Exemption Orders (Discretionary)

DYNAMIC MUTUAL FUNDS LTD.


2001 BCSECCOM 616


Headnote

Mutual Reliance Review System for Exemptive Relief Applications – Revocation of a previous decision providing relief from section 8.2 of National Instrument 81-105.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, s. 171

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA, NEWFOUNDLAND, PRINCE EDWARD ISLAND, YUKON, NORTHWEST TERRITORIES AND NUNAVUT

AND

IN THE MATTER OF NATIONAL INSTRUMENT 81-105 MUTUAL FUND SALES PRACTICES

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF DYNAMIC MUTUAL FUNDS LTD., DUNDEE SECURITIES CORPORATION AND DUNDEE PRIVATE INVESTORS INC.

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Newfoundland, Prince Edward Island, Yukon, Northwest Territories and Nunavut (the “Jurisdictions”) has received an application from Dynamic Mutual Funds Ltd. (“Dynamic”), Dundee Securities Corporation (“Dundee Securities”) and Dundee Private Investors Inc. (“Private Investors”) (collectively the “Filers”) for a decision pursuant to section 9.1 of National Instrument 81-105 Mutual Fund Sales Practices (the “National Instrument”) to permit the equity interests of representatives (and their respective associates) of Dundee Securities, Private Investors and any other broker or dealer (collectively the “Dundee Dealers”) which becomes an affiliate of Dundee Wealth Management Inc. (“Dundee Wealth”) to be calculated and disclosed for purposes of the National Instrument on the basis that the special shares of Dundee Wealth have been converted into common shares of Dundee Wealth at the then prevailing conversion ratio;

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 decision;

AND WHEREAS the Filers have represented to the Decision Makers that:

1. Dynamic is the manager of mutual funds, the securities of which are qualified for distribution in some or all of the provinces and territories of Canada pursuant to simplified prospectuses and annual information forms for which receipts have been issued by the applicable Decision Makers. The mutual funds managed by Dynamic, together with such other mutual funds of which Dynamic or another affiliate (collectively, the “Dundee Managers”) of Dundee Wealth is or becomes the manager, are referred to collectively herein as the “Related Mutual Funds”. The sale of securities of each Related Mutual Fund is subject to the requirements of the National Instrument.

2. Each Filer is a direct or indirect wholly-owned subsidiary of Dundee Wealth. Consequently, for purposes of the National Instrument, each Dundee Dealer and Dundee Manager is or will be a member of the organization of each Related Mutual Fund. Each Dundee Dealer also is a participating dealer for purposes of the National Instrument.

3. Dundee Wealth is a reporting issuer in all the provinces of Canada. The common shares (“Common Shares”) of Dundee Wealth are listed and posted for trading on The Toronto Stock Exchange (the “TSE”). Dundee Wealth is a majority-owned subsidiary of Dundee Bancorp Inc. (“Dundee Bancorp”). Dundee Bancorp is a reporting issuer in all the provinces and territories of Canada. The class A subordinate voting shares of Dundee Bancorp are listed and posted for trading on the TSE.

4. Representatives (and their associates) of the Dundee Dealers may own equity securities in Dundee Wealth and/or Dundee Bancorp. However, no representative (or their associate) of a Dundee Dealer owns more than 10% of the outstanding voting or equity securities of Dundee Wealth or Dundee Bancorp.

5. The authorized capital of Dundee Wealth consists of, among other securities, an unlimited number of Common Shares and an unlimited number of special shares (“Special Shares”), issuable in series. Special Shares and Common Shares have similar rights to vote, receive dividends from, and participate in the distribution of assets by, Dundee Wealth. Special Shares are convertible into Common Shares in certain circumstances and may be repurchased by Dundee Wealth in certain circumstances. Special Shares are intended to be a temporary substitute for Common Shares in order to provide Dundee Wealth with flexibility to structure transactions involving the issue of shares by Dundee Wealth;

6. Dynamic, Infinity Investment Counsel Ltd., Dundee Securities and Private Investors received relief from the National Instrument by way of an MRRS Decision Document dated September 15, 1999 in all of the Jurisdictions except Saskatchewan and by way of a Decision dated January 17, 2000 in Saskatchewan (collectively, the “Existing Decision Document”).

7. The filers now wish to revoke and replace the terms of the Existing Decision Document by:

(a) deleting the condition that the disclosure relating to equity interests provided to purchasers in accordance with the National Instrument include a statement that sales representatives of each Dundee Dealer own, in the aggregate, less than (or not more than) a stated percentage of the outstanding shares of Dundee Wealth; and

(b) extending the relief to representatives of registered brokers and dealers who may become affiliates of Dundee Wealth in the future.

8. The condition noted in submission 7(a) is no longer appropriate because Dundee Wealth is now a reporting issuer in Canada and has a class of its securities listed on a Canadian stock exchange. Consequently, equity interests in Dundee Wealth now may be calculated in the manner contemplated by paragraph (a) of the definition of “equity interest” in section 1.1 of the National Instrument.

9. The requested extension noted in submission 7(b) is appropriate as Dundee Wealth may, from time to time, establish or acquire other registered brokers and dealers who will be members of the organisations of the Related Mutual Funds.

AND WHEREAS pursuant to the System this 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 securities legislation of each of the Jurisdictions (the “Legislation”) that provides the Decision Makers with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that the Existing Decision Document is hereby revoked;

AND THE DECISION of the Decision Makers pursuant to the National Instrument is that, for purposes of the National Instrument, the equity interests of representatives (and their respective associates) of the Dundee Dealers may be calculated and disclosed by the Dundee Dealers and the Dundee Managers on the basis that the Special Shares of Dundee Wealth have been converted into Common Shares of Dundee Wealth at the then prevailing conversion ratio.

Dated on June 1, 2001.

J.A. Geller R. Stephen Paddon
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