing Alternative Funds)
AND
THE ALTERNATIVE MUTUAL FUNDS ESTABLISHED IN THE FUTURE AND MANAGED BY THE FILER OR AN AFFILIATE OF THE FILER
(the Future Alternative Funds, and, together with the Existing Alternative Funds, the Alternative Funds)
Decision
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that grants relief to:
(a) the Core Bond Fund from subsection 62(5) of the Act and subsection 2.5(7) of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) to extend the time limits pertaining to the filing of the renewal simplified prospectus of the Core Bond Fund to April 24, 2025 (the Lapse Date Relief); and
(b) to the Alternative Funds from the requirement in subsection 5.1(4) of NI 81-101 which states that a simplified prospectus (SP) for an alternative mutual fund must not be consolidated with a SP of another mutual fund if the other mutual fund is not an alternative mutual fund in order to permit SP(s) for one or more Alternative Funds to be consolidated with the SP(s) of one or more mutual funds existing today or created in the future (i) that are reporting issuers to which NI 81-101 and National Instrument 81-102 Investment Funds (NI 81-102) apply, (ii) that are not alternative mutual funds, and (iii) for which the Filer, or an affiliate of the Filer, acts as the investment fund manager (the Conventional Funds, and together with the Alternative Funds, the Funds) (the Consolidation Relief, and, together with the Lapse Date Relief, 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 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 Canadian Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions 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:
The Filer
The Filer is a general partnership established under the laws of the Province of Ontario, with its head office located at 33 Yonge Street, Suite 320, Toronto, Ontario M5E 1G4.
The Filer is registered as (a) portfolio manager and exempt market dealer in the Provinces of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Ontario, Prince Edward Island, Quebec, and Saskatchewan, (b) investment fund manager in the Provinces of Ontario, Newfoundland and Labrador, and Quebec, and (c) commodity trading manager in the Province of Ontario.
The Filer, or an affiliate of the Filer, is, or will be, the investment fund manager of the Funds.
The Filer is not in default of the securities legislation in any of the Canadian Jurisdictions.
The Funds
Each Alternative Fund is, or will be, established under the laws of Ontario or Canada as an alternative mutual fund that is a trust and is, or will be, a reporting issuer in one or more of the Canadian Jurisdictions.
The Core Bond Fund is established under the laws of Ontario as a mutual fund that is a trust and is a reporting issuer in the Canadian Jurisdictions.
Each Conventional Fund, including the Core Bond Fund, is not, or will not be, an alternative mutual fund.
Each of the existing Funds is not in default of the securities legislation in any of the Canadian Jurisdictions.
The securities of each Fund are, or will be, qualified for distribution in one or more of the Canadian Jurisdictions using a SP, fund facts and/or ETF facts document(s) prepared and filed in accordance with the securities legislation in such Canadian Jurisdictions.
The securities of the Core Bond Fund are currently qualified for distribution in each of the Canadian Jurisdictions under the current SP of the Core Bond Fund, dated October 27, 2023 (the Current Prospectus).
The securities of the Existing Alternative Funds are currently qualified for distribution in each of the Canadian Jurisdictions under the current SP of the Existing Alternative Funds, dated April 24, 2024.
If an Alternative Fund offers both securities which are listed on a stock exchange and securities which are not listed on a stock exchange, the Alternative Fund will have received permission to distribute such securities using a SP rather than a long form prospectus pursuant to National Instrument 41-101 General Prospectus Requirements (NI 41-101).
The lapse date for the Current Prospectus is October 27, 2024 (the Current Lapse Date). Accordingly, under the securities legislation in the Canadian Jurisdictions, the distribution of securities of the Core Bond Fund would have to cease on the Current Lapse date unless: (i) the Core Bond Fund file a pro forma SP at least 30 days prior to its Current Lapse Date; (ii) the final SP is filed no later than 10 days after its Current Lapse Date; and (iii) a receipt for the final SP is obtained within 20 days after its Current Lapse Date.
Reasons for Exemption Sought
Lapse Date Relief
If the Lapse Date Relief is not granted, and assuming that the Consolidation Relief is granted, it will be necessary to renew the SP of the Existing Alternative Funds twice within a short period of time in order to consolidate the SP of the Core Bond Fund with the SP of the Existing Alternative Funds, and it would be unreasonable for the Filer to incur the costs and expenses associated therewith, given investors would not be prejudiced by the Lapse Date Relief.
There have been no material changes in the affairs of the Core Bond Fund since the date of the Current Prospectus. Accordingly, the Current Prospectus and current fund facts and ETF facts document(s) of the Core Bond Fund continue to provide accurate information regarding the Core Bond Fund.
Given the disclosure obligations of the Filer and the Core Bond Fund, should any material change in the business, operations or affairs of the Core Bond Fund occur, the Current Prospectus and current fund facts and ETF facts document(s) of the Core Bond Fund will be amended as required under the securities legislation in the Canadian Jurisdictions.
New investors of the Core Bond Fund will receive delivery of the most recently filed fund facts and/or ETF facts document(s) of the Core Bond Fund. The Current Prospectus of the Core Bond Fund will remain available to investors upon request.
The Lapse Date Relief will not affect the accuracy of the information contained in the Current Prospectus or the fund facts or ETF facts document(s) of the Core Bond Fund and will therefore not be prejudicial to the public interest.
Consolidation Relief
The Filer wishes to combine the SP(s) for one or more Alternative Funds with the SP(s) of one or more Conventional Funds, including the Core Bond Fund, in order to reduce renewal, printing and related costs. Offering the Alternative Funds using the same SP as the Conventional Funds would facilitate the distribution of the Alternative Funds in the Canadian Jurisdictions under the same prospectus disclosure and enable the Filer to streamline disclosure across the Filer’s fund platform.
Even though the Alternative Funds are, or will be, alternative mutual funds, they share, or will share, many common operational and administrative features with the Conventional Funds and combining them in the same SP will allow investors to more easily compare the features of the Alternative Funds and the Conventional Funds.
Investors will receive the fund facts and/or ETF facts document(s), as applicable, when purchasing securities of the Alternative Funds or Conventional Funds as required by applicable securities legislation. The form and content of the fund facts and ETF facts document(s) of the Alternative Funds and Conventional Funds will not change as a result of the Consolidation Relief. The SP of the Alternative Funds and Conventional Funds will continue to be provided to investors, upon request, as required by applicable securities legislation.
NI 41-101 does not contain a provision equivalent to subsection 5.1(4) of NI 81-101. Accordingly, an investment fund manager that manages exchange-traded funds (ETFs) is permitted to consolidate a prospectus under NI 41-101 for its ETFs that are alternative mutual funds with a prospectus for its ETFs that are conventional mutual funds. There is no reason why mutual funds filing a prospectus under NI 81-101 should be treated differently from ETFs filing a prospectus under NI 41-101.
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.
“Darren McKall”
Darren McKall
Manager, Investment Management Division
Ontario Securities Commission
Application #2024/0471
SEDAR+ Project #6165746