Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted from self-dealing provisions in s. 4.2 of NI 81-102 to permit certain funds to conduct inter-fund trades in debt securities between mutual funds, pooled funds, and non-redeemable investment funds -- inter-fund trades will comply with conditions in s. 6.1(2) of National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) including Independent Review Committee approval.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.2, 4.3(1), 4.3(2), 19.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4).

December 2, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

NORTHWEST TERRITORIES, YUKON AND

NUNAVUT

(Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

(MRRS)

AND

IN THE MATTER OF

UBS GLOBAL ASSET MANAGEMENT

(CANADA) CO.

(the Filer)

AND

IN THE MATTER OF

UBS (CANADA) GLOBAL ALLOCATION FUND

(the Existing NI 81-102 Fund)

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions received an application (the Application) under the securities legislation of the Jurisdictions (the Legislation) from the Filer in respect of the Existing NI 81-102 Fund and in respect of any future funds (each a Future NI 81-102 Fund) that the Filer, or an affiliate of the Filer, may manage and/or advise, for relief (the Requested Relief) from the prohibition in section 4.2 of NI 81-102 in order to permit the Existing NI 81-102 Fund and the Future NI 81-102 Funds (each an NI 81-102 Fund) to trade debt securities (the Inter-Fund Trades) with Pooled Funds (as defined below) and Public Funds (as defined below).

Under the MRRS:

(i) the principal regulator for the Application is the Ontario Securities Commission; and

(ii) this Decision Document represents the decision of each of the Decision Makers.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions, in NI 81-102 Mutual Funds (NI 81-102) and in National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meaning in this MRRS Decision Document unless they are otherwise defined in this Decision Document.

Pooled Fund means an existing or future investment fund that the Filer, or an affiliate of the Filer, manages and/or advises that is not, or will not be, a reporting issuer.

Public Fund means an existing or future non-redeemable investment fund that the Filer, or an affiliate of the Filer, manages and/or advises that is, or will be, a reporting issuer, but is not subject to NI 81-102.

Representations

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

1. Each NI 81-102 Fund, Public Fund, and Pooled Fund (each a Fund) is, or will be, an open-ended or closed-ended mutual fund trust, or an open-ended or closed-ended mutual fund corporation.

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

3. Each NI 81-102 Fund is, or will be, a reporting issuer in one or more of the Jurisdictions. The Pooled Funds are not, or will not, be a reporting issuer in any of the Jurisdictions and are not, or will not, be subject to NI 81-102 or NI 81-107.

4. The Filer, or an affiliate of the Filer, is, or will be, the manager or portfolio manager of a Public Fund. The Public Funds are not, or will not, be subject to NI 81-102.

5. The Filer, or an affiliate of the Filer, has established, or will establish, an independent review committee (the IRC) in respect of each NI 81-102 Fund and each Public Fund in accordance with the requirements of NI 81-107.

6. The Filer, or an affiliate of the Filer, will establish an IRC (which will likely also be the IRC in respect of the NI 81-102 Funds and the Public Funds) in respect of each Pooled Fund.

7. The mandate of the IRC of a Pooled Fund, among other things, will include approving Inter-fund Trades between the Pooled Fund and a NI 81-102 Fund. The IRC of the Pooled Funds will be composed by the Filer, or an affiliate of the Filer, in accordance with the requirements of section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. Further, the IRC of the Pooled Funds will not approve Inter-Fund Trades unless it has made the determination set out in section 5.2(2) of NI 81-107.

8. Inter-Fund Trades involving a NI 81-102 Fund or a Public Fund will be referred to the IRC of the NI 81-102 Fund under section 5.2(1) of NI 81-107 and will be subject to the requirements of section 5.2(2) of NI 81-107.

9. The Filer has determined that it would be in the interests of each NI 81-102 Fund to receive the Requested Relief. The NI 81-102 Funds cannot rely upon the exemption from section 4.2 of NI 81-102 for debt securities codified in paragraph 4.3(2) of NI 81-102 because the Pooled Funds are not, or will not be, subject to NI 81-107 and because the Public Funds are not, or will not be, mutual funds.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers is that the Requested Relief is granted in respect of each NI 81-102 Fund so long as:

(a) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;

(b) the IRC of the NI 81-102 Fund has approved the Inter-Fund Trade in respect of the NI 81-102 Fund under section 5.2(2) of NI 81-107; and

(b) the IRC of the Pooled Fund or Public Fund has approved the Inter-Fund Trade on the same terms as are required under Section 5.2(2) of NI 81-107.

"Vera Nunes"