Exemption Orders (Discretionary)
AIC LIMITED
2001 BCSECCOM 965
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Relief from requirement to file reports of certain trades of mutual fund units provided that the prescribed reports are filed and fees paid within 30 days of the financial year-end of the fund.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 74(2)(4), 74(2)(19), 74(2)(22), and 76
Securities Rules, B.C. Reg 194/97, s. 139
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND, NEWFOUNDLAND, YUKON, NORTHWEST TERRITORIES AND NUNAVUT
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF AIC LIMITED AND AIC AMERICAN FOCUSED PLUS FUND
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Yukon, Northwest Territories and Nunavut (the “Jurisdictions”) has received an application from AIC Limited (“AIC”), for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that:
(a) trades in units (“Units”) of AIC American Focused Plus Fund (“AIC American”) and other open-end unit trusts established, or to be established from time to time, by AIC (the “Funds”) are not subject to the registration and prospectus requirements of the Legislation of the Jurisdictions (other than British Columbia);
(b) trades in additional Units of a Fund (“Additional Units”) to an investor, subsequent to the investor’s initial subscription for Units of the Fund on an exempt basis, are not subject to the registration and prospectus requirements of the Legislation of the Jurisdictions (other than British Columbia);
(c) trades in Additional Units of a Fund upon the reinvestment of distributions by the Fund are not subject to the registration and prospectus requirements of the Legislation of New Brunswick, Newfoundland, Prince Edward Island and the Yukon Territory; and
(d) trades in Units or Additional Units of a Fund are not subject to the requirements of the Legislation of the Jurisdictions, other than New Brunswick, Prince Edward Island and the Yukon Territory, relating to the filing of forms and the payment of fees within certain prescribed time periods (the “Reporting Requirement”);
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS AIC has represented to the Decision Maker as follows:
1. AIC is registered under the Securities Act (Ontario) and the Securities Act (Manitoba) as an adviser in the categories of investment counsel and portfolio manager.
2. AIC American will be established pursuant to a master declaration of trust under the laws of the province of Ontario, with AIC as trustee and manager. AIC intends to establish additional Funds pursuant to the master declaration of trust, with AIC as trustee and manager.
3. Each Fund is or will be a “mutual fund” as defined in the Legislation.
4. None of the Funds currently intends to become a reporting issuer, as such term is defined in the Legislation, and the Units will not be listed on any stock exchange.
5. Each Fund will be divided into Units which will evidence each investor's undivided interest in the assets of the Fund.
6. It is intended that Units of the Funds will be qualified for investment by a trust governed by a self-administered registered retirement savings plan or registered retirement income fund including corresponding locking-in agreements (“Registered Plans”);
7. The initial distribution of Units of a Fund (the "Initial Investment”) to an investor and the Registered Plans of the investor will have an aggregate acquisition cost to the investor and the investor’s Registered Plans (an investor alone, an investor's Registered Plan alone, or any combination of the foregoing, a "Unitholder") of at least the amount prescribed by the Legislation (the “Prescribed Amount”), in connection with exemptions from the prospectus and registration requirements (the “Private Placement Exemptions”) which require the investor to purchase securities of an issuer having a minimum acquisition cost. Under the Legislation of British Columbia, the Prescribed Amount required by the Private Placement Exemption can be satisfied by aggregation of the costs of Units of a Fund purchased for an investor’s non-registered account and his or her Registered Plan.
8. Following an Initial Investment, it is proposed that a Unitholder be able to subscribe and pay for Additional Units of a Fund in increments of less than the Prescribed Amount, provided that, at the time of such additional acquisition, the Unitholder holds Units of the Fund with an aggregate acquisition cost or aggregate net asset value of at least the Prescribed Amount. The issuance of Additional Units of a Fund to an investor in such circumstances is exempt from the registration and prospectus requirements of the Legislation of British Columbia.
9. Each Fund proposes to distribute Additional Units by way of automatic reinvestment of distributions to Unitholders of the Fund. The issuance of Additional Units of a Fund upon the reinvestment of distributions is exempt from the registration and prospectus requirements of the Legislation of the Jurisdictions other than New Brunswick, Newfoundland, Prince Edward Island and the Yukon Territory.
10. The Legislation of the Jurisdictions, other than New Brunswick, Prince Edward Island and the Yukon Territory, has a Reporting Requirement in respect of distributions pursuant to the Private Placement Exemptions.
11. In Ontario, the Ontario Securities Commission has published for comment proposed OSC Rule 45-501- Exempt Distributions, (2001) 24 OSCB 4247 (“Proposed OSC Rule 45-501"). Specific provisions of Proposed OSC Rule 45-501 prescribe the circumstances under which trades in securities of a mutual fund (such as the Funds) may be made on an exempt basis, and the reporting requirements in respect of such trades .
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that:
(A) an Initial Investment in Units of a Fund is not subject to the registration and prospectus requirements of the Legislation of the Jurisdictions, other than British Columbia, provided that:
i. the aggregate acquisition cost to a Unitholder of the Initial Investment is not less than the Prescribed Amount, and
ii. in Ontario, this paragraph A will cease to be in effect on the date that Proposed OSC Rule 45-501 comes into force;
(B) a trade in Additional Units of a Fund to a Unitholder, subsequent to the Initial Investment in the Fund by the Unitholder in reliance upon the Private Placement Exemptions or upon the registration and prospectus exemption contained in this Decision, is not subject to the registration and prospectus requirements of the Legislation of the Jurisdictions, other than British Columbia, provided that,
i. at the time of such trade in Additional Units of the Fund,
(a) AIC is registered under the Securities Act (Ontario) as an adviser in the categories of investment counsel and portfolio manager, and
(b) the Unitholder then owns Units of the Fund having an aggregate acquisition cost or an aggregate net asset value of not less than the Prescribed Amount; and
ii. in Ontario, this paragraph (B) will cease to be in effect on the date that Proposed OSC Rule 45-501 comes into force;
(C) a trade in Additional Units of a Fund to a Unitholder pursuant to the reinvestment of distributions of the Fund is not subject to the registration and prospectus requirements of the Legislation of New Brunswick, Newfoundland, Prince Edward Island and Yukon Territory provided that:
i. no sales commissions or other charge in respect of such trade in Additional Units of the Fund is required to be paid by the Unitholder directly or indirectly, and
ii. each Unitholder who receives Additional Units has received, not more than 12 months before such issuance, a statement describing
(a) the details of any deferred or contingent sales charge or redemption fee that is payable at the time of the redemption of a Unit,
(b) any right that the Unitholder has to make an election to receive cash instead of Units in the payment of the net income or net realized capital gains distributed by theFund,
(c) instructions on how the right referred to in subclause (b), if any, can be exercised, and
(d) the fact that no prospectus is available for the Fund as its Units are offered pursuant to prospectus exemptions only;
(D) the Reporting Requirements of the Legislation of the Jurisdictions, other than New Brunswick, Prince Edward Island and the Yukon Territory, do not apply to a trade in Units or Additional Units of a Fund made in reliance upon the exemptions from the registration and prospectus requirements contained in this Decision or in reliance upon the Private Placement Exemptions, provided that
i. within 30 days of the end of its financial year, the Fund
(a) files with the applicable Decision Maker a report in respect of all trades in Units of the Fund during such financial year, in the form prescribed by the applicable Legislation, and
(b) remits to the applicable Decision Maker the fee prescribed by the applicable Legislation, and
ii. in Ontario, this paragraph (D) will cease to be in effect on the date that Proposed OSC Rule 45-501 comes into force,
PROVIDED FURTHER THAT the first trade in Units or Additional Units of a Fund acquired in reliance upon an exemption from the registration and prospectus requirements provided in this Decision is a distribution or primary distribution to the public in a Jurisdiction,
i. unless otherwise exempt under the Legislation of the Jurisdiction, or
ii. unless, at the time of the first trade,
(a) the Fund is a reporting issuer or the equivalent under the applicable Legislation,
(b) if the seller of the Units is in a special relationship (as defined in the applicable Legislation) with the Fund, the seller has reasonable grounds to believe that the Fund is not in default of any requirement of the applicable Legislation,
(c) no unusual effort is made to prepare the market or to create a demand for the Units and no extraordinary commission or consideration is paid in respect of such trades, and
(d) the Units have been held for a period of at least eighteen months from the later of the date they were acquired by the seller of the Units and the date that the Fund became a reporting issuer,
except that, in Ontario, this condition will cease to be in effect on the date that Proposed OSC Rule 45-501 comes into force.
DATED at Toronto this 25th day of September, 2001
J. A. Geller R. Stephen Paddon