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Soundvest Capital Management Ltd
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval for change of control of manager under s. 5.5(1)(a.1) of National Instrument 81-102 Investment Funds and abridgement of securityholder notice period under s. 5.8(1)(a) of NI 81-102 to 30 days -- acquirer has requisite experience and integrity to participate in Canadian capital markets -- transaction will not result in any material changes to operations and management of the manager or the funds it manages.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 5.5(1)(a.1), 5.7(1)(a), 5.8(1), 19.1.
May 23, 2018
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 SOUNDVEST CAPITAL MANAGEMENT LTD. (the Manager or Soundvest)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Manager and Soundvest Capital Holdings Ltd. (the Purchaser, and together with the Manager, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for (i) approval with respect to a proposed change of control of the Manager as described herein pursuant to section 5.5(1)(a.1) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval Sought) and (ii) an abridgement to not less than 30 days of the time period prescribed by section 5.8(1)(a) of NI 81-102 for delivering notice to securityholders of the Soundvest Funds (as defined below) of the change of control of the Manager resulting from the Proposed Transaction (as defined below) (the Abridgement Relief).
Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (NP 11-203) (for a passport application):
(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application; and
(b) the Manager 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 province and territory of Canada (the Jurisdictions).
Interpretation
Terms defined in NI 81-102, National Instrument 14-101 Definitions, NP 11-203 and MI 11-102 have the same meaning if used in this decision unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filers:
Soundvest
1. Soundvest, a corporation existing under the Canada Business Corporations Act, with its head office in Ottawa, Ontario, is an asset management company.
2. Soundvest is registered as a portfolio manager in Alberta, British Columbia, Ontario and Quebec and as an investment fund manager and exempt market dealer in Ontario.
3. Soundvest common shares are owned 50% by the Purchaser and 50% by the Vendor. The Vendor owns all of the issued and outstanding preferred shares of Soundvest.
4. Soundvest is not in default of any securities legislation in any of the Jurisdictions.
The Soundvest Funds
5. Soundvest is the manager and investment advisor of Soundvest Split Trust and Soundvest Equity Fund (together, the Soundvest Funds), each a non-redeemable investment fund.
6. The Soundvest Funds are reporting issuers in all provinces of Canada. Additional information regarding Soundvest and the Soundvest Funds is available on SEDAR.
7. The Soundvest Funds are not in default of any securities legislation in any of the Jurisdictions.
8. On March 29, 2018, Soundvest announced that it has determined, in accordance with the terms of the Fund's declaration of trust, to wind-up Soundvest Equity Fund on or about June 14, 2018.
The Purchaser
9. The Purchaser is a corporation existing under the Business Corporations Act (Ontario) (the OBCA), with its head office in Ottawa, Ontario.
10. The Purchaser is registered as a portfolio manager in Alberta, British Columbia, Ontario and Quebec and as an investment fund manager and exempt market dealer in Ontario.
11. The Purchaser currently owns 50% of the common shares of Soundvest and the Charlebois Family (2016) Trust, a trust organized under the laws of Ontario for the benefit of Kevin Charlebois and his family, owns 100% of the issued and outstanding common shares of the Purchaser.
12. Kevin Charlebois is a Director and the current President, Chief Executive Officer, Secretary and Chief Investment Officer of Soundvest.
13. The Purchaser is not in default of securities legislation in any of the Jurisdictions.
Brookfield Asset Management Inc.
14. Brookfield Asset Management Inc. (Vendor) is a corporation existing under the OBCA, with its head office in Toronto, Ontario.
15. The Vendor is a reporting issuer in all of the provinces and territories of Canada. Additional information regarding the Vendor is available on SEDAR.
16. The Vendor owns 50% of the common shares of Soundvest (the Vendor Common Shares) and 100% of the preferred shares of Soundvest (the Preferred Shares).
The Proposed Transaction
17. The Purchaser and Soundvest entered into a share purchase agreement with the Vendor on April 13, 2018 pursuant to which the Purchaser is to acquire the Preferred Shares and Soundvest is to repurchase for cancellation the Vendor Common Shares, with the result that the Purchaser will own all of the outstanding shares of Soundvest (the Proposed Transaction), as described in the press release issued by Soundvest announcing the Proposed Transaction.
18. The parties would like to close the Proposed Transaction on or about May 24, 2018 (the Closing Date), provided that, among other things, all necessary regulatory notices, non-objections, and approvals have been given and received.
Change of Control of Soundvest
19. As the share ownership of Soundvest will change such that the Purchaser will acquire the Preferred Shares and the Vendor Common Shares will be repurchased for cancellation, and, as a result, the Purchaser will own 100% of the issued and outstanding shares of Soundvest on the Closing Date, the Proposed Transaction will result in a change of control of Soundvest and accordingly regulatory approval is required pursuant to section 5.5(1)(a.1) of NI 81-102.
Impact on Soundvest and the Soundvest Funds
20. Completion of the Proposed Transaction is not expected to result in any material changes to, or impact on, the business, operations or affairs of the Soundvest Funds, the securityholders of the Soundvest Funds or Soundvest.
21. Soundvest will continue to act as the investment fund manager and investment advisor of the Soundvest Funds in the same manner as it has conducted such activities immediately prior to the Closing Date.
22. There are no current plans to change the role of Soundvest as manager or investment advisor of the Soundvest Funds.
23. Mr. Kevin Charlebois, the current President, Chief Executive Officer, Secretary and Chief Investment Officer of Soundvest and Ms. Gabrielle Lenz, the current Chief Financial Officer and Controller of Soundvest, will remain in those senior management roles, and Mr. Kevin Charlebois will continue to serve as a director of Soundvest.
24. The Vendor has not been involved in the day-to-day operations of the Manager other than having one nominee as a director of Soundvest.
25. Effective upon the closing of the Proposed Transaction, the Vendor's director nominee, Mr. Brian Hurley will resign his position as director of Soundvest. Mr. Kevin Charlebois and Mrs. Audrey Charlebois will continue to serve as directors of Soundvest.
26. Except for the previously announced termination of Soundvest Equity Fund, there is no current intention to:
(a) make any substantive changes as to how Soundvest operates or manages the Soundvest Funds;
(b) change the structures, investment objectives, investment strategies or valuation procedures of the Soundvest Funds;
(c) immediately following the Closing Date, or within a foreseeable period of time, change the investment fund manager, or portfolio manager of the Soundvest Funds;
(d) change the names or branding of Soundvest or the Soundvest Funds;
(e) change the fees and expenses that are charged to the Soundvest Funds;
(f) merge the Soundvest Funds;
(g) rationalize personnel or systems;
(h) except for the resignations of the Vendor's director nominee, change any of the directors, officers or employees involved in any of the day-to-day business, operations or affairs of Soundvest or the Soundvest Funds;
(i) make changes to fund accounting and other administrative functions undertaken by the current providers, both internal and external, to Soundvest or the Soundvest Funds; or
(j) make changes to the trustees or custodians of the Soundvest Funds.
27. The members of the Independent Review Committee (IRC) of the Soundvest Funds will cease to be IRC members upon completion of the Proposed Transaction by operation of section 3.10(1)(c) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107). However, it is currently intended that immediately following the completion of the Proposed Transaction, the same members of the IRC will be re-appointed in accordance with NI 81-107.
28. The Proposed Transaction is not expected to impact the financial stability of Soundvest or its ability to fulfill its regulatory obligations.
29. The Proposed Transaction will not have any impact on the securityholders' interest in the Soundvest Funds and securityholders are not required to take any action. The change of control of Soundvest, by itself, will not trigger any other material change to the Soundvest Funds.
Notice Requirement
30. As required by section 5.8(1) of NI 81-102, written notice (the Notice) regarding the Proposed Transaction was sent to each securityholder of the Soundvest Funds on April 23, 2018.
31. While the Proposed Transaction is pending, but not closed, there is uncertainty among securityholders of the Soundvest Funds and others regarding Soundvest. It is strongly preferable to close the Proposed Transaction promptly with an abridgement to the 60-day notice period and minimize this period of uncertainty.
32. It is the Filers' view that it would not be prejudicial to the securityholders of the Soundvest Funds to abridge the notice period required under s. 5.8(1)(a) of NI 81-102 from 60 days to not less than 30 days for the following reasons:
(a) the securityholders of the Soundvest Funds are sufficiently aware of the Proposed Transaction;
(b) the Proposed Transaction is not expected to result in any change in how the Manager administers or manages the Soundvest Funds;
(c) the Transaction will not have any impact on the securityholders' interest in the Soundvest Funds and securityholders are not required to take any action; securityholders need only consider whether they wish to dispose of their securities of the Soundvest Funds. The change of control of Soundvest, by itself, will not trigger any other material change to the Soundvest Funds; and
(d) the Soundvest Funds calculate and publish their net asset values per security on a weekly basis and provide liquidity by having their securities listed on the TSX, allowing securityholders of the Soundvest Funds to dispose of their securities prior to the Closing Date if they so choose.
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 Approval Sought is granted; and
(b) the Abridgement Relief is granted provided that
(i) the Notice is given to securityholders of the Soundvest Funds at least 30 days before the Closing Date, and
(ii) no material changes will be made to the management, operations or portfolio management of the Soundvest Funds for at least 60 days following the date the Notice was delivered.
"Stephen Paglia"
Manager, Investment Funds and Structured Products Branch
Ontario Securities Commission