Foyston, Gordon & Payne Inc. (Re), 2026 CanLII 49708

May 26, 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

FOYSTON, GORDON & PAYNE INC.

(the Filer)

AND

THE TOP FUNDS

(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Top Funds for a decision under the securities legislation of the Jurisdiction (the Legislation):

1. exempting the Top Funds, with respect to investments in the Underlying Funds (as defined below), from the restrictions in the Legislation which prohibit: (a) an investment fund from knowingly making an investment in a person or company in which the investment fund, alone or together with one or more related investment funds, is a substantial security holder; (b) an investment fund from knowingly making an investment in an issuer in which: (i) any officer or director of the investment fund, its management company or distribution company or an associate of them, or (ii) any person or company who is a substantial security holder of the investment fund, its management company or its distribution company, has a significant interest; (c) an investment fund, its management company or its distribution company from knowingly holding an investment described in paragraph (a) or (b) above (collectively, the Related Issuer Relief); and
2. exempting the Top Funds, with respect to investments in the Underlying Funds, from the restrictions contained in paragraph 13.5(2)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) which prohibit a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase a security of an issuer in which a responsible person or an associate of a responsible person is a partner, officer or director, unless (i) this fact is disclosed to the client and (ii) the written consent of the client to the purchase is obtained before the purchase (the Consent Relief, and together with the Related Issuer Relief, the Requested Relief).

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 the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in MI 11‑102, National Instrument 14‑101 Definitions and NI 31-103 have the same meaning if used in this decision, unless otherwise defined.

For the purposes of this decision, the following terms have the following meaning:

FGP Funds means existing investment funds managed by the Filer that are not reporting issuers.

Initial Top Funds means FGP Balanced Fund, FGP Core Plus Bond Fund, FGP Corporate Plus Bond Fund, FGP Income Fund, FGP Private Balanced Fund and GFD – Foyston Care & Maintenance Income Fund, each existing mutual funds managed by the Filer that are not reporting issuers.

Initial Underlying Fund means FGP Mortgage Fund, an existing investment fund managed by the Filer that is not a reporting issuer.

Future Top Funds means any future mutual funds managed by the Filer that are not, or will not be, reporting issuers.

Future Underlying Funds means any future investment funds or other collective investment vehicles the Top Funds will invest in that are managed by the Filer or an affiliate of the Filer and are not, or will not be, reporting issuers.

Top Funds means, collectively, the Initial Top Funds and the Future Top Funds.

Underlying Funds means, collectively, the Initial Underlying Fund and the Future Underlying Funds.

Representations

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

The Filer

1. The Filer is a corporation formed under the laws of Canada with its head office located in Toronto, Ontario.
2. The Filer is registered as (i) an investment fund manager, portfolio manager and exempt market dealer in Ontario, Quebec and Newfoundland and Labrador; (ii) a portfolio manager and exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, and Saskatchewan; and (iii) a portfolio manager in the Northwest Territories, Nunavut and Yukon.
3. The Filer is the investment fund manager (IFM) and portfolio manager (PM) of the Initial Top Funds and the Filer will be the IFM and/or PM of the Future Top Funds.
4. The Filer is the IFM and PM of the Initial Underlying Fund and the Filer, or an affiliate of the Filer, will be the IFM and/or PM of the Future Underlying Funds.
5. The Filer is not a reporting issuer in any of the Jurisdictions. The Filer is not currently in default of securities legislation in any Jurisdiction, except for breaches that occurred when the Initial Top Funds invested in and held (and continues to hold) the Initial Underlying Fund, resulting in the inadvertent non-compliance with paragraph 111(2)(b) and subsection 111(4) of the Securities Act (Ontario). Upon issuance of this decision, the Filer will not be in default of securities legislation of any jurisdiction of Canada.

The Top Funds

6. The Initial Top Funds are mutual funds established as trusts under the laws of Ontario. Each Future Top Fund will be formed as a limited partnership, trust or corporation governed by the laws of a Jurisdiction or a foreign jurisdiction.
7. Each Top Fund is not, or will not be, a reporting issuer under the securities legislation of one or more Jurisdictions.
8. The securities of each Top Fund are, or will be, distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45‑106 Prospectus Exemptions (NI 45‑106) and the Legislation. Each Top Fund has, or will have, an offering memorandum or other investor disclosure document that is provided or made available to investors.
9. The investment objective and policies of the Initial Top Funds are as follows: (a) FGP Balanced Fund: The investment objective of the FGP Balanced Fund is to aim to generate an attractive total investment return through income and long-term capital growth. To achieve this investment objective, the FGP Balanced Fund will invest primarily in a diversified mix of Canadian equity securities and fixed-income securities. (b) FGP Core Plus Bond Fund: The investment objective of the FGP Core Plus Bond Fund is to aim to generate an attractive total investment return through income and long-term capital appreciation primarily by investing in debt obligations and other evidences of indebtedness of Canadian, U.S., and international issuers. To achieve this investment objective, the FGP Core Plus Bond Fund will invest in a diversified mix of fixed-income securities. (c) FGP Corporate Plus Bond Fund: The investment objective of the FGP Corporate Plus Bond Fund is to aim to generate an attractive total investment return through income and long-term capital appreciation through investments in debt obligations and other evidences of indebtedness of Canadian, U.S., and international corporate issuers. To achieve this investment objective, the FGP Corporate Plus Bond Fund will invest in a diversified mix of fixed-income securities with a weighted average credit quality of “BBB”. (d) FGP Income Fund: The investment objective of the FGP Income Fund is to aim to generate an attractive total after-tax investment return through income and long-term capital growth. To achieve this investment objective, the FGP Income Fund will invest primarily in a diversified mix of debt obligations and other evidences of indebtedness of primarily Canadian issuers, preferred shares, common shares, income trusts, and real estate investment trusts. (e) FGP Private Balanced Fund: The investment objective of the FGP Private Balanced Fund is to aim to generate an attractive after-tax total investment return through income and long-term capital growth. To achieve this investment objective, the FGP Private Balanced Fund will invest primarily in a diversified mix of equity securities and fixed-income securities. (f) GFD – Foyston Care & Maintenance Income Fund: The investment objective of the GFD – Foyston Care & Maintenance Income Fund is to generate an attractive total investment return through income and long-term capital appreciation primarily through investments in debt obligations and other evidences of indebtedness of primarily Canadian issuers, preferred shares, common shares, income trusts and real estate investment trusts. GFD – Foyston Care & Maintenance Income Fund provides a customized strategy for the members of a certain not-for-profit organization.
10. Each Initial Top Fund has allocated a portion of its assets to the Initial Underlying Fund.
11. Certain Initial Top Funds, alone or together with other FGP Funds, are a substantial security holder of certain other FGP Funds, other than the Initial Underlying Fund, in compliance with section 2.5.1 of National Instrument 81-102 Investment Funds (NI 81-102).
12. The Initial Top Funds are valued and redeemable daily.
13. To the extent that a Top Fund wishes to invest in an Underlying Fund, the investment objectives and strategies of such Top Fund will permit it to do so.
14. Each Top Fund is, or will be, an investment fund for the purposes of the Legislation.

The Underlying Funds

15. The Initial Underlying Fund is an investment fund established as a trust under the laws of Ontario. Future Underlying Funds may be investment funds or other collective investment vehicles structured as limited partnerships, trusts or corporations governed by the laws of a Jurisdiction or a foreign jurisdiction.
16. The Underlying Funds are not, or will not be, reporting issuers in any of the Jurisdictions. Securities of the Underlying Funds are, or will be, distributed to investors in Canada pursuant to exemptions from the prospectus requirements in accordance with NI 45‑106 and the Legislation.
17. The Initial Underlying Fund has an offering memorandum that is provided to investors or is made available to investors upon request. Any Future Underlying Funds will have an offering memorandum or other investor disclosure document that will be provided to investors or will otherwise be made available to investors upon request.
18. The investment objective of the Initial Underlying Fund is to generate attractive total investment return through income and long-term capital appreciation. To achieve this investment objective, the Initial Underlying Fund will primarily invest in mortgage obligations and other evidences of mortgage-related indebtedness of Canadian, U.S. and international borrowers through securities available on public markets or otherwise privately offered.
19. The Initial Underlying Fund is valued daily and redeemable monthly.
20. The net asset value (NAV) of the Initial Underlying Fund is calculated by an arm’s length third party.
21. Currently, approximately 25% of the Initial Underlying Fund’s NAV is made up of mortgage-based securities that are considered to be “illiquid assets” within the meaning of NI 81-102. The NAV of Future Underlying Funds may similarly be comprised of illiquid assets above the applicable illiquid asset restriction thresholds set out for investment funds in section 2.4 of NI 81-102.
22. Each Future Underlying Fund will be operated in a manner similar to how the Filer operates its investment funds, including being managed by the Filer or an affiliate and using an arm’s length third party to calculate the NAV to determine the purchase and redemption price of the securities of each Future Underlying Fund. Future Underlying Funds may be potentially subject to redemption limitations, including lock-up periods, early redemption penalties and other restrictions on redemptions in a given period of time (collectively, Redemption Limitations). The Initial Underlying Fund is not subject to any Redemption Limitations.
23. The Underlying Funds produce, or will produce, audited financial statements on an annual basis, in accordance with generally accepted accounting principles with a qualified auditing firm as the auditor of those financial statements.

Necessity for Requested Relief

24. Currently, the Initial Top Funds collectively hold more than 20% of the outstanding voting securities of the Initial Underlying Fund and, as such, are a substantial security holder of the Initial Underlying Fund within the meaning of the Legislation. Such investments and holdings are contrary to paragraph 111(2)(b) and subsection 111(4) of the Legislation.
25. Going forward, the amount invested from time to time, directly or indirectly, in a Future Underlying Fund by a Top Fund (or in the Initial Underlying Fund by a Future Top Fund), together with one or more other funds managed by the Filer, may also exceed 20% of the outstanding voting securities of such Underlying Fund. As a result, a Top Fund could, together with one or more other Top Funds, become a substantial security holder of an Underlying Fund. Each such Top Fund is, or will be, “related investment funds”, as such term is defined in the Legislation by virtue of common management by the Filer.
26. Currently, there is no officer or director of any Initial Top Fund, the Filer, or of any associate of them, who has a significant interest in the Initial Underlying Fund. Additionally, there is no person or company who is a substantial security holder of any Initial Top Fund or the Filer, that has a significant interest in the Initial Underlying Fund.
27. Going forward, a Top Fund may invest in an Underlying Fund in which (i) an officer or director of a Top Fund, the Filer, or an associate of any of them, has a significant interest and/or (ii) a person or company who is a substantial security holder of the Top Fund or the Filer, has a significant interest.
28. The Top Funds are unable to invest in the Underlying Funds in reliance on the exemption from the investment restrictions of the Legislation that is provided under subsection 2.5.1(2) of NI 81-102 for non-reporting issuer investment funds that purchase or hold securities of another non-reporting issuer investment fund because, among other reasons, the Underlying Funds may be collective investment vehicles that are not “investment funds” as defined in the Legislation, the Underlying Funds may be investment funds that do not comply with the illiquid asset restrictions in section 2.4 of NI 81-102, or the Top Funds and Underlying Funds may not have the same valuation and redemption dates.
29. In the absence of the Related Issuer Relief, each Top Fund (including the Initial Top Funds) would be precluded from directly or indirectly purchasing or holding securities of an Underlying Fund (including the Initial Underlying Fund) due to the investment restrictions contained in the Legislation.
30. In the absence of the Consent Relief, the Filer would be precluded from causing a Top Fund to invest in an Underlying Fund unless the specific fact is disclosed to each investor of the Top Fund and written consent of each investor of the Top Fund is obtained prior to the purchase, since a responsible person (as per subsection 13.5(1) of NI 31-103) or an associate of a responsible person, may also be a partner, officer and/or director of the applicable Underlying Fund.

Generally

31. An investment by a Top Fund in an Underlying Fund will only be made if the investment is, or will be, compatible with the investment objectives and investment strategy of the Top Fund.
32. The Filer believes that the investment by a Top Fund in an Underlying Fund will provide the Top Fund with an efficient and cost‑effective manner of pursuing portfolio, asset and strategy diversification, instead of purchasing securities directly.
33. No management fees or incentive fees would be payable by a Top Fund with respect to an investment in an Underlying Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Fund for the same service.
34. No sales fees or redemption fees would be payable by a Top Fund in relation to its purchases or redemptions of securities of an Underlying Fund, unless the Top Fund redeems its securities of the Underlying Fund during a Redemption Limitation, in which case a fee may be payable by the Top Fund.
35. Investments in, and redemptions of, securities of an Underlying Fund by a Top Fund will be effected at an objective price, which for this purpose will be the NAV per security of the applicable class or series of the Underlying Fund.
36. In all cases, the Filer manages, or will manage, the liquidity of each Top Fund having regard to the redemption features of the corresponding Underlying Fund to ensure that it can meet redemption requests from investors of the applicable Top Fund.
37. A Top Fund will not invest in an Underlying Fund with less frequent redemptions than the Top Fund, unless the Filer believes that the liquidity of the Top Fund’s portfolio is adequately managed through other strategies. As part of such strategies, at least 50% of the assets held by each Top Fund are, or will be, redeemable or able to be liquidated at least as frequently as securities of the Top Fund are redeemable; the balance of the assets may have more limited liquidity.
38. A Top Fund’s investment in an Underlying Fund will be disclosed to investors in such Top Fund’s offering memorandum or other investor disclosure document and, where applicable, periodic reports and financial statements.
39. An investment by a Top Fund in an Underlying Fund will only be made if such investment represents the business judgement of a responsible person uninfluenced by considerations other than the best interests of that Top Fund and its investors.

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) the securities of the Top Funds and the Underlying Funds, if distributed in Canada, are distributed in Canada solely pursuant to exemptions from the prospectus requirements in accordance with NI 45-106 and the Legislation; (b) a direct or indirect investment by a Top Fund in an Underlying Fund will be compatible with the fundamental investment objectives and strategies of such Top Fund; (c) at the time of the purchase by a Top Fund of securities of an Underlying Fund, either (A) the Underlying Fund holds no more than 10% of its NAV in securities of other investment funds, or (B) the Underlying Fund: (i) purchases or holds securities of investment funds that are “clone funds” (as such term is defined in NI 81-102); (ii) purchases or holds securities of investment funds that are “money market funds” (as such term is defined in NI 81-102); or (iii) purchases or holds securities that are “index participation units” (as such term is defined in NI 81-102) issued by an investment fund; (d) no management fees or incentive fees will be payable by a Top Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Fund for the same service; (e) no sales fees or redemption fees are payable by a Top Fund in relation to its purchases or redemptions of securities of an Underlying Fund, unless that Top Fund redeems its securities of the Underlying Fund during a Redemption Limitation, in which case a fee may be payable by that Top Fund; (f) the securities of an Underlying Fund held by a Top Fund will not be voted at any meeting of the security holders of the Underlying Fund, except that the Top Fund may arrange for the securities of the Underlying Fund it holds to be voted by the beneficial holders of securities of the Top Fund; (g) a Top Fund’s investment in securities of an Underlying Fund will be disclosed to investors in the Top Fund’s offering memorandum or other investor disclosure document and, where applicable, periodic reports and financial statements; (h) an offering memorandum or statement of investment policies and guidelines, where available, or other disclosure document, will be provided to each prospective investor in a Top Fund prior to the time of investment or prior to the Requested Relief being relied on by such Top Fund, and will disclose: (i) that a Top Fund may purchase securities of one or more Underlying Funds; (ii) that the Filer is the manager of the Top Fund, that the Filer or an affiliate of the Filer is the manager of the Underlying Funds, and the relationship between the Filer and the affiliate of the Filer, as applicable; (iii) the approximate or maximum percentage of the Top Fund’s assets that may be invested in securities of each Underlying Fund; (iv) the nature of the fees, expenses and any performance or special incentive distributions payable by the Underlying Fund in which a Top Fund invests; (v) for each officer, director or substantial security holder of the Filer or its affiliate, or of any Top Fund, that has a significant interest in an Underlying Fund, and for any such officers, directors and substantial security holders who together in aggregate hold a significant interest in an Underlying Fund, the approximate amount of the significant interest they hold, on an aggregate basis, expressed as a percentage of the Underlying Fund's net asset value, and the potential conflicts of interest which may arise from such relationships; (vi) that investors in the Top Fund are entitled to receive from the Filer, on request and free of charge, a copy of the offering memorandum or other similar disclosure document of the Underlying Fund, if available; and (vii) that investors in the Top Fund are entitled to receive from the Filer, on request and free of charge, the annual audited financial statements and interim financial reports, if any, relating to the Underlying Fund in which the Top Fund invests; (i) where an investment is made by a Top Fund in an Underlying Fund, the records of portfolio transactions maintained by the Top Fund include, separately for every portfolio transaction effected for a Top Fund by the Filer, the name of the related person in which an investment is made, being the Underlying Fund; (j) each Top Fund will be treated as an arm's length investor in an Underlying Fund on the same terms as all other third-party investors, with each investment by a Top Fund in the Underlying Fund made at a price and other terms as favourable for the Top Fund as for all other third-party investors; (k) a Top Fund will not invest in the securities of an Underlying Fund with less frequent redemptions than the Top Fund, unless at least 50% of the assets held by each Top Fund are, or will be, redeemable or able to be liquidated at least as frequently as securities of the Top Fund are redeemable; and (l) a Top Fund will not invest in an Underlying Fund unless (i) the NAV of the Underlying Fund is based on a valuation of the portfolio assets of the Underlying Fund that is independently determined by an arm's length third party and (ii) the Underlying Fund produces annual financial statements that are audited by a qualified auditing firm in accordance with generally accepted accounting principles and made available to the Top Fund.

"Darren McKall"

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

Application # App2026-195

SEDAR+ #: 06428670