Skip Navigation
Securities Law

NIN 96/42 - Further Transitional Relief Mutual Funds and Related Party Transactions Involving Non-Participating Affiliates [NIN - Rescinded]

Published Date: 1996-11-29
Effective Date: 1996-11-27
The Commission is issuing BOR#96/21. BOR#96/21 extends the period of transitional relief previously provided under BOR#95/8, BOR#96/6, BOR#96/11 and BOR#96/13 regarding section 110.1 of the Securities Act for certain responsible persons and types of securities. This notice provides background to the issuance of BOR#96/21.

Section 110.1 prohibits certain related party transactions between mutual funds and responsible persons, including the purchase and sale of securities from or to the account of a responsible person. BOR#96/5 and BOR#96/17 provide relief from section 110.1(1)(b) to permit certain principal transactions between mutual funds and responsible persons involving mortgages and certain debt securities, respectively, subject to conditions. The Commission has received submissions requesting similar relief for equity securities, forward contracts and over-the-counter options. Forward contracts and over-the-counter options are both defined in National Policy Statement No. 39. No decision has been reached with respect to the submissions received. In light of the recommendation made regarding principal transactions by the Investment Funds Steering Group in their report entitled, "The Stromberg Report: An Industry Perspective", prepared for the Canadian Securities Administrators and issued earlier this month, the submission warrants further consideration. It is also anticipated that the CSA will be considering this issue further.

The definition of "responsible person" in section 104(1) of the Securities Act includes an affiliate of a responsible person that does not participate in the investment decisions made on behalf of, or the advice given to, the mutual fund. The equivalent provision to section 110.1 in other Canadian jurisdictions does not apply to a non-participating affiliate. The Commission has received submissions that the application of section 110.1 to a non-participating affiliate will require market participants to implement procedures to address the prohibition imposed by section 110.1(1)(b) on the purchase or sale of equity securities, forward contracts and over-the-counter options from or to the account of a non-participating affiliate and that market participants need additional time to develop the procedures.

Accordingly, the Commission has determined that it would be appropriate to provide additional transitional relief for equities, forward contracts and over-the-counter options where the transactions involve non-participating affiliates. The transitional relief will provide additional time to consider the submissions further and to allow market participants a period of time to develop procedures to address the new requirements. The additional transitional relief available to non-participating affiliates under BOR#96/21 expires December 1, 1997. Transitional relief for other responsible persons available under BOR#96/13 expires December 1, l996.

DATED at Vancouver, British Columbia, on November 27, 1996.

Douglas M. Hyndman

REF: BOR#95/8