Securities Law & Instruments

Headnote

Process for Exemptive Relief Applications in Multiple Jurisdictions -- Portfolio manager and exempted from the dealer and adviser registration requirements in the Legislation in respect of trades in shares or units of mutual funds managed by an affiliate of the portfolio manager, made by portfolio manager through its officers and employees acting on its behalf, to managed accounts, subject to terms and conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 74(1).

Rules Cited

Multilateral Instrument 11-102 Passport System.

National Instrument 14-101 Definitions.

National Instrument 81-101 Mutual Fund Prospectus Disclosure.

National Instrument 81-102 Mutual Funds.

December 30, 2008

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

SCOTIA CASSELS INVESTMENT

COUNSEL LIMITED

(Scotia Cassels)

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Scotia Cassels (the Filer) for a decision under the securities legislation of the Jurisdiction (the Legislation) for a decision that the requirement in the Legislation that prohibits a person or company from trading in a security unless the person or company is registered in the appropriate category of registration under the Legislation (the Dealer Registration Requirement) should not apply in respect of any trades in units of the Private Client Units class (PCU) of funds that are managed by Scotia Securities Inc. (the Scotia Funds), made by the Filer to a client account of the Filer that is a Managed Account (as defined below) (the Requested Relief).

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

(a) the Ontario Securities Commission is the principal regulator for the application; and

(b) the Filers have provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, the Yukon, the Northwest Territories and Nunavut.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions 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:

1. The Filer is registered as an adviser in the appropriate categories to provide discretionary advisory services in all provinces and territories of Canada. The Filer has a head office in Ontario.

2. The Filer is not, to its knowledge, in default of the Legislation of any Jurisdiction.

3. The Filer is the portfolio manager of many of the Scotia Funds which are offered pursuant to a prospectus prepared and filed in accordance with National Instrument 81-101 and that are subject to National Instrument 81-102.

4. The Filer's affiliate, Scotia Securities Inc. (the Manager), is the manager and trustee of the Scotia Funds.

5. The Filer provides discretionary portfolio management services to clients pursuant to investment management agreements between the clients and the Filer (Managed Account Agreements).

6. Based on the size of the assets of each client and depending on the allocation of a client's assets to a particular asset class, the Filer either manages the client's assets on a segregated account basis by investing directly in securities of various issuers (the Managed Accounts), or manages clients' assets on pooled basis by, inter alia, investing in the PCU's of Scotia Funds.

7. The PCU's were, and in the future shall be, established by the Manager of the Scotia Funds at the request of the Filer in order to assist the Filer in managing clients' assets on a pooled basis.

8. Pursuant to the Managed Account Agreements, the Filer has full authority to provide its portfolio management services to each client's accounts, including investing in mutual funds for which the Filer is the portfolio manager and changing those mutual funds as the Filer determines appropriate, in accordance with the mandate of each client.

9. From time to time, the Filer may determine that in lieu of holding securities in a Managed Account, a client would be better served by being invested in the PCUs of one or more of the Scotia Funds.

10. The Filer is required under the Legislation to meet "know your client", suitability, anti-money laundering and anti-terrorist financing requirements.

11. Currently, every order to purchase or redeem PCU's is forwarded to the Manager for acceptance and processing, acting in its capacity as both manager of the Scotia Fund and as a mutual fund dealer.

12. The Manager wishes to cease acting in the capacity of mutual fund dealer with regard to purchase and redemptions of the PCU's.

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 Requested Relief is granted for the Filer provided that:

(a) the Filer is at the time of trade, registered under the Legislation as an adviser in the category of "portfolio manager" (or the equivalent);

(b) the trade is for the PCU class of Scotia Funds which are established by the Manager of the Scotia Funds.

"Paulette Kennedy"
Commissioner
Ontario Securities Commission
 
"James E.A. Turner"
Commissioner
Ontario Securities Commission