Lysander Funds Limited et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- subsection 4.1(1)(b) of National Instrument 31-103 Registration Requirements and Exemptions and Ongoing Registrant Obligations -- a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual is registered as a dealing, advising or associate advising representative of another registered firm -- individuals have time to serve both registered firms -- policies in place to handle potential conflicts of interest -- clients advised of relationship between affiliated firms -- Filers exempted from prohibition.

Applicable Legislative Provisions

Multilateral Instrument 11-102 Passport System, s. 4.7.

National Instrument 31-103 Registration Requirements and Exemptions, ss. 4.1, 15.1.

May 14, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

LYSANDER FUNDS LIMITED (Lysander) AND

CANSO INVESTMENT COUNSEL LTD. (Canso) AND

TIMOTHY JOHN HICKS (Hicks) AND

BRIAN RICHARD USHER-JONES (Jones)

(collectively, the Filers)

DECISION

Background

The regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for relief from the requirement under paragraph 4.1(1)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) (the Relief Sought) to permit Hicks and Usher-Jones (collectively, the Representatives) to each be registered as both a dealing representative of Lysander and an associate advising, advising and/or dealing representative of Canso (the Dual Registration).

Interpretation

Terms defined in National Instrument 14-101 Definitions have the same meaning in this decision unless otherwise defined.

Representations

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

1. Canso is registered as a portfolio manager and exempt market dealer with the OSC and as a portfolio manager and exempt market dealer with the securities regulatory authorities of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Quebec and Saskatchewan. The head office of Canso is in Richmond Hill, Ontario.

2. Lysander has applied for registration as an exempt market dealer and investment fund manager with the OSC. The head office of Lysander is in Richmond Hill, Ontario.

3. Lysander is a direct majority-owned subsidiary of Grip Investments Limited (Grip), while Canso is an indirect majority-owned subsidiary of Grip and they are thus affiliates of one another.

4. The Filers are not in default of any requirements of securities legislation in any jurisdiction of Canada.

5. Each of the Representatives is currently registered as a dealing representative, associate advising representative and/or advising representative of Canso in Ontario and is a resident of Ontario.

6. Lysander is the investment fund manager of Lysander Balanced Fund, Lysander Corporate Value Bond Fund and Lysander Bond Fund (formerly Lysander Canadian Bond Fund), which were qualified for sale in Ontario and various other Canadian jurisdictions of Canada pursuant to a simplified prospectus, and two closed-end funds, Canso Credit Income Fund (whose Class A units are listed on the TSX) and Canso Credit Trust, and may, in the future, act as investment fund manager for non-prospectus-qualified funds and additional prospectus qualified funds (the current and future funds are collectively referred to as the Lysander Funds). The current Lysander Funds are distributed by third-party registered dealers. It is proposed that Lysander act as an exempt market dealer in connection with distribution services for the current Lysander Funds and for future Lysander Funds to clients that qualify for a prospectus exempt distribution, such as accredited investors.

7. Canso acts as the portfolio manager for the Lysander Funds and for the non-prospectus-qualified mutual funds for which Canso Fund Management Ltd. (CFM) acts as investment fund manager (the CFM Funds). There are currently no other portfolio advisers to either the Lysander Funds or the CFM Funds. Therefore, each of CFM and Lysander act as the investment fund manager to different business lines, and Canso acts as the portfolio manager to all of the CFM Funds/Lysander Funds. Canso acts as an exempt market dealer primarily to facilitate the purchase of the CFM Funds by its managed accounts. It also acts as an exempt market dealer to distribute the CFM Funds to clients that qualify for a prospectus exempt distribution, such as accredited investors.

8. The Representatives provide portfolio management services in respect of the Lysander Funds and the CFM Funds in their capacities as associate advising or advising representatives of Canso. The Representatives may also provide distribution services in respect of the Lysander Funds and the CFM Funds to clients resident in various provinces of Canada in their capacities as dealing representatives of Canso. Hicks also advises certain Canso managed account clients as an advising representative of Canso and neither of the Representatives advises or trades for any other clients.

9. It is proposed that the Representatives also provide distribution services in respect of Lysander Funds in their capacity as dealing representatives of Lysander.

10. Because each of Canso, CFM and Lysander are "small shops", and because each Representative is an advising or associate advising representative with Canso, each Representative is intimately familiar with all of the investment products offered by each of CFM and Lysander and is in the best position to act in the proposed dual roles with Canso and Lysander. The Representatives devote their full time each day to these roles concurrently.

11. The Representatives will be subject to supervision by, and the applicable compliance requirements of, both Filers. Existing compliance and supervisory structures will apply depending on which regulatory entity the client assets are held with.

12. As the Representatives will be trading with different client bases in their dual roles with Lysander and Canso, there is minimal potential for conflicts of interest. Moreover, because the Filers are majority-owned subsidiaries of the same ultimate parent company, the Dual Registration of the Representatives will not give rise to the conflicts of interest present in a similar arrangement involving unrelated, arms'-length firms.

13. If these duties and business lines were being carried out under the umbrella of a single registrant (as is very common), each Representative's "multiple" roles would not be an issue.

14. The Filers have in place policies and procedures to address any potential conflicts of interest that may arise in their business, and believe that they will be able to appropriately deal with these conflicts.

15. In the absence of the Requested Relief, the Filers would be prohibited under paragraph 4.1(1)(b) of NI 31-103 from permitting a Representative to act as a dealing representative of Lysander while the individual is an associate advising, advising and/or dealing representative of Canso, even though Lysander and Canso are affiliates.

Decision

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

The decision of the regulator under the Legislation is that the Relief Sought is granted.