1832 Asset Management L.P.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted relief to purchase debt securities from related principal dealer and revoke existing relief -- internal reorganization will result in filer acquiring asset management business of affiliate including management of funds -- affiliate had relief but terms do not permit relief to flow through to Filer following reorganization -- relief needed to ensure continuity for funds relying on relief -- related dealer is a significant principal dealer in debt securities in Canada -- transactions to be subject to terms and conditions to ensure transparent and independent pricing of securities.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(b)(ii), 15.1.

October 30, 2013

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)

AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND
IN THE MATTER OF
1832 ASSET MANAGEMENT L.P.
(the Filer)

AND

IN THE MATTER OF
THE FUNDS
(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on its own behalf and on behalf of existing mutual funds and future mutual funds of which the Filer or an affiliate of the Filer is the portfolio adviser and to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (each, an NI 81-102 Fund and collectively, the NI 81-102 Funds), and on behalf of existing mutual funds and future mutual funds of which the Filer or an affiliate of the Filer is the portfolio adviser and to which NI 81-102 does not apply (each, a Pooled Fund and collectively, the Pooled Funds), and on behalf of existing closed-end funds and future closed-end funds, being investment funds of which the Filer or an affiliate of the Filer is the portfolio adviser that are reporting issuers and are not mutual funds (each, a Closed-End Fund and collectively, theClosed-End Funds and together with the NI 81-102 Funds and the Pooled Funds, the Funds), for

(a) a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer or an affiliate of the Filer, as the registered adviser of a Fund, from the prohibition in Section 13.5(2)(b)(ii) of National Instrument 31-103 -- Registration Requirements and Exemptions (NI 31-103) to permit the Funds to purchase or sell a security from or to the investment portfolio of an associate of the Filer or an affiliate of the Filer (the Principal Trade Relief); and

(b) to revoke and replace the GCIC Relief (as defined below) (the Revocation Relief)

(the Principal Trade Relief and the Revocation Relief are collectively, the Requested Relief).

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

(c) the Ontario Securities Commission is the principal regulator for the application, and

(d) 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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, NI 81-102 and in National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meaning if used in this decision, unless otherwise defined.

In this Decision Document the term Related Party will be used to refer to an associate of the Filer, or an affiliate of the Filer, that is a principal dealer (Principal Dealer) in the Canadian debt securities market.

Representations

This decision is based on the following facts represented by the Filer in respect of the Filer and the Funds:

1. The Filer is an Ontario limited partnership, which is wholly-owned, indirectly, by The Bank of Nova Scotia (BNS). The general partner of the Filer is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned directly by BNS with its head office in Ontario.

2. The Filer, or an affiliate of the Filer, is or will be the manager and/or adviser of the Funds.

3. The Filer is registered as (i) a portfolio manager in all of the provinces of Canada, and in the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Quebec, and Newfoundland and Labrador; and (iv) a commodity trading manager in Ontario.

4. The Filer or an affiliate of the Filer, as the registered adviser of a Fund, will be a responsible person under the Legislation.

5. The Filer is not in default of securities legislation in any of the Jurisdictions.

6. BNS is the ultimate parent company of the Filer and of Scotia Capital Inc. (Scotia Capital). The Filer, as an affiliate of BNS, is deemed pursuant to the Legislation to beneficially own the securities owned by BNS (including the securities of Scotia Capital). As BNS beneficially owns more than 10% of the voting shares of Scotia Capital, Scotia Capital may be considered to be an associate of the Filer under the Legislation.

7. Scotia Capital is a Principal Dealer in the Canadian debt securities market, both primary and secondary and is, therefore, a Related Party.

8. Each Fund is or will be established under the laws of one of the Jurisdictions as an investment fund that is (a) an open-ended mutual fund trust, (b) an open-ended mutual fund corporation, or (c) a closed-ended limited partnership and/or closed-ended trust.

9. Each of the NI 81-102 Funds and the Closed-End Funds is or will be a reporting issuer in one or more of the Jurisdictions. The securities of each of the NI 81-102 Funds are, or will be, qualified for distribution in each of the Jurisdictions pursuant to a simplified prospectus and annual information form that has been, or will be, prepared and filed in accordance with securities legislation of each of the relevant Jurisdictions. Securities of each of the Closed-End Funds have been, or will be, qualified for distribution in each of the Jurisdictions pursuant to a prospectus which has been, or will be, filed in accordance with the securities legislation of each of the Jurisdictions.

10. The securities of the Pooled Funds are or will be offered for sale only on an exempt basis pursuant to available prospectus and registration exemptions from the prospectus requirements in one or more of the Jurisdictions. None of the Pooled Funds is or will be a reporting issuer.

11. An Independent Review Committee (IRC) has been or will be established for each NI 81-102 Fund and each Closed Fund in accordance with the requirements of NI 81-107.

12. An IRC has also been or will be established for the Pooled Funds whose composition will be in accordance with section 3.7 of NI 81-107 and which will comply with the standard of care set out in section 3.9 of NI 81-107.

13. None of the Funds are in default of securities legislation in any of the Jurisdictions.

14. The Filer is seeking the Principal Trade Relief in order to allow the Funds to purchase debt securities from, or sell debt securities to, an associate of the Filer (or an affiliate of the Filer that acts as portfolio adviser to a Fund).

15. A Fund's purchase of securities of an issuer from the investment portfolio of an associate of the Filer (or an affiliate that acts as portfolio adviser to a Fund) is prohibited under the Legislation. A Fund is therefore prohibited from purchasing certain debt securities in the secondary market from a Principal Dealer that is a Related Party of the Filer, such as Scotia Capital (a Restricted Transaction).

16. The investment strategies of each Fund that will rely on the Principal Trade Relief permit the Fund to invest in debt securities issued or fully and unconditionally guaranteed by the federal or a provincial government (Government Debt Securities) or debt securities that are not Government Debt Securities (Non-Government Debt Securities).

17. There is a limited supply of Non-Government Debt Securities and Government Debt Securities available to the Funds, and frequently the only source of Non-Government Debt Securities for a Fund may be a Related Party such as Scotia Capital.

18. The Filer considers granting the Principal Trade Relief to not be prejudicial to the public interest, given that the decision to transact securities purchases and sales with a Related Party will be made in the best interests of the Funds and free from the influence of that Related Party.

19. The Filer considers that a Fund may be prejudiced if it must refrain from entering into a Restricted Transaction, where to do so is consistent with its investment objective.

20. Related Parties do not influence the business judgment of the Filer in connection with the determination of the suitability of investments and information, and influence barriers are in place. Decisions made by the Filer as to which investments a Fund should hold are based on the best interests of such Fund, without consideration given to the interests of the party with whom a purchase or sale is transacted. This principle is reflected in the policies and procedures that have been and will be implemented and approved by the IRC for dealing with related parties.

21. The Filer is seeking the Revocation Relief in connection with a proposed internal reorganization of BNS's asset management business (the Reorganization).

22. The Reorganization is structured as an internal consolidation of the asset management business currently conducted by certain affiliated BNS entities, namely, GCIC Ltd. (GCIC), WaterStreet Family Capital Counsel Inc. and CPA Securities Inc. -- each of which is wholly-owned directly or indirectly by BNS -- into the Filer. Under the Reorganization, the asset management business conducted by GCIC at the time of the Reorganization will be transferred to the Filer. The closing date of the Reorganization is November 1, 2013 (the Completion Date).

23. If the Reorganization is completed as contemplated, GCIC will cease to carry on registrable business and will have its various registrations under the Legislation revoked. Thereafter, the business of GCIC will be carried on by the Filer which includes becoming portfolio adviser of Funds for which GCIC provided such services prior to the Reorganization.

24. The Reorganization does not involve an amalgamation.

25. Under a decision dated May 13, 2011, the Principal Regulator granted GCIC relief that is substantially the same as the Principal Trade Relief (the GCIC Relief). The Filer is not able to rely on the GCIC Relief because the terms of the GCIC Relief do not permit that relief to flow through to the Filer.

26. Accordingly, as of the Completion Date, the Filer is seeking the Revocation Relief and to replace the GCIC Relief with the Principal Trade Relief.

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:

(a) the Revocation Relief is granted; and

(b) the Principal Trade Relief is granted provided that:

(i) the purchase or sale is consistent with, or is necessary to meet, the investment objective of the Fund;

(ii) at the time of the investment, the IRC has approved the transaction in accordance with section 5.2(2) of NI 81-107;

(iii) the Fund's manager complies with section 5.1 of NI 81-107, and the Filer or the affiliate and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transaction;

(iv) the bid and ask price of the security transacted are readily available, as contemplated by section 6.1(2)(c) of NI 81-107;

(v) a purchase is not executed at a price which is higher than the available ask price and a sale is not executed at a price which is lower than the available bid price;

(vi) the purchase or sale is subject to "market integrity requirements" as defined in NI 81-107; and

(vii) the Fund keeps the written records required by section 6.1(2)(g) of NI 81-107.

This decision is effective on the Completion Date.

"Darren McKall"
Manager, Investment Funds Branch
Ontario Securities Commission