FT Portfolios Canada Co. (Re), 2025 CanLII 49211

May 29, 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 FT PORTFOLIOS CANADA CO. (the Filer)

AND

IN THE MATTER OF FIRST TRUST LONG/SHORT EQUITY ETF

(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Fund, an exchange-traded alternative mutual fund subject to National Instrument 81-102 Investment Funds (NI 81-102) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from:

(a) subsection 2.1(1.1) of NI 81-102 to permit the Fund to purchase securities of the U.S. Underlying ETF (as defined below) even though, immediately after the transaction, more than 10% of the Fund’s net asset value (NAV) would be invested in it;

(b) paragraph 2.5(2)(a.1) of NI 81-102 to permit the Fund to purchase securities of the U.S. Underlying ETF (as defined below) even though it is not subject to NI 81-102; and

(c) paragraph 2.5(2)(c) of NI 81-102 to permit the Fund to purchase securities of the U.S. Underlying ETF (as defined below) even though it is not a reporting issuer in a Jurisdiction,

(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 this application; 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 all of the provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.

U.S. means the United States of America.

U.S. Underlying ETF means First Trust Long/Short Equity ETF, an exchange traded mutual fund whose securities are listed on NYSE, Arca Inc. (NYSE Arca).

Representations

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

The Filer

1. The Filer is a corporation formed by amalgamation pursuant to a certificate of amalgamation dated November 29, 2001 under the laws of the province of Nova Scotia.

2. The Filer will be the investment fund manager of the Fund and is registered as an investment fund manager under the securities legislation in Ontario, Québec and Newfoundland and Labrador and is also registered in Ontario as a mutual fund dealer. The head office of the Filer is in Toronto, Ontario.

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

The Fund and the U.S. Underlying ETF

4. The Fund will be an exchange-traded open-ended alternative mutual fund governed by the laws of the province of Ontario.

5. The U.S. Underlying ETF is an actively managed exchange-traded fund subject to the U.S. Investment Company Act of 1940 (the Investment Company Act) and is an “investment fund” within the meaning of applicable Canadian securities legislation.

6. First Trust Advisors L.P. (FTA), an affiliate of the Filer, acts as the portfolio advisor for the U.S. Underlying ETF and will act as the portfolio advisor for the Fund. FTA is registered under the Securities Act (Ontario) as a portfolio manager and is also registered with the U.S. Securities and Exchange Commission (the SEC) under the U.S. Investment Advisers Act of 1940.

7. The investment objective of the Fund will be, and the investment objective of the U.S. Underlying ETF is, to seek to provide unitholders with long-term total return.

8. Each of the Fund and the U.S. Underlying ETF will seek to achieve its investment objective by investing in both a long and short portfolio consisting of (a) at least 80% of its net asset in U.S. exchange-listed equity securities of U.S. and foreign companies such as common stocks and exchange-traded funds (ETFs) and (b) up to 20% of its net assets in U.S. exchange-listed equity index futures contracts. The Fund and the U.S. Underlying ETF may also invest in equity securities of master limited partnerships and real estate investment trusts.

9. Futures contracts will be used to gain long or short exposure to broad based equity indexes. Any borrowing by the Fund or the U.S. Underlying ETF will be made in accordance with the requirements of NI 81-102.

10. The Fund and the U.S. Underlying ETF may also invest in equity securities of master limited partnerships and real estate investment trusts.

11. The aggregate market value of securities sold short by the Fund and the U.S. Underlying ETF will not exceed 50% of the net assets of such fund.

12. Initially, the Fund will seek to hedge its U.S. dollar currency exposure back to the Canadian dollar but may, in the future, also offer an unhedged class of units.

13. The Fund will seek to achieve its investment objective by investing all, or substantially all, of its assets in the U.S. Underlying ETF.

14. The portfolio managers at FTA responsible for overseeing the Fund’s and the U.S. Underlying ETF’s portfolio and investments will be the same individuals.

15. The Fund will distribute its securities pursuant to a long form prospectus prepared pursuant to National Instrument 41-101 General Prospectus Requirements (NI 41-101) and Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2) and will be governed by the applicable provisions of NI 81-102, subject to any exemptions therefrom that may be granted by the Canadian securities regulatory authorities.

16. Securities of the U.S. Underlying ETF are offered in their primary market in a manner similar to the Fund pursuant to a prospectus filed with the SEC which discloses material facts, similar to the disclosure requirements under Form 41-101F2.

17. Units of the Fund will be, subject to receiving conditional approval and satisfying the original listing requirements of Cboe Canada Inc. or the Toronto Stock Exchange (each, an Exchange), as applicable, listed on the Exchange. The securities of the U.S. Underlying ETF are listed and traded on NYSE Arca (a recognized exchange in the United States). The listing requirements of NYSE Arca are consistent with the listing requirements of the Exchange in Canada.

18. The Fund will be a reporting issuer in each of the Jurisdictions.

19. The Fund is not in default of the securities legislation in any of the Jurisdictions.

20. FTA, the Fund’s portfolio advisor, is responsible for the management, investment management and administration of the U.S. Underlying ETF and is also responsible for the oversight of all service providers to the U.S. Underlying ETF.

21. Each of FTA and the U.S. Underlying ETF is regulated by the SEC. The regulatory oversight of FTA and the U.S. Underlying ETF by the SEC is functionally equivalent to that of the Filer and the Fund which are, or will be, primarily regulated by the OSC.

22. The Bank of New York Mellon, a sister of CIBC Mellon Trust Company, the Fund’s custodian, prime broker, fund accountant and valuation agent, acts as the administrator, custodian and fund accountant and transfer agent for the U.S. Underlying ETF.

23. As of April 22, 2025, the total value of the U.S. Underlying ETF was US$1,876,247,770, the percentage of the U.S. Underlying ETF’s portfolio held in long positions was 93.22% (consisting of 247 holdings and maximum market cap of US$3.0 trillion and a minimum market cap of US$683.2 million), the percentage of the U.S. Underlying ETF’s portfolio held in short positions was 36.47% (consisting of 157 holdings and maximum market cap of US$291.3 billion and a minimum market cap of US$846.9 million) with both long positions and short positions invested across 11 sectors. The average size of short and long position taken by the U.S. Underlying ETF being approximately US$7.1 million and US$4.4 million, respectively.

24. The portfolio holdings of the U.S. Underlying ETF are available on the U.S. Underlying ETF’s website and are updated on a daily basis.

25. The U.S. Underlying ETF is required to prepare key investor information documents which provide disclosure that is substantially similar to the disclosure required to be included in the ETF facts document required by Form 41-101F4 Information Required in an ETF Facts Document.

26. The U.S. Underlying ETF is subject to continuous disclosure obligations which are substantially similar to the disclosure obligations under National Instrument 81-106 Investment Fund Continuous Disclosure.

27. The U.S. Underlying ETF is required to update information of material significance in its prospectus, to prepare management reports and an unaudited set of financial statements at least semi-annually, and to prepare management reports and an audited set of financial statements annually.

28. FTA is subject to a governance framework which sets out the duty of care and standard of care, which require FTA to act in the best interest of unitholders of the U.S. Underlying ETF.

29. The market for securities of the U.S. Underlying ETF is liquid because it is a large fund with approximately US$1.9 billion in assets (as at April 22, 2025) and is traded on NYSE Arca (i.e. it is more liquid because of its size and its trading volume). In addition, it is supported by authorized participants (who are U.S. broker-dealers) which make the market for the securities of the U.S. Underlying ETF and are incentivized to do so because of the arbitrage opportunities inherent in making such market. Accordingly, the Filer expects the Fund to be able to dispose of its securities of the U.S. Underlying ETF through market facilities in order to raise cash, including to fund the redemption requests of its unitholders from time to time.

General

30. Absent the Exemption Sought, an investment by the Fund of up to 100% of its NAV in securities of the U.S. Underlying ETF would be prohibited by:

(a) subsection 2.1(1.1) of NI 81-102 because more than 10% of the Fund’s NAV would be invested in securities of the U.S. Underlying ETF;

(b) paragraph 2.5(2)(a.1) of NI 81-102 because the U.S. Underlying ETF is not subject to NI 81-102; and

(c) paragraph 2.5(2)(c) of NI 81-102 because the U.S. Underlying ETF is not a reporting issuer in a Jurisdiction.

31. An investment by the Fund in the U.S. Underlying ETF would not qualify for the exception in (a) subsection 2.1(2) or (b) paragraph 2.5(3)(a) of NI 81-102 because the securities of the U.S. Underlying ETF are not government securities, a security issued by a clearing corporation, index participation units or an equity security where the purchase is made by a fixed portfolio investment fund in accordance with its investment objectives.

32. The Fund’s investment objective and investment strategies will be substantially the same as the U.S. Underlying ETF’s investment objective and investment strategies.

33. Having the ability to invest up to 100% of the Fund’s NAV in securities of the U.S. Underlying ETF will provide the Fund with access to investment opportunities which, at a significantly smaller size, the Fund would have difficulty or may be unable to access and which will allow the Fund to provide its unitholders with exposure to a much more diversified portfolio.

34. An investment in securities of the U.S. Underlying ETF by the Fund is an efficient and cost effective alternative to investing in a long/short portfolio on the same basis as the U.S. Underlying ETF.

35. The investment objective, investment strategies, investment restrictions and risk factors applicable to the Fund and the U.S. Underlying ETF are, or will be, substantially the same. The Fund will essentially be the Canadian version of the U.S. Underlying ETF and will be managed by affiliates and advised by the same portfolio advisor and portfolio management team as the U.S. Underlying ETF. Accordingly, as FTA is the portfolio advisor for both funds, the Filer is in a position to ensure that the requirements of NI 81-102 are complied with.

36. The only material difference in the investment strategies utilized by the Fund and the U.S. Underlying ETF is that the Fund will seek to hedge substantially all of its U.S. dollar currency exposure back to the Canadian dollar (though the Fund may also, in the future, offer an unhedged class of units).

37. The Fund will not pay any management or incentive fees in connection with an investment in securities of the U.S. Underlying ETF which to a reasonable person would duplicate a fee payable by the U.S. Underlying ETF for the same service.

38. The management, portfolio management and administration of the U.S. Underlying ETF is substantially similar to that of the Fund given that (a) the manager of the U.S. Underlying ETF is an affiliate of the Filer, (b) FTA manages, or will manage, the investment portfolio of both funds using the same portfolio managers, (c) the custodian, prime broker, administrator, valuation agent and transfer agent of the U.S. Underlying ETF is a sister of the custodian, prime broker, administrator and valuation agent of the Fund and (d) Deloitte LLP is, will be, the auditor of both funds.

39. A summary of the key benefits to the Fund in investing up to 100% of its assets in securities of the U.S. Underlying ETF include:

(a) the Fund would continue to have access to specialized knowledge, expertise and/or analytical resources of FTA;

(b) it is an efficient and cost effective alternative for the Fund to invest directly in the U.S. Underlying ETF instead of mirroring the investments of the U.S. Underlying ETF by investing in a long/short equity portfolio directly;

(c) unitholders of the Fund will have the ability to make their investments using Canadian dollars;

(d) improved overall risk profile (given the greater liquidity of the securities of the U.S. Underlying ETF);

(e) increased diversification and exposure to broader long and short portfolios (given the size of the U.S. Underlying ETF and the number of holdings in the fund’s portfolio);

(f) the Fund would be able to rely, indirectly, on established relationships with the U.S. Underlying ETF’s prime broker which the Fund would not otherwise have access to in Canada (currently none of the existing funds managed by the Filer use leverage in order to seek to achieve their investment objectives); and

(g) the rates and streamlined borrowing program which are available to the U.S. Underlying ETF would likely not be available to the Fund and the Fund would likely be limited in its ability to execute is short selling strategy.

40. An investment in securities of the U.S. Underlying ETF by the Fund should pose limited additional investment risk to the Fund because the U.S. Underlying ETF will be subject to the Investment Company Act and oversight of the SEC and the U.S. Underlying ETF will comply with sections 2.1 (concentration restriction), 2.2 (control restrictions), 2.3 (restrictions concerning types of assets), 2.4 (restrictions concerning illiquid assets), 2.6 (restrictions on borrowing and other investment practices), 2.6(1) (restrictions regarding short sales), 2.6.2 (restrictions regarding total borrowing and short sales) and 2.9.1 (restrictions regarding aggregate exposure to borrowing, short selling and specified derivatives) of NI 81-102.

41. The amount of loss that could result from an investment by the Fund in securities of the U.S. Underlying ETF will be limited to the amount invested by the Fund in the U.S. Underlying ETF.

42. An investment by the Fund in securities of the U.S. Underlying ETF represents, or will represent, the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Fund.

43. The securities of the U.S. Underlying ETF will not meet the definition of index participation unit as set out in NI 81-102 because the U.S. Underlying ETF will not:

(a) hold securities that are included in a specified widely quoted index in substantially the same proportion as those securities are reflected in that index; or

(b) invest in a manner that causes the U.S. Underlying ETF to replicate the performance of an index.

44. Granting the Exemption Sought is in the best interests of the Fund and is not prejudicial to the public interest or to unitholders of the Fund.

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 is that the Exemption Sought is granted, provided that:

(a) the investment by the Fund in securities of the U.S. Underlying ETF is made in accordance with the investment objective of the Fund;

(b) the U.S. Underlying ETF is an investment company subject to the Investment Company Act in good standing with the SEC;

(c) the aggregate amount of all borrowings and short selling strategies of the U.S. Underlying ETF does not exceed the limits appliable to an alternative mutual fund under NI 81-102, as it may be amended from time to time;

(d) the portfolio manager of the Fund and the U.S. Underlying ETF is FTA, or its successor, that is: (i) registered under the Securities Act (Ontario) as a portfolio manager and (ii) registered with the SEC under the U.S. Investment Advisers Act of 1940;

(e) the U.S. Underlying ETF will not, at the time securities of the U.S. Underlying ETF are acquired by the Fund, hold more than 10% of its NAV in securities of any other mutual fund; and

(f) the prospectus of the Fund will disclose in the investment strategy section, the fact that the Fund has obtained the Exemption Sought to permit investments in the U.S. Underlying ETF on the terms described in this decision.

“Darren McKall” ____________

Darren McKall

Associate Vice President, Investment Management Division

Ontario Securities Commission

Application File #: 2025/0279

SEDAR+ File #: 6275142