NIN 97/11 - Meaning of "Fully Managed" Accounts [NIN - Rescinded]

Sections 29(1)(a) and 55(1)(a) of the Securities Act deem a trust company or insurer to be acting as principal when it purchases or sells a security as an agent or trustee for accounts that are fully managed by it. Similarly, sections 29(1)(b) and 55(1)(b) of the Securities Act deem a portfolio manager to be acting as principal when the portfolio manager purchases or sells a security as agent for accounts that are fully managed by the portfolio manager. These deeming provisions enable a trust company, insurer or portfolio manager, when purchasing on behalf of fully managed accounts, to rely on certain exemptions from the registration and prospectus requirements of the Securities Act that require the purchaser to purchase as "principal".

BOR#97/4, issued concurrently with this interpretation note, also provides certain exemptions from the registration and prospectus requirements of the Securities Act where a trust company, insurer or portfolio manager in another province or territory of Canada, or a foreign portfolio manager, purchases a security on behalf of fully managed accounts.

The purpose of this interpretation note is to clarify the meaning of the term "fully managed" in sections 29(1) and 55(1) of the Securities Act and in BOR#97/4.

An account is "fully managed" by a trust company, insurer or portfolio manager where the trust company, insurer or portfolio manager has absolute discretion as to purchasing and selling for the account, and where it receives no instructions respecting purchasing or selling for the account from any person beneficially interested in the account or any other person. All investment decisions with respect to the account must be made by the trust company, insurer or portfolio manager.

Where a trust company, insurer or portfolio manager receives instructions from any person respecting purchasing or selling for an account, or where it otherwise acts at any person's direction with respect to management of the account, the account would not be considered "fully managed" within the meaning of sections 29(1) and 55(1) of the Securities Act or BOR#97/4.

DATED at Vancouver, British Columbia, on March 4, 1997.

Douglas M. Hyndman
Chair