Exemption Orders (Discretionary)
MARQUEST INVESTMENT COUNSEL INC.
2001 BCSECCOM 984
Headnote:
Mutual Reliance Review System for Exemptive Relief Applications – relief granted from the registration and prospectus requirements to permit trades of reinvested units of pooled funds to existing unitholders - trades in units of pooled funds also exempt from the requirement to file a report of such trade provided that reports are filed and fees paid yearly.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(a), 48, 61 and 76
SecuritiesRules, B.C. Reg. 194/97, s. 139(2) and (5)
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 MARQUEST INVESTMENT COUNSEL INC.
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 Marquest Investment Counsel Inc. (the “Applicant”) for a decision pursuant to the securities legislation (the "Legislation") of the Jurisdictions that:
(a) certain trades in units (“Units”) of open-end unit trusts established, or to be established from time to time, by the Applicant (the “Funds”) shall not be subject to the registration and prospectus requirements of the Legislation of the Jurisdictions, other than British Columbia where such relief is not required;
(b) trades in additional Units (“Additional Units”) of the Funds to an investor upon:
(i) the subsequent subscription of an investor shall not subject to the registration and prospectus requirements of the Legislation of the Jurisdictions, other than British Columbia where such relief is not required; and
(ii) the reinvestment of distributions by a Fund shall not be subject to the registration and prospectus requirements of the Legislation of New Brunswick, Newfoundland, Prince Edward Island and Yukon Territory; and
(c) trades in Units and Additional Units are not subject to the requirements of the Legislation of the Jurisdictions relating to the filing of forms and the payment of fees within 10 days of each trade;
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 the Applicant has represented to the Decision Maker that:
1. the Applicant is registered under the Securities Act (Ontario) as a limited market dealer and as an adviser in the categories of investment counsel and portfolio manager;
2. the Applicant has established or will establish one or more Funds pursuant to declarations of trust for which the Applicant acts or will act as the trustee and manager;
3. each Fund is or will be a “mutual fund” as defined in the Legislation of the Jurisdictions;
4. none of the Funds currently intends to become a reporting issuer, as such term is defined in the Legislation of the Jurisdictions, and the Units of the Funds will not be listed on any stock exchange;
5. each Fund is or 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 certain Funds are or will be qualified for investment by a trust governed by a self-administered registered retirement savings plan, registered retirement income fund or a deferred profit sharing plan (“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 of the Jurisdictions (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;
8. where the Prescribed Amount of an Initial Investment in a Fund is met through the aggregation of the acquisition costs of Units of a Fund by some or all of an investor and an investor’s Registered Plans, the Private Placement Exemptions would not be available in the Jurisdictions, except British Columbia, and exemptive relief would be required;
9. 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 subsequent acquisition the Unitholder holds Units of the Fund with an aggregate acquisition cost or aggregate net asset value of at least the Prescribed Amount;
10. each Fund proposes to distribute Additional Units by way of automatic reinvestment of distributions to Unitholders of the Fund; and
11. Units are non-transferable except in limited circumstances as set out in the declaration of trust of each Fund.
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 DECISIONSof the Decision Makers pursuant to the Legislation are that:
(A) the registration and prospectus requirements contained in the Legislation of the Jurisdictions, other than British Columbia where such relief is not required, shall not apply to:
(i) an Initial Investment in Units of a Fund provided that:
(a) the aggregate acquisition cost to a Unitholder of the Initial Investment is not less than the Prescribed Amount;
(b) at the time of the Initial Investment of Units, the Applicant is registered under the Legislation of Ontario as an adviser in the categories of investment counsel and portfolio manager and such registration is in good standing; and
(c) this clause (A)(i) will cease to be in effect in a Jurisdiction 90 days after the coming into force, subsequent to the date of this Decision, of any legislation, regulation or rule in the Jurisdiction exempting from the registration and prospectus requirements of the Legislation Initial Investments by Unitholders in securities of a pooled fund as described in this Decision;
(ii) trades in Additional Units pursuant to a subsequent subscription and payment by a Unitholder provided that:
(a) at the time of trade of Additional Units, the Applicant is registered under the Legislation in Ontario as an adviser in the categories of investment counsel and portfolio manager;
(b) at the time of the trade of Additional Units of a Fund, 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
(c) this clause (A)(ii) will cease to be in effect in a Jurisdiction 90 days after the coming into force, subsequent to the date of this Decision, of any legislation, regulation or rule in the Jurisdiction exempting from the registration and prospectus requirements of the Legislation distributions by a fund manager on behalf of a pooled fund of additional securities which applies to trades of Additional Units as described in this Decision;
(B) trades in Additional Units of a Fund pursuant to the reinvestment of distributions of the Fund shall not subject to the registration and prospectus requirements of the Legislation in New Brunswick, Newfoundland, Prince Edward Island and Yukon Territory provided that:
(i) no sales commissions or other charge in respect of such issuance of Additional Units is payable; 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 charges or redemption fee that is payable at the time of the redemption of a Unit, (b) any rights 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 the no prospectus is available for the Fund as Units are offered pursuant to prospectus exemptions only;
(C) the first trade of Units by Unitholders acquired under an exemption from the registration and prospectus requirements provided in this Decision is deemed to be a distribution or primary distribution to the public in a Jurisdiction unless otherwise exempt under the Legislation of the Jurisdiction or unless at the time of the first trade:
(i) the Fund has been a reporting issuer or the equivalent under the applicable Legislation for at least 12 months;
(ii) 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;
(iii) the trade is not a control distribution;
(iv) 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
(v) the Units have been held for a period of at least twelve months from the date they were acquired by the seller of the Units; and
(D) the requirements contained in the Legislation of the Jurisdictions to file a report of trades in Units and pay the associated fee shall not apply to a trade in Units of a Fund made in reliance on the exemptions from the registration and prospectus requirements contained in this Decision or in reliance on the Private Placement Exemptions, provided that, within 30 days of the end of each financial year of each Fund, such Fund:
(i) files with the applicable Decision Maker a report in respect of all trades in Units of the Fund during such financial year, in a form prescribed by applicable Legislation; and
(ii) remits to the applicable Decision Maker the fee prescribed by the applicable Legislation.
DATED September 28th, 2001.
Paul M. Moore R. W. Davis