CIBC Private Investment Counsel Inc. -- s. 74(1)

Headnote

Relief from the prospectus requirement of the Securities Act (Ontario) to permit the distribution of investment fund securities to certain fully managed accounts on an exempt basis.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

Rules Cited

National Instrument 81-102 Mutual Funds.

National Instrument 45-106 Prospectus and Registration Exemptions.

September 28, 2010

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

CIBC PRIVATE INVESTMENT COUNSEL INC.

(THE FILER)

AND

THE IMPERIAL POOLS LISTED IN SCHEDULE A

AND

THE RENAISSANCE FUNDS LISTED IN SCHEDULE B

AND

THE CIBC POOLED FUNDS LISTED IN SCHEDULE C

RULING

(Subsection 74(1) of the Act)

Background

The Ontario Securities Commission (the Commission) has received an application from the Filer, on behalf of itself and of the mutual funds set out in Schedule A hereto (the Existing Imperial Pools) and any mutual funds established in the future as part of the group of Imperial Pools (the Future Imperial Pools and together with the Existing Imperial Pools, the Imperial Pools), the mutual funds set out in Schedule B hereto (the Existing Renaissance Funds) and any mutual funds established in the future as part of the group of Renaissance Funds (the Future Renaissance Funds and together with the Existing Renaissance Funds, the Renaissance Funds), the mutual funds set out in Schedule C hereto (the Existing CIBC Pooled Funds) and any mutual funds established in the future as part of the group of CIBC Pooled Funds (the Future CIBC Pooled Funds and together with the Existing CIBC Pooled Funds, the CIBC Pooled Funds) (the Imperial Pools, the CIBC Pooled Funds and the Renaissance Funds are together, the Funds) for a ruling pursuant to subsection 74(1) of the Act, that distributions of units of the Funds to Secondary Managed Accounts (as defined below) of Clients (as defined below) for which the Filer provides discretionary investment management services will not be subject to the prospectus requirement (the Prospectus Requirement) under section 53 of the Act (the Requested Relief).

Interpretation

Defined terms contained in the Act and in National Instrument 14-101 Definitions have the same meaning in this ruling unless they are defined in this ruling.

Representations

This ruling is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation incorporated under the laws of Canada and has its head office in Toronto, Ontario. The Filer is a wholly-owned subsidiary of Canadian Imperial Bank of Commerce (CIBC).

2. The Filer is registered as an adviser and is a portfolio manager under National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) in each of the provinces and the territories. It was also registered as a limited market dealer in Ontario and Newfoundland and Labrador and automatically became an exempt market dealer when NI 31-103 came into effect. In the provinces and territories, other than Ontario and Newfoundland and Labrador, it has relied on an exemption from the dealer registration requirement until the date of the decision referred to in paragraph 3 below. In addition, the Filer has relied on an exemption from the prospectus requirement in all provinces and territories except Ontario.

3. The Filer has also applied for an exemption from the Canadian Securities Administrators to exempt it from the dealer registration requirement in the Legislation of each of the provinces and territories of Canada. The Filer intends to drop its exempt market dealer registration in Ontario and Newfoundland and Labrador when the exemption is obtained.

4. The Filer offers discretionary portfolio management services to individuals, corporations and other entities (each a Client) seeking wealth management or related services through a fully managed account (Managed Account). The managed account agreement (Managed Account Agreement) authorizes the use of the Funds by the Filer to carry out the IPS (as defined below) of a Client without obtaining the specific consent of the Client prior to the purchase or sale of a Fund.

5. The discretionary investment management services for each Managed Account are provided by portfolio managers of the Filer (Portfolio Managers) who meet the proficiency requirements of an advising officer or advising representative (or associate advising representative) under Ontario securities law.

6. At the initial meeting between a new Client and a Portfolio Manager, an Investment Policy Statement (IPS) is established for the Client. The IPS provides the general investment goals and objectives of the Client and describes the strategies that the Filer will employ to meet these objectives. This includes specific information on matters such as asset allocation, risk tolerance and liquidity requirements.

7. After the initial meeting, the Portfolio Managers offer to meet at least twice per year with their Clients to review the performance of their Managed Account and their investment goals. In most cases, the larger the Managed Account, the more frequent the meetings.

8. Clients are provided with a quarterly portfolio statement showing all transactions carried out in their account during the quarter. The Portfolio Manager for the Managed Account is available to review and discuss with a Client any quarterly portfolio statement that is prepared for that Client.

9. The Filer typically uses the Funds as tools to carry out its investment management duties. Each of the Funds is or will be an open-ended mutual fund trust established under the laws of the Province of Ontario.

10. As a best practice, the prospectus of the Imperial Pools and Renaissance Funds may be provided to Clients when they enter into a Managed Account Agreement as part of the client welcome package. While the Clients receive the Imperial Pools and Renaissance Funds prospectuses, they are not asked to participate in the selection of the Imperial Pools and Renaissance Funds. Instead, the Filer selects the Funds for each Client's Managed Account as part of the discretionary investment mandate given to the Filer.

11. Investing in the Funds provides Clients with the benefit of asset diversification, access to investment products with very high minimum investment thresholds and economies of scale on minimum brokerage commission charges in contrast to individual trades of securities in each Managed Account.

12. None of the Funds (Class O units in the case of the Renaissance Funds) pays investment management fees. Clients pay the Filer a negotiated investment management fee under the Managed Account Agreements. There is no duplication of fees between a Managed Account and the Funds.

13. None of the Funds (Class O units in the case of the Renaissance Funds) charges, nor do the Clients pay, a sales commission or other fees in respect of the trades in units of the Funds.

The Clients

14. The Filer's Clients resident in Ontario currently consist of persons who qualify as accredited investors with respect to a trade under National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106). Managed Accounts held by such Clients are referred to as "Primary Managed Accounts". The minimum aggregate account balance for opening a Primary Managed Account is $1,000,000.

15. From time to time, the Filer is requested by Clients who hold Primary Managed Accounts to provide discretionary investment management services to persons who are not accredited investors under NI 45-106 and who do not meet the Filer's minimum account balance of $1,000,000. Such Clients consist of family members of holders of Primary Managed Accounts, including spouses, direct relatives, close business associates and others close to a Client with a Primary Managed Account (Secondary Managed Accounts).

16. The Filer would service the Clients who hold Secondary Managed Accounts as a courtesy to its Clients who hold Primary Managed Accounts. Assets managed by the Filer for Clients who hold Secondary Managed Accounts will be incidental to the assets it manages for Clients who hold Primary Managed Accounts.

Imperial Pools

17. The Imperial Pools are reporting issuers in each of the provinces and the territories.

18. The Imperial Pools are generally purchased on behalf of Clients under Managed Account Agreements with the Filer or under managed account agreements with CIBC Global Asset Management Inc. (CGAM) or CIBC Trust Corporation (CIBC Trust). CGAM and CIBC Trust Corporation are affiliates of CIBC and the Filer. Clients with accounts that are managed in other affiliates of CIBC may also purchase units of the Imperial Pools at the discretion of CIBC.

19. CIBC is the investment fund manager of the Imperial Pools and in that capacity provides, or arranges to provide for, the administration of each Imperial Pool. CIBC Asset Management Inc. (CAMI), an affiliate of CIBC and of the Filer, is the portfolio manager of the Imperial Pools. CAMI may retain portfolio sub-advisers, including CGAM, to provide portfolio management services to the Imperial Pools. CIBC Trust is the trustee and CIBC Mellon Trust Company is the custodian.

20. The Filer is responsible for paying the fees to CAMI for its services in respect of the Filer's Clients, and CAMI in turn is responsible for the fees of any sub-adviser.

21. Each Imperial Pool may pay CIBC an annual management fee of up to 0.25% of the net asset value of the Fund.

22. Each of the Imperial Pools pays all administration fees and expenses relating to its operation.

Renaissance Funds

23. The Renaissance Funds are reporting issuers in each of the provinces and the territories. The Renaissance Funds offer various classes of securities pursuant to a simplified prospectus filed in the provinces and territories of Canada.

24. When the Filer purchases the Renaissance Funds on behalf of its Clients, the Filer purchases Class O units of the Renaissance Funds, rather than the classes available to all investors under the simplified prospectus of the Renaissance Funds. In addition to the Filer's Clients, Class O units of the Renaissance Funds are available only to certain classes of investors either because such other investors are (a) institutional investors with similar pricing needs, or (b) investors that wish to avoid duplication of fees, including institutional investors or segregated funds, fund of funds and investors where dealers or discretionary managers such as the Filer offer separately managed accounts or similar programs. Some of these investors may not qualify for any applicable private placement exemptions. It is for this reason that the Class O units of the Renaissance Funds are included in the simplified prospectus of the Renaissance Funds.

25. Although currently there are more than 40 Renaissance Funds which may offer Class O units, not all of these Funds are used for the Managed Accounts of the Filer's Clients.

26. CAMI is the manager of the Renaissance Funds and in that capacity provides, or arranges to provide for, the administration of each Renaissance Fund. CAMI is also the portfolio adviser of the Renaissance Funds. CAMI may retain portfolio sub-advisers, including CGAM, to provide portfolio management services to the Renaissance Funds. CAMI is the trustee and CIBC is the custodian.

27. No management fees or operating expenses are charged in respect of the Class O units of the Renaissance Funds; instead a negotiated management fee is charged by CAMI.

28. The Filer is responsible for paying the negotiated management fees to CAMI for its services in respect of the Filer's Clients and CAMI in turn is responsible for the fees of any sub-adviser.

CIBC Pooled Funds

29. The CIBC Pooled Funds are not reporting issuers in the Jurisdictions.

30. The CIBC Pooled Funds are purchased on behalf of Clients with a Managed Account Agreement with the Filer or on behalf of CGAM clients.

31. CGAM is both the investment fund manager and portfolio manager of each CIBC Pooled Fund and in that capacity is responsible for the administration of each CIBC Pooled Fund and the investment decisions made on behalf of each CIBC Pooled Fund. CIBC Mellon Trust Company is the trustee and custodian of each CIBC Pooled Fund.

32. Each of the CIBC Pooled Funds either pays all administration fees and expenses relating to its operation or CGAM waives and/or absorbs such fees and expenses.

Secondary Managed Accounts

33. The Filer wishes to provide discretionary investment management services to the Clients with Secondary Managed Accounts on the same basis as for Primary Managed Accounts. The Filer will manage the Secondary Managed Accounts in the same way it manages the Primary Managed Accounts. The Filer may carry out the investment management services for the Secondary Managed Accounts through investing in the Imperial Pools, the Class O units of the Renaissance Funds and the CIBC Pooled Funds on a prospectus-exempt basis.

34. Similar to Clients with a Primary Managed Account, a Client with a Secondary Managed Account will enter into a Managed Account Agreement pursuant to which they will pay investment management fees. As with the Primary Managed Accounts, no investment management fees nor sales commissions will be charged by or on behalf of the Funds in which they invest.

35. Investments in individual securities may not be appropriate for the Clients with Secondary Managed Accounts, since they may not receive the same asset diversification benefits and may, as a result of minimum commission charges, incur disproportionately higher brokerage commissions relative to Clients with Primary Managed Accounts.

36. The Filer may pay referral fees to a person or company in connection with the referral of a Primary Managed Account. Payments made to any person or company as a referral fee in respect of the Primary Managed Account may reflect the assets under management of, or related to, the Primary Managed Account, including assets in any related Secondary Managed Accounts.

37. Absent the Requested Relief, the Funds are prohibited in Ontario from permitting Clients with Secondary Managed Accounts to invest in, and the Filer is effectively prohibited from investing the Secondary Managed Accounts in, securities of the Funds on an exempt basis, unless the individual Client who is the beneficial owner of the Secondary Managed Account is otherwise qualified as an "accredited investor" or invests a minimum of $150,000 in a Fund. Reliance upon the $150,000 minimum investment exemption available under NI 45-106 may not be appropriate for smaller Secondary Managed Accounts as this might require a disproportionately high percentage of the account to be invested in a single Fund than the percentage that the Portfolio Manager of the Secondary Managed Account may prefer to allocate.

Ruling

The Commission being satisfied that the relevant test contained in subsection 74(1) of the Act has been met, the Commission rules that the Requested Relief is granted in connection with the distributions of securities of the Funds to Secondary Managed Accounts, provided that:

A. this ruling will only apply where the holder of the Secondary Managed Account is, and in the case of clauses (iii) to (vi) remains,

(i) an individual (of the opposite sex or same sex) who is or has been married to the holder of a Primary Managed Account, or is living or has lived with the holder of a Primary Managed Account in a conjugal relationship outside of marriage;

(ii) a parent, grandparent, child or sibling of either the holder of a Primary Managed Account or the individual referred to in clause (i) above;

(iii) a personal holding company controlled by an individual referred to in clause (i) or (ii) above;

(iv) a trust, other than a commercial trust, of which an individual referred to in clause (i) or (ii) above is a beneficiary;

(v) a private foundation controlled by an individual referred to in clause (i) or (ii) above; or

(vi) a close business associate, employee or professional adviser to a holder of a Primary Managed Account provided that:

(a) in each instance, there are exceptional factors that have persuaded the Filer for business reasons to accept such close business associate, employee or professional adviser as a Secondary Managed Account Client, and a record is kept and maintained of the exceptional factors considered; and

(b) the Secondary Managed Account Clients acquired through such relationships to a holder of a Primary Managed Account shall not at any time represent more than five percent of the Filer's total Managed Account assets under management;

B. the Filer and each of its affiliates that acts as the investment fund manager of the Funds do not receive any compensation in respect of a sale or redemption of securities of the Funds;

C. the Filer and each of its affiliates that acts as the investment fund manager of the Funds do not pay referral fees to any person or company in connection with the referral of a Secondary Managed Account that invests in securities of the Funds unless the payment of such referral fees is proportionate to, or less than, and incidental to, the payment of referral fees on the Primary Managed Account related to such Secondary Managed Account; and

D. this Ruling will terminate upon the coming into force of any legislation or rule of the Commission exempting a trade by a fully managed account in securities of investment funds from the Prospectus Requirement.

SCHEDULE A

IMPERIAL POOLS

SCHEDULE B

RENAISSANCE FUNDS

Class O Units

SCHEDULE C

CIBC POOLED FUNDS