Russell Investments Canada Limited (Re), 2025 CanLII 111065

October 16, 2025

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 RUSSELL INVESTMENTS CANADA LIMITED (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of the investment funds managed by the Filer that are subject to National Instrument 81-102 Investment Funds (NI 81-102) (the Existing Funds) and any future investment funds managed by the Filer or an affiliate of the Filer that are, or will be, subject to NI 81-102 (the Future Funds, and together with the Existing Funds, the Funds).

The Filer applies for a decision under the securities legislation of the Jurisdiction (the Legislation) that grants exemptive relief to the Funds that:

(a) the purchases by a Fund that is a Qualified Institutional Buyer (as defined in §230.144A of the Securities Act of 1933, as amended (the US Securities Act)) at the time of purchase, of those fixed income securities that qualify for, and may be traded pursuant to, the exemption from the registration requirements of the US Securities Act as set out in Rule 144A of the US Securities Act (Rule 144A) for resales of certain fixed income securities (144A Securities) to Qualified Institutional Buyers, are exempt from part (b) of the definition of an “illiquid asset” in section 1.1 of NI 81-102;

(b) the purchases by a Fund of those fixed income securities that qualify for, and may be traded pursuant to, the exemption from the registration requirements of the US Securities Act as set out in Rule 904 of Regulation S (Rule 904) of the US Securities Act for resales of certain fixed income securities (Regulation S Securities) to non-US persons, are exempt from part (b) of the definition of an “illiquid asset” in section 1.1 of NI 81-102; and

(c) a Fund's holdings of 144A Securities and Regulation S Securities (collectively, Privately Issued Fixed Income Securities) are excluded from consideration as an “illiquid asset” for the purposes of section 2.4 of NI 81-102

(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 for the 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 Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Québec, Prince Edward Island, Saskatchewan and Yukon (together with the Jurisdiction, the Canadian Jurisdictions).

Interpretation

Terms defined in Legislation, National Instrument 14-101 Definitions, and NI 81-102 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:

The Filer

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

2. The Filer currently is registered under the securities legislation in:

(i) each Canadian Jurisdiction in the categories of investment fund manager, portfolio manager and exempt market dealer;

(ii) Ontario as a commodity trading manager and as a mutual fund dealer exempt from membership in the Mutual Fund Dealers Association of Canada (now the Canadian Investment Regulatory Organization); and

(iii) Manitoba as an advisor (commodities).

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

The Funds

4. Each Fund is, or will be, an investment fund to which NI 81-102 applies, and will be organized and governed by the laws of a Canadian Jurisdiction.

5. The Filer is the manager of the Existing Funds and the Filer, or an affiliate of the Filer, will be the manager of any Future Funds.

6. The securities of the Funds are, or will be, qualified for distribution in one or more of the Canadian Jurisdictions and distributed to investors pursuant to a simplified prospectus and fund facts document(s), prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure, or as applicable, pursuant to a long-form prospectus and ETF facts document(s) prepared in accordance with National Instrument 41-101 General Prospectus Requirements.

7. Each Fund is, or will be, a reporting issuer under the securities legislation of one or more Canadian Jurisdictions.

8. The Existing Funds are not in default of the securities legislation of any of the Canadian Jurisdiction.

Definition of Illiquid Assets in NI 81-102

9. Pursuant to section 1.1 of NI 81-102, an "illiquid asset" is defined as:

(a) a portfolio asset that cannot be readily disposed of through market facilities on which public quotations in common use are widely available at an amount that at least approximates the amount at which the portfolio asset is valued in calculating the net asset value per security of the investment fund; or

(b) a restricted security held by an investment fund.

144A Securities

10. Rule 144A provides an exemption from the registration requirements of the US Securities Act for resales of unregistered securities by and to a Qualified Institutional Buyer. Rule 144A also requires that there must be adequate current public information about the issuing company before the sale can be made.

11. The definition of a Qualified Institutional Buyer under §230.144A of the US Securities Act includes several types of entities, but in general, such entities must, in the aggregate, own and invest on a discretionary basis at least USD$100 million in securities of issuers that are not affiliated with such entity.

12. While issuers themselves cannot rely on Rule 144A, as Rule 144A provides an exemption for resales of unregistered securities, the existence of Rule 144A allows financial intermediaries to purchase unregistered securities from issuers and resell them to Qualified Institutional Buyers in transactions that comply with Rule 144A without registering such securities.

13. Pursuant to the terms of the US Securities Act, public resales of 144A Securities to non-Qualified Institutional Buyers must be conducted in reliance upon other available exemptions, such as Rule 144. Rule 144 allows a seller to sell 144A Securities to a purchaser who does not qualify as a Qualified Institutional Buyer after a prescribed period of time (ranging from six months to one year after issuance), if certain other reporting requirements of the issuer are satisfied.

14. Despite the foregoing, 144A Securities are immediately freely tradable among Qualified Institutional Buyers in accordance with Rule 144A without regard to any holding periods. 144A Securities may also be sold to and purchased by non-Qualified Institutional Buyers after registration of the securities, or pursuant to another exemption from registration under the US Securities Act, if any exemption is available at that time.

15. Because public resales of 144A Securities are subject to certain holding periods notwithstanding that Qualified Institutional Buyers may purchase 144A Securities in accordance with Rule 144A which does not require a holding period, they may be considered restricted securities for the purposes of the part (b) definition of an “illiquid asset” under section 1.1 of NI 81-102, and each Fund's holdings of 144A Securities may be subject to the limits on holdings of illiquid assets in subsections 2.4(1), 2.4(2) and 2.4(3) of NI 81-102 (the Illiquid Asset Restrictions).

Regulation S Securities

16. Rule 904 provides an exemption from the registration requirements of the US Securities Act for resales of unregistered securities to non-US persons as defined under Regulation S. Among other conditions, Rule 904 requires that the offer or sale of such securities is made in an offshore transaction, and no directed selling efforts are made in the US by the seller, an affiliate, or any person acting on its behalf.

17. In conducting distributions of unregistered securities, financial intermediaries and other holders of the securities also routinely resell the unregistered securities to purchasers outside the US pursuant to Rule 904 without registering such Regulation S Securities to the extent the note indenture facilitates such Regulation S sales, which is typical in the market, except for some limited offerings.

18. Regulation S Securities are represented by a separate global note (the Reg S Global Note) from the global note representing securities sold under Rule 144A (the 144A Global Note), but the securities represented by the Reg S Global Note can be resold to Qualified Institutional Buyers in the same manner as the securities represented by the 144A Global Note, or resold to non-US person pursuant to Rule 904 provided the other conditions for the exemption are met. Regulation S Securities represented by the Reg S Global Note and the 144A Global Note are fungible and of equal value; at any time, any holder of such securities may transfer such securities to a US Qualified Institutional Buyer or to a non-US purchaser pursuant to Rule 904, and accordingly the securities have the same value and are fungible upon transfer. The liquidity and value of Regulation S Securities are the same in the hands of the Funds or of any other regardless of whether they are represented by the Reg S Global Note or the 144A Global Note.

19. Because Regulation S Securities may not be sold to the broader public notwithstanding that they are freely tradable with non-US persons that qualify under Rule 904, Regulation S Securities may be considered restricted securities for the purposes of the part (b) definition of an “illiquid asset” under section 1.1 of NI 81-102, and each Fund's holdings of Regulation S Securities may be subject to the Illiquid Asset Restrictions.

Reasons for the Exemption Sought

20. The Filer is of the view that certain Privately Issued Fixed Income Securities provide an attractive investment opportunity for the Funds. Due to the part (b) definition of an "illiquid asset" under section 1.1 of NI 81-102, the Funds may be unable to pursue these investment opportunities without risking a breach of the Illiquid Asset Restrictions.

21. The ability of Qualified Institutional Buyers to freely trade 144A Securities pursuant to Rule 144A has substantially reduced the discounts and illiquidity that were present in unregistered offerings historically. The market for Privately Issued Fixed Income Securities consists of a very deep pool of Qualified Institutional Buyers, as well as to non-US persons if the relevant note indenture permits sales under Regulation S.

22. The most liquid Privately Issued Fixed Income Securities have traded with comparable volumes to the most liquid corporate debt securities that are registered with the US Securities and Exchange Commission (Registered Securities) over the past few years. The segment of the US investment grade corporate bond market that is made up of Privately Issued Fixed Income Securities has grown substantially over the past 15 years. The segment of the US high-yield corporate bond market that is made up of Privately Issued Fixed Income Securities has also grown significantly over the past decade.

23. Daily market quotations are obtained in the same way through fixed income market platforms for Privately Issued Fixed Income Securities as they are for Registered Securities. Real-time price quotes and market trade data are available for Privately Issued Fixed Income Securities. Many fixed income trades including Privately Issued Fixed Income Securities, are reported within minutes into the Trade Reporting and Compliance Engine, a program initially developed by the National Association of Securities Dealers, Inc. (now the Financial Industry Regulatory Authority, Inc.) that provides for the reporting of over-the-counter transactions pertaining to eligible fixed income securities, including Privately Issued Fixed Income Securities, thus meeting market integrity requirements.

24. A Fund that qualifies as a Qualified Institutional Buyer at the time it purchases 144A Securities may trade those 144A Securities to another Qualified Institutional Buyer without further restriction (i.e. not subject to any holding period). Typically, a Fund would sell 144A Securities to other brokers or dealers that are Qualified Institutional Buyers themselves, who may then resell the securities to other Qualified Institutional Buyers. A Fund is not required to maintain its Qualified Institutional Buyer status in order to be able to resell its holdings of 144A Securities to another Qualified Institutional Buyer at any time.

25. A Fund that purchases Regulation S Securities may trade those Regulation S Securities to other non-US persons or, if the Fund is a Qualified Institutional Buyer at the time of the trade, to another Qualified Institutional Buyer without further restriction.

26. In the course of determining the potential liquidity of a security, the Filer uses a consistent list of factors. These factors may include, but would not be limited to, market volatility, trending credit quality, current valuation, maturity, size of the tranche or offering, the applicable underwriters, the status of well-covered credit or first-time issuer, index eligibility, and in the case of Privately Issued Fixed Income Securities, whether the security falls under “144A for life” status.

27. The Filer is of the view that it has the tools, resources and expertise necessary to assess issuances of Privately Issued Fixed Income Securities and to evaluate the creditworthiness of issuers on a per issuance basis. The Filer has the ability to conduct sufficient analysis and should have the opportunity to invest in Privately Issued Fixed Income Securities, and for the foregoing reasons, considers Privately Issued Fixed Income Securities to be liquid investments that are not “restricted securities” under part (b) of the section 1.1 definition of an “illiquid asset” in NI 81-102.

28. The purpose of the Illiquid Asset Restrictions is to govern a core investment fund principle: investors should be able to redeem mutual fund securities and, where applicable, non-redeemable investment fund securities on demand. Considering that Privately Issued Fixed Income Securities trade in an active institutional market, the Filer is of the view that Privately Issued Fixed Income Securities can be liquid relative to a Fund's need to satisfy redemptions. The result of the current part (b) definition of an "illiquid asset" in NI 81-102 is that all Privately Issued Fixed Income Securities may be rendered illiquid, whereas Privately Issued Fixed Income Securities may be more liquid than other types of securities that meet the liquidity criteria set out in NI 81-102.

29. Formally exempting Privately Issued Fixed Income Securities from the section 1.1, part (b) definition of an "illiquid asset" in NI 81-102 will not result in a Fund being unable to satisfy redemption requests. Investing in Privately Issued Fixed Income Securities may actually be more beneficial to the Funds than various other securities in which the Funds may invest, and the liquidity determination regarding any such Privately Issued Fixed Income Securities should be made on the actual trading liquidity of the security and not simply based on the manner in which the security was offered into the market.

30. The Filer maintains investor protection policies and procedures that address liquidity risk, and uses a combination of risk management tools, which may include (i) independent review committee approved governance policies that have been adopted to protect investors in the Funds, (ii) internal portfolio manager notification requirements of significant cash flows into the Funds, (iii) ongoing liquidity monitoring of each Fund's portfolio, (iv) real time cash projection reporting for the Funds, and (v) the consideration of factors set out in paragraph 26 above in order to assess the potential liquidity of a security.

31. If a Fund no longer meets the requirements for qualifying as a Qualified Institutional Buyer, then the Filer will arrange to immediately restrict any further purchases of 144A Securities until such time as the Fund regains its status as a Qualified Institutional Buyer.

32. The Filer is of the view that, if Privately Issued Fixed Income Securities were deemed to be illiquid assets, which may have the effect of prohibiting the Funds from accessing and investing in Privately Issued Fixed Income Securities, the Funds and their investors would lose out on potential investment opportunities in the fixed income space. The Filer is of the view that every basis point counts towards the total return opportunity of fixed income investors and investors would benefit from an expanded investment universe.

33. For the foregoing reasons, the Filer is of the view that it would not be prejudicial to the public interest to grant the Exemption Sought to the Funds.

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) a Fund that purchases Privately Issued Fixed Income Securities is readily able to resell such securities to eligible purchasers without being subject to any holding period;

(b) the Privately Issued Fixed Income Securities purchased pursuant to the Exemption Sought are traded through market facilities on which public quotations in common use are widely available at an amount that at least approximates the amount at which the Privately Issued Fixed Income Securities are valued in calculating the net asset value per security of the Fund; and

(c) the prospectus of each Fund relying on the Exemption Sought discloses or will disclose in the next renewal of its prospectus following the date of this decision, the fact that the Fund has obtained the Exemption Sought.

“Darren McKall”

Darren McKall, Associate Vice President Investment Management Division Ontario Securities Commission

Application # 2025/0439 SEDAR+ # 6310199