Exemption Orders (Discretionary)
EMERALD CANADIAN EQUITY FUND
2001 BCSECCOM 445
Headnote:
Mutual Reliance Review System for Exemptive Relief Applications - Relief from the substantial securityholder prohibition to permit certain mutual funds to invest in securities of exchange traded funds at any time that the dealer owns more than 10% of the securities of the exchange traded funds.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 121(2)(c), 130
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, QUEBEC, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF EMERALD CANADIAN EQUITY FUND, TD CANADIAN INDEX FUND, TD BALANCED FUND, TD BALANCED GROWTH FUND, TD DIVIDEND INCOME FUND, TD DIVIDEND GROWTH FUND, TD CANADIAN EQUITY FUND, TD CANADIAN BLUE CHIP EQUITY FUND, TD CANADIAN VALUE FUND, TD CANADIAN STOCK FUND, CT PRIVATE CANADIAN DIVIDEND FUND, CT PRIVATE CANADIAN EQUITY/GROWTH FUND, CT PRIVATE CANADIAN EQUITY/INCOME FUND, CT PRIVATE NORTH AMERICAN EQUITY/GROWTH FUND, CT PRIVATE NORTH AMERICAN EQUITY/INCOME FUND, EMERALD CANADIAN LARGE CAP POOLED FUND TRUST, EMERALD CANADIAN SMALL CAP POOLED FUND TRUST, EMERALD CANADIAN MID CAP POOLED FUND TRUST, EMERALD CANADIAN 300 POOLED FUND TRUST, EMERALD ENHANCED CANADIAN EQUITY POOLED FUND TRUST, EMERALD CANADIAN EQUITY 300 POOLED FUND TRUST II, EMERALD CANADIAN 300 CAPPED POOLED FUND TRUST, EMERALD CANADIAN EQUITY 299 POOLED FUND TRUST, AND EMERALD ENHANCED CANADIAN 300 POOLED FUND TRUST (COLLECTIVELY, THE “FUNDS”)
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia and Newfoundland, (the “Jurisdictions”) has received an application (the “Application”) from TD Asset Management Inc. (“TDAM”), on behalf of the Funds, for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the provisions in the Legislation that prohibit a mutual fund from investing in or holding an investment in an issuer in which any person or company who is a substantial security holder of the management company or the distribution company of the mutual fund has a significant interest or, in Quebec, in securities that a registered person or an affiliate of a registered person owns or is underwriting (the “Applicable Requirements”) shall not apply in respect of an investment by the Funds in securities issued by TD TSE 300 Index Fund or TD TSE 300 Capped Index Fund (the “ETFs”);
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for the Application;
AND WHEREAS it has been represented to the Decision Maker that:
1. Each of the Funds is a “mutual fund in Ontario”, within the meaning of section 1(l) of the Securities Act Ontario (the “Act”), either because it is organized under the laws of Ontario or because it is a “reporting issuer”, within the meaning of the Act, and the Funds which are “reporting issuers”, within the meaning of the Legislation of a Jurisdiction, other than Ontario, are “mutual funds in” such Jurisdiction. The Funds which are “reporting issuers” are subject to National Instrument 81-102 (“NI 81-102”).
2. TD Securities Inc. (the “Dealer”), an affiliate of TDAM, acts as an underwriter and a designated broker of the ETFs in respect of the distributions (the “Offerings”) of securities of the ETFs.
3. The ETFs are mutual funds that are listed and posted for trading on the Toronto Stock Exchange and each of the Offerings by the ETFs is or will be a continuous distribution of securities of the ETFs in the Jurisdictions.
4. Each of the ETFs is a mutual fund which is a “reporting issuer” in each of the Jurisdictions and which is subject to NI 81-102.
5. The Dealer, in acting as an underwriter and a designated broker, will receive no compensation from the Funds, the ETFs or TDAM.
6. The investment by a Fund in an ETF will only be made if it is consistent with the investment objectives of the Fund and, in the view of TDAM, is in the best interests of the Fund.
7. It is anticipated by TDAM that an investment by a Fund in an ETF will be made with cash balances which the Fund holds either to fund redemptions or pending direct investment in other securities.
8. It is anticipated by TDAM that a Fund will generally invest between 0.50% and 3.00% of its net asset value in an ETF, but in no event will a Fund invest greater than 5.00% of its net asset value at the time of the investment in securities of the ETFs.
9. A Fund will not knowingly make or hold an investment in an ETF if, at the time of such investment, the Fund, alone or together with other Funds, is a substantial security holder of the ETF.
10. The investment by a Fund which is subject to NI 81-102 in an ETF will be made in compliance with all of the requirements of NI 81-102 other than section 4.1(1) of NI 81-102, in respect of which relief has been received, and in compliance with all the requirements of the Legislation other than the Applicable Requirements.
11. The investment by a Fund which is not subject to NI 81-102 in an ETF will be made in compliance with all of the requirements applicable to “mutual funds in” each Jurisdiction, other than the Applicable Requirements.
12. The Dealer, in its capacity as underwriter and as a designated broker of an ETF, may own, from time to time, more than 10% of the outstanding units of an ETF.
13. The Toronto-Dominion Bank is a substantial security holder of both the Dealer and TDAM and would be deemed to have a significant interest in the ETFs at any time when the Dealer is holding more than 10% of the outstanding units of the ETFs.
14. In the absence of this decision, pursuant to the Legislation, the Funds are prohibited from investing in or holding the securities of an ETF at any time when the Dealer holds more than 10% or, in Quebec, any of the outstanding units of the ETF.
15. The investment by a Fund in securities of an ETF represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Fund.
AND WHEREAS pursuant to 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 the Applicable Requirements shall not apply so as to prevent a Fund from investing in securities issued by an ETF in respect of which the Dealer has a significant interest or, in Quebec, is an owner or an underwriter;
PROVIDED IN EACH CASE THAT:
1. the Decision will terminate one year after the date hereof; and
2. the Decision shall only apply if at the time a Fund makes an investment in an ETF:
(a) the investment in the ETF is consistent with the investment objective of the Fund;
(b) the Dealer, in acting as underwriter and designated broker of the securities of the ETF, receives no compensation from the Fund, the ETF or TDAM; and
(c) the investments by a Fund in both ETFs do not exceed 5.00% of the net asset value of the Fund.
DATED this 24th day of April, 2001.
Paul Moore Robert W. Davis