Barometer Capital Management Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption granted from conflict of interest trading prohibition in section 13.5(2)(b) of NI 31-103 to permit in-specie purchases and redemptions of pooled funds by separately managed accounts and pooled funds -- Portfolio manager is a responsible person -- Pooled funds are associates of portfolio manager who is their trustee -- Pooled funds and managed accounts have same portfolio manager -- Relief subject to certain conditions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5(2)(b)(ii), (iii).

April 12, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BAROMETER CAPITAL MANAGEMENT INC.

(the Filer)

DECISION

Background

The principal regulator in the Province of Ontario has received an application from the Filer under the securities legislation of the Province of Ontario (the Legislation) for a decision granting an exemption from the prohibition in sections 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) against an adviser knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of an associate of a responsible person, or of an investment fund for which a responsible person acts as an adviser, to permit the following transactions, each referred to in this decision as an In Specie Transaction (collectively, the Exemption Sought):

(a) the purchase or redemption by an account fully managed by the Filer (a Managed Account) of securities of existing and future investment funds managed by the Filer sold pursuant to prospectus exemptions (a Pool, and its securities, Pool Securities) and the payment:

(i) for such purchase, in whole or in part, by the Managed Account making good delivery of portfolio securities to the Pool; and

(ii) for such redemption, in whole or in part, by the Managed Account receiving good delivery of portfolio securities from the Pool; and

(b) the purchase or redemption by a Pool of Pool Securities of another Pool, and the payment:

(i) for such purchase, in whole or in part, by the Pool making good delivery of portfolio securities to the other Pool; and

(ii) for such redemption, in whole or in part, by the Pool receiving good delivery of portfolio securities from the other Pool.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this application; and;

2. the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces of Canada (collectively, with Ontario, the Jurisdictions, and individually a Jurisdiction).

Interpretation

Terms defined in NI 31-103, National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

The Filer, the Pools and the Managed Accounts

3. The Filer is a corporation incorporated under the laws of Canada and has its head office in Toronto, Ontario. The Filer is registered as a portfolio manager, commodity trading manager, investment fund manager and exempt market dealer in Ontario. The Filer is also registered as a portfolio manager and exempt market dealer in each of the other Jurisdictions.

4. The Filer is, or will be, the manager, trustee, portfolio advisor and promoter of each Pool.

5. Each Pool is, or will be, a trust fund established under the laws of Ontario, and is, or will be, a "mutual fund" under the Securities Act (Ontario) (the OSA). No existing Pool is, and no future Pool will be, a reporting issuer under the OSA.

6. The Pools will be sold on an exempt basis to investors in each Jurisdiction pursuant to applicable exemptions from the prospectus requirements in that Jurisdiction.

7. The Filer provides discretionary investment management services to its clients pursuant to managed account agreements (each a Managed Account Agreement) between such clients and the Filer in respect of the Managed Accounts. Pursuant to a Managed Account Agreement, each client, in accordance with its investment objectives, authorizes the Filer to manage that client's investment portfolio on a fully-discretionary basis, which depending on its size, may be managed by the Filer on a segregated account basis or invested in one or more of the Pools.

8. Neither the Filer nor the existing Pools are in default of securities legislation in any Jurisdiction.

In Specie Transactions

9. In acting on behalf of a Pool, the Filer wishes to be able, in accordance with the investment objectives and investment restrictions of the Pool, to cause the Pool to either invest in Pool Securities, or redeem Pool Securities, of another Pool pursuant to anIn Specie Transaction.

10. Similarly, when acting for a Managed Account of a client, the Filer wishes to be able, in accordance with the investment objectives and investment restrictions of the client, to cause the client's Managed Account to either invest in Pool Securities, or redeem Pool Securities, pursuant to an In Specie Transaction.

11. At the time of an In Specie Transaction, the Filer will have in place policies and procedures to enable In Specie Transactions between Pools, and between Managed Accounts and Pools.

12. Prior to engaging in an In Specie Transaction on behalf of a client's Managed Account, the Managed Account Agreement or other documentation in respect of the Managed Account will contain an authorization from the client allowing the Filer to enter into In Specie Transactions on behalf of the client's Managed Account.

13. The Filer's compliance officer will pre-approve each In Specie Transaction with respect to the purchase or redemption of Pool Securities by another Pool or by a Managed Account.

14. The portfolio securities transferred in In Specie Transactions will meet the investment objectives of the Pool or Managed Account that is acquiring such portfolio securities.

15. The portfolio securities in an In Specie Transaction will be valued using the same valuation principles as are used to calculate the net asset value of the Pools.

16. None of the portfolio securities involved in an In Specie Transaction will be related issuers of the Filer.

17. Each Pool will keep written records of each In Specie Transaction, including records of each purchase and redemption of portfolio securities and the terms thereof for a period of five (5) years commencing after the end of the financial year in which the trade occurred, the most recent two (2) years in a reasonably accessible place.

18. The Filer considers that effecting In Specie Transactions will be beneficial to the Pools and Managed Accounts in that they will reduce transaction costs on the acquisition or disposition of Pool Securities for the applicable Pool or Managed Account.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. in connection with an In Specie Transaction where a Pool acquires Pool Securities of another Pool:

(a) the other Pool would, at the time of payment, be permitted to purchase the portfolio securities;

(b) the portfolio securities are acceptable to the Filer as portfolio manager of the other Pool and meet the other Pool's investment objectives;

(c) the value of the portfolio securities is at least equal to the issue price of the Pool Securities of the other Pool for which they are payment, valued as if the portfolio securities were portfolio assets of the other Pool;

(d) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer; and

(e) the Filer will keep written records of each In Specie Transaction in a financial year of the other Pool, reflecting the details of the portfolio securities delivered to the other Pool and the value assigned to such portfolio securities, for five (5) years after the end of the financial year of the other Pool, the most recent two (2) years in a reasonably accessible place;

2. in connection with an In Specie Transaction where a Pool redeems Pool Securities of another Pool:

(a) the portfolio securities are acceptable to the Filer as portfolio manager of the Pool acquiring the portfolio securities and meet the Pool's investment objectives;

(b) the value of the portfolio securities is equal to the amount at which those portfolio securities were valued in calculating the net asset value per security used to establish the redemption price;

(c) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer; and

(d) the Filer will keep written records of each In Specie Transaction in a financial year of the other Pool, reflecting the details of the portfolio securities delivered by the other Pool and the value assigned to such portfolio securities, for five (5) years after the end of the financial year of the Pool, the most recent two (2) years in a reasonably accessible place;

3. in connection with an In Specie Transaction where a Managed Account acquires Pool Securities:

(a) the Filer obtains the prior written consent of the client of the Managed Account before it engages in any In Specie Transaction and such consent has not been revoked;

(b) the Pool would, at the time of payment, be permitted to purchase the portfolio securities;

(c) the portfolio securities are acceptable to the Filer as portfolio manager of the Pool and meet the Pool's investment objectives;

(d) the value of the portfolio securities is at least equal to the issue price of the Pool Securities for which they are payment, valued as if the portfolio securities were portfolio assets of the Pool;

(e) the client of the Managed Account has not provided notice to terminate its Managed Account;

(f) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

(g) the account statement next prepared for the Managed Account will describe the portfolio securities delivered to the Pool and the value assigned to such portfolio securities; and

(h) the Filer will keep written records of each In Specie Transaction in a financial year of the Pool, reflecting the details of the portfolio securities delivered to the Pool and the value assigned to such portfolio securities, for five (5) years after the end of the financial year of the Pool, the most recent two (2) years in a reasonably accessible place;

4. in connection with an In Specie Transaction where a Managed Account redeems Pool Securities:

(a) the Filer obtains the prior written consent of the client of the Managed Account before it engages in any In Specie Transaction and such consent has not been revoked;

(b) the portfolio securities are acceptable to the Filer as portfolio manager of the Managed Account and meet the Managed Account's investment objectives;

(c) the value of the portfolio securities is equal to the amount at which those portfolio securities were valued in calculating the net asset value per security used to establish the redemption price;

(d) the client of the Managed Account has not provided notice to terminate its Managed Account;

(e) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

(f) the account statement next prepared for the Managed Account will describe the portfolio securities delivered to the Managed Account and the value assigned to such portfolio securities; and

(g) the Filer will keep written records of each In Specie Transaction in a financial year of the Pool, reflecting the details of the portfolio securities delivered by the Pool and the value assigned to such portfolio securities, for five (5) years after the end of the financial year of the Pool, the most recent two (2) years in a reasonably accessible place; and

5. The Filer does not receive any compensation in respect of any In Specie Transaction and, in respect of any delivery of securities further to an In Specie Transaction, the only charges paid by the applicable Pool or Managed Account are administrative charges levied by the custodian of the Pools and Managed Accounts.

"Raymond Chan"
Manager, Investment Funds Branch
Ontario Securities Commission