April 28, 2026
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
CORTON CAPITAL INC.
(the Filer)
AND
THE FUNDS
(as defined herein)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Corton Rosenberg Global Macro Fund and all current and future investment funds (the Funds, and each, a Fund) that are, or will be, managed by the Filer or an affiliate of the Filer that are, or will be, subject to National Instrument 81 102 - Investment Funds (NI 81-102) for a decision under the securities legislation of the principal regulator (the Legislation) for an exemption from:
(a) in respect of the Funds, the following provisions of NI 81-102 in order to permit each Fund to invest in securities of other existing and future investment funds that are not index participation units (IPUs) and whose securities are, or will be, listed for trading on a stock exchange in the United States (collectively, the Underlying ETFs):
(i) paragraphs 2.5(2)(a) and (a.1) to permit each Fund to purchase and/or hold securities of an Underlying ETF even though the Underlying ETF is not subject to NI 81-102; and
(ii) paragraph 2.5(2)(c) to permit each Fund to purchase and/or hold securities of an Underlying ETF even though the Underlying ETF is not a reporting issuer in any province or territory of Canada.
(collectively, the Underlying U.S. ETF Relief).
(b) in respect of the Funds, subparagraph 2.6(1)(a)(i) of NI 81-102 in order to permit each Fund to borrow cash from the custodian of the Fund (the Custodian) and, if required by the Custodian, to provide a security interest over any of its portfolio assets as a temporary measure to fund the portion of any distribution payable to beneficial or registered holders of securities of the Fund (the Securityholders) that represents, in the aggregate, amounts that are owing to, but not yet received by, the Fund (the Borrowing Relief).
(paragraphs (a) to (b), collectively, the Exemption Sought).
Under the process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (the OSC) 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 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.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
The Filer is a corporation incorporated under the laws of the Province of Ontario. The Filer has its head office in Carrying Place, Ontario.
The Filer is registered as: (a) an Investment Fund Manager in the Provinces of Ontario, British Columbia, Québec, and Newfoundland and Labrador; (b) an adviser in the category of Portfolio Manager in the Provinces of Ontario, British Columbia, Alberta, Saskatchewan, Québec, New Brunswick, Newfoundland and Labrador, and Nova Scotia; and (c) a dealer in the category of Exempt Market Dealer in the Provinces of Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Yukon, and Nunavut.
The Filer or an affiliate of the Filer is, or will be, the investment fund manager of each Fund.
The Filer is not in default of securities legislation in any of the Jurisdictions.
The Funds
Each Fund is, or will be, an investment fund governed by the laws of Canada or a Jurisdiction.
Each Fund is, or will be, governed by the applicable provisions of NI 81-102, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities.
Each Fund is, or will be, a reporting issuer in one or more Jurisdictions.
Each existing Fund is not in default of securities legislation in any of the Jurisdictions.
The Underlying U.S. ETF Relief
The Funds may, from time to time, wish to invest in Underlying ETFs in accordance with their investment strategy.
Each Underlying ETF is, or will be, a reporting issuer registered with the U.S. Securities and Exchange Commission (the SEC).
The Underlying ETFs in which the Funds may invest include those subject to either the United States Investment Company Act of 1940, as amended (the '40 Act) and/or the Underlying ETFs registered under the United States Securities Act of 1933, as amended (the '33 Act).
Each Underlying ETF is, or will be, an “investment fund” within the meaning of applicable Canadian securities legislation.
An Underlying ETF may be managed by the Filer or an affiliate or associate of the Filer, or by a third-party investment fund manager.
The securities of an Underlying ETF will not meet the definition of an IPU in NI 81-102 because the purpose of the Underlying ETF will not be to:
(a) hold the securities that are included in a specified widely quoted market index in substantially the same proportion as those securities are reflected in that index; or
(b) invest in a manner that causes the Underlying ETF to replicate the performance of that index.
An Underlying ETF’s investment objectives and strategies will be substantially consistent with the investment restrictions in NI 81-102 and, as such, a Fund’s limited investment in securities of an Underlying ETF will not cause the Fund to indirectly invest in assets or have access to investment strategies that it would not be permitted to have directly.
The securities of an Underlying ETF are, or will be, listed on a national securities exchange registered with the SEC in the United States (a National Securities Exchange) and the market for them is, or will be, liquid because it is, or will be, supported by authorized participants (similar to designated brokers or dealers). As a result, the Filer expects a Fund to be able to dispose of such securities through market facilities in order to raise cash, including to fund the redemption requests of its securityholders.
An investment in an Underlying ETF by a Fund will otherwise comply with section 2.5 of NI 81-102, including that:
(a) no Underlying ETF will hold more than 10% of its net asset value (NAV) in securities of another investment fund (at the time of purchase) unless the Underlying ETF (i) is a clone fund, as defined in NI 81-102, or (ii) in accordance with NI 81-102, purchases or hold securities: (A) of a money market fund, as defined in NI 81-102, or (B) that are IPUs issued by an investment fund; and
(b) no Fund will pay management or incentive fees that to a reasonable person would duplicate a fee payable by an Underlying ETF for the same service.
- Absent the Underlying U.S. ETF Relief, a Fund’s investment in an Underlying ETF would:
(a) be prohibited by paragraph 2.5(2)(a) or (a.1) of NI 81-102, as applicable, because such Underlying ETF may not be subject to NI 81-102; and
(b) be prohibited by paragraph 2.5(2)(c) of NI 81-102 because such Underlying ETF may not be a reporting issuer in any Jurisdiction.
As the securities of the Underlying ETF will not be IPUs, a Fund may not rely on the exception in paragraph 2.5(3)(a) of NI 81-102 when investing in securities of an Underlying ETF.
The key benefits of a Fund investing in the Underlying ETFs are greater choices, lower fees and expenses and potentially enhanced returns. For example:
(a) an investment in an Underlying ETF may lead to efficiencies that result from lower operating expenses and overall management fees relative to the cost of investing directly in the individual portfolio securities held by the Underlying ETF or the cost of investing through a Canadian exchange-traded fund;
(b) an investment in an Underlying ETF will provide the Funds with access to specialized knowledge, expertise and/or analytical resources of the investment advisor to the Underlying ETF;
(c) investing through an Underlying ETF provides a potentially better risk profile, diversification and improved liquidity and/or tradability than direct holdings of asset classes to which the Underlying ETF provides exposure; and
(d) the investment strategies of the Underlying ETFs offer significantly broader exposure to certain asset classes, sectors and markets than those available in the existing Canadian market.
- The Filer submits that having the option to allocate a limited portion of a Fund’s assets to one or more Underlying ETFs will increase diversification opportunities and may improve the Fund’s overall risk/reward profile. As such, the Filer considers that the Underlying ETF Relief will not be prejudicial to the Funds and their securityholders.
The Borrowing Relief
Subparagraph 2.6(1)(a)(i) of NI 81-102 prevents a mutual fund from borrowing cash or providing a security interest over its portfolio assets unless the transaction is a temporary measure to accommodate redemption requests or to settle portfolio transactions and does not exceed five percent of the net assets of the mutual fund. As a result, a Fund is not permitted under subparagraph 2.6(1)(a)(i) to borrow from the Custodian to fund distributions under its Distribution Policy (as defined below).
Each Fund will make distributions on a monthly, quarterly or annual basis or at such frequency as the Filer may, in its discretion, determine appropriate, may make additional distributions and, in each taxation year, will distribute sufficient net income and net realized capital gains so that it will not be liable to pay income tax under Part I of the Income Tax Act (Canada) (the Tax Act), and for each Fund structured as a corporation or a class thereof, under Part IV of the Tax Act on taxable dividends from taxable Canadian corporations (collectively, the Distribution Policy).
Amounts included in the calculation of net income and net realized capital gains of a Fund for a taxation year that must be distributed in accordance with its Distribution Policy sometimes include amounts that are owing to but have not actually been received by the Fund from the issuers of securities held in the Fund’s portfolio (Issuers).
While it is possible for a Fund to maintain a portion of its assets in cash or to dispose of securities in order to obtain any cash necessary to make a distribution in accordance with its Distribution Policy, maintaining such a cash position or making such a disposition (which would generally be followed, when the cash is actually received from the Issuers, by an acquisition of the same securities) will impact the Fund’s performance. Maintaining assets in cash or disposing of and reacquiring the same securities would preclude a portion of the net asset value of the Fund from being invested in accordance with its investment objective.
The Filer is of the view that it is in the interests of a Fund to have the ability to borrow cash from its Custodian and, if required by the Custodian, to provide a security interest over its portfolio assets as a temporary measure to fund the portion of any distribution payable to Securityholders that represents, in the aggregate, amounts that are owing to, but have not yet been received by, the Fund from the Issuers. While such borrowing will have a cost, the Filer expects that such costs will be less than the reduction to the Fund’s performance if the Fund had to hold cash instead of securities in order to fund the distribution.
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) in respect of the Underlying U.S. ETF Relief, the Fund complies with the following conditions:
(i) the investment by a Fund in securities of an Underlying ETF is in accordance with the investment objectives of the Fund;
(ii) a Fund does not purchase securities of an Underlying ETF if, immediately after the purchase, more than 10% of the NAV of the Fund, in aggregate, taken at market value at the time of the purchase, would consist of securities of Underlying ETFs;
(iii) the securities of each Underlying ETF are listed on a National Securities Exchange in the United States;
(iv) each Underlying ETF is, immediately before the purchase by a Fund of securities of that Underlying ETF:
an “investment company” subject to the '40 Act and in good standing with the SEC; or
regulated by the SEC as a reporting issuer under the '33 Act and in good standing with the SEC.
(b) in respect of the Borrowing Relief, the Fund complies with the following conditions:
(i) the borrowing by the Fund in respect of a distribution does not exceed the portion of the distribution that represents, in the aggregate, amounts that are payable to the Fund but have not been received by the Fund from the Issuers and, in any event, does not exceed five percent of the net assets of the Fund;
(ii) the borrowing is not for a period longer than 45 days;
(iii) any security interest in respect of the borrowing is consistent with industry practice for the type of borrowing and is only in respect of amounts owing as a result of the borrowing;
(iv) the Fund does not make any distribution to Securityholders where the distribution would impair the Fund’s ability to repay any borrowing to fund distributions; and
(v) the final prospectus or amendment thereto of the Fund discloses the potential borrowing, the purpose of the borrowing and the risks associated with the borrowing.
(c) the prospectus of each Fund 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 on the terms described in this decision.
“Darren McKall”
Darren McKall, Associate Vice President
Investment Management Division
Ontario Securities Commission
Application #App2026-158
SEDAR+ Filing# 06422805