Diapason Commodities Management S.A. -- s. 80 of the CFA

Headnote

Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirements of paragraph 22(1)(b) of the CFA granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges and cleared through clearing corporations, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1), 38(1).

Securities Act, R.S.O. 1990, c S.5, as am. - Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C.20, AS AMENDED

(the CFA)

AND

IN THE MATTER OF

DIAPASON COMMODITIES MANAGEMENT S.A.

ORDER

(Section 80 of the CFA)

UPON the application (the Application) to the Ontario Securities Commission (the Commission) by Diapason Commodities Management S.A. (the Sub-Adviser) for an order of the Commission, pursuant to section 80 of the CFA, that the Sub-Adviser (including its directors, partners, officers, employees or other individual representatives, acting on its behalf), is exempt from the adviser registration requirement in the CFA in connection with the Sub-Adviser acting as an adviser to Sentry Select Capital Corp. (the Principal Adviser) and Sentry Select Capital Inc. (the Successor Principal Adviser) in respect of trades in commodity futures contracts and related products trading on commodity futures exchanges and cleared through clearing corporations;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Sub-Adviser, the Principal Adviser and the Successor Principal Adviser having represented to the Commission that:

1. The Sub-Adviser is an investment management company organized under the laws of Switzerland, with its principal place of business located in Prilly, Switzerland. The Sub-Adviser specializes in the fields of asset management, commodities markets, futures and option trading.

2. The Sub-Adviser is registered as a commodities trading adviser with the United States Commodity Futures Trading Commission (CFTC). The Sub-Adviser is not registered or licensed in any capacity in Switzerland as the laws of Switzerland do not require registration or licensing from any regulatory body in order to be able to provide advice or portfolio management services in connection with commodity futures. The Sub-Adviser is authorised and regulated by the Swiss banking regulatory body, the Commission Fédérale des Banques (CFB) and by the Financial Services Authority.

3. The Principal Adviser is a corporation incorporated under the laws of Ontario. It is registered with the Commission as a mutual fund dealer and adviser in the categories of investment counsel and portfolio manager under the Securities Act (Ontario) (the OSA) and as an adviser in the category of commodity trading manager under the CFA. The Principal Adviser acts as trustee and manager of Commodities Investment Trust (the Trust), an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust, and also acts as manager and trustee of Sentry Select Commodities Income Trust (SSCIT).

4. The Successor Principal Adviser is a corporation incorporated under the laws of Ontario. It is registered with the Commission as a mutual fund dealer and adviser in the categories of investment counsel and portfolio manager under the OSA and as an adviser in the category of commodity trading manager under the CFA. Sentry Select will, effective on or about December 31, 2008, act as trustee and manager of the Trust and will also act as manager and trustee of SSCIT.

5. The Sub-Adviser has entered into an investment sub-advisory agreement with the Principal Adviser which sets out the obligations and duties of the Sub-Adviser, which will be assigned to the Successor Principal Adviser on or about December 31, 2008, whereby the Sub-Adviser has been appointed as the sub-adviser in respect of purchases and sales of commodity futures contracts and related products with respect to the Trust.

6. On or about December 31, 2008, as a result of a reorganization, all business activity which is "registrable" under the OSA and CFA, and all respective registered and approved individuals, will be transferred from the Principal Adviser to the Successor Principal Adviser (the Restructuring and Transfer).

7. A preliminary prospectus has been filed with the Commission on behalf of SSCIT. A portion of the net proceeds of the offering of units of SSCIT were used to purchase common shares of Canadian public companies (the Common Share Portfolio). SSCIT has entered into one or more forward purchase and sale agreements (the Forward Agreement) with Canadian Imperial Bank of Commerce (the Counterparty). Under the Forward Agreement, the Counterparty agreed to pay to SSCIT on its termination date as the purchase price for the Common Share Portfolio, an amount based upon the redemption proceeds of a specified number of units of the Trust.

8. It is possible that the Principal Adviser or the Successor Principal Adviser will also appoint the Sub-Adviser as sub-adviser for other investment portfolios (Other Clients) which the Principal Adviser or the Successor Principal Adviser manages. In acting as sub-adviser to the Principal Adviser or the Successor Principal Adviser with respect to Other Clients, the Principal Adviser or Successor Principal Adviser, respectively, and the Sub-Adviser will enter into written sub-advisory agreements which set out the obligations and duties of the Sub-Adviser.

9. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a partner or an officer of a registered adviser and is acting on behalf of a registered adviser. Under the CFA, "adviser" means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to trading in "contracts", and "contracts" means commodity futures contracts and commodity futures options.

10. In acting as sub-adviser to the Principal Adviser or the Successor Principal Adviser with respect to the Trust and Other Clients (the Proposed Advisory Services), the Sub-Adviser will be acting as an adviser with respect to commodity futures contracts and commodity futures options and, in the absence of being granted the requested relief, would be required to register as an adviser under the CFA.

11. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures contracts and commodity futures options that is similar to the exemption from the adviser registration requirement in section 25(1)(c) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.3 of OSC Rule 35-502 -- Non Resident Advisers.

12. As would be required under section 7.3 of Rule 35-502, the Sub-Adviser will provide the Proposed Advisory Services only if the Principal Adviser or the Successor Principal Adviser, respectively, has contractually agreed with the Trust, or Other Clients, respectively, to be responsible for any loss arising out of the failure of the Sub-Adviser to:

(a) exercise its powers and discharge its duties honestly, in good faith and in the best interests of the Principal Adviser or the Successor Principal Adviser, respectively, and the Trust, or Other Clients, as the case may be; or

(b) exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances,

(collectively the Standard of Care);

and the Principal Adviser or the Successor Principal Adviser, respectively, cannot be relieved by the Trust or Other Clients from their responsibility for such loss.

13. As there will be no offering documents for the Trust, the annual information form for SSCIT, and the offering documents for any other product for which the Proposed Advisory Services are applicable, will disclose that:

(a) the Principal Adviser or the Successor Principal Adviser, respectively, will be responsible for any investment advice given or portfolio management services provided by the Sub-Adviser; and

(b) to the extent applicable, there may be difficulty in enforcing any legal rights against the Sub-Adviser because it is resident outside Canada and all or a substantial portion of its assets are situated outside Canada.

14. The Sub-Adviser will provide the Proposed Advisory Services only while the Principal Adviser or the Successor Principal Adviser, respectively, is registered as a commodity trading manager under the CFA.

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;

IT IS ORDERED, pursuant to section 80 of the CFA, that the Sub-Adviser (including its directors, officers and employees) is exempted from the requirements of paragraph 22(1)(b) of the CFA, in respect of the Proposed Advisory Services provided to the Principal Adviser prior to the Restructuring and Transfer, and to the Successor Principal Adviser after the Restructuring and Transfer, for a period of five years, provided that trades in commodity futures contracts and related products are traded on commodity futures exchanges and cleared through clearing corporations, and at the relevant time that such activities are engaged in:

a. the Principal Adviser or the Successor Principal Adviser, respectively, is registered under the CFA as an adviser in the category of commodity trading manager;

b. the Sub-Adviser is appropriately registered or licensed, is not required to be registered or licensed, or is entitled to rely on appropriate exemptions from such registrations or licences, to provide advice to the Trust or Other Clients pursuant to the applicable legislation of its principal jurisdiction;

c. the duties and obligations of the Sub-Adviser are set out in a written agreement with the Principal Adviser or Successor Principal Adviser, respectively;

d. the Principal Adviser or Successor Principal Adviser, respectively, has contractually agreed with the Trust or Other Clients to be responsible for any loss that arises out of any failure of the Sub-Adviser to meet the Standard of Care;

e. the Principal Adviser or the Successor Principal Adviser, respectively, cannot be relieved by the Trust or Other Clients or their respective securityholders from their responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Standard of Care; and

f. the Sub-Adviser will provide the Proposed Advisory Services only where the annual information form for SSCIT, and the offering document for any other product for which the Proposed Advisory Services are applicable, disclose that:

(i) the Principal Adviser or Successor Principal Adviser, respectively, is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Standard of Care;

(ii) the Principal Adviser or the Successor Principal Adviser, respectively, is responsible for any investment advice given or portfolio management services provided by the Sub-Adviser; and

(iii) there may be difficulty in enforcing any legal rights against the Sub-Adviser (or the individual representatives of the Sub-Adviser) because it is resident outside Canada and all or a substantial portion of its assets are situated outside Canada.

December 19, 2008