Securities Law & Instruments

Headnote

Representatives of mutual fund dealer exemptedfrom the prohibition against payment of commission/fee rebatesto clients who switch investments from third party mutual fundsto mutual funds managed by affiliate of mutual fund dealer.

Rules Cited

National Instrument 81-105 Mutual Fund SalesPractices, subsection 7.1(1), section 9.1.

IN THE MATTER OF

NATIONAL INSTRUMENT 81-105MUTUAL FUND

SALES PRACTICES ("NI81-105")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

IQON FINANCIAL INC.

 

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatoryauthorities or regulators (the "Decision Makers")in the jurisdictions of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, New Brunswick, Nova Scotia, Newfoundlandand Labrador, and Prince Edward Island have received an applicationfrom IQON Financial Inc. ("IQON") on behalf of itselfand its current and future representatives (the "Representatives")from time to time for a decision pursuant to section 9.1 ofNI 81-105 that the prohibitions on certain rebates ("Rebates")of redemption commission or fees contained in paragraph 7.1(1)(b)of NI 81-105 shall not apply to Rebates paid by Representativesto clients who are switching from Third Party Funds (definedbelow) to MB Funds and CI Funds (defined below) (the "ProprietaryRebates");

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Manitoba Securities Commission is the principal regulatorfor this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions;

AND WHEREAS IQON has represented to theDecision Makers as follows:

1. IQON is registered as a mutual fund dealerin each of the provinces of Canada, other than Quebec;

2. Sun Life Assurance Company of Canada ("SunLife") owns or controls approximately 56% of McLean BuddenLimited ("MB") and 34% of CI Fund Management Inc.("CI"), the managers of the McLean Budden familyof mutual funds (the "MB Funds") and the CI familyof mutual funds (the "CI Funds") respectively;

3. Sun Life indirectly owns 51% of the votingshares of IQON. As a result, Sun Life is a member of the organizationof the MB Funds and the CI Funds;

4. IQON is a participating dealer of the MBFunds and the CI Funds as well as a participating dealer ofother mutual funds not managed by MB or CI ('Third Party Funds");

5. Paragraph 7.1(1)(b) of NI 81-105 prohibitsRepresentatives from paying Proprietary Rebates to clientswho are switching from Third Party Funds to MB Funds and CIFunds;

6. The relief is being applied for in orderto facilitate the Proprietary Rebates;

7. The decision to pay such Proprietary Rebateswill be made by the Representatives based on the best interestsof the particular client; and

8. Representatives are not required by IQONor any of its affiliates to sell MB Funds or CI Funds to clientsand accordingly have no quotas in respect of selling MB Fundsor CI Funds and are not provided with incentives by IQON (otherthan as permitted by NI 81-105 or any of its affiliates tosell MB Funds or CI Funds).

AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in NI 81-105 that providesthe Decision Maker with the jurisdiction to make the decisionhas been met;

THE DECISION of the Decision Makers pursuantto section 9.1 of NI 81-105 is that IQON shall be exempt fromthe prohibitions on payment of Rebates contained in paragraph7.1(1)(b) of NI 81-105 to the extent necessary to allow Representativesto pay Proprietary Rebates;

PROVIDED that in respect of each suchpayment:

1. IQON, and the relevant Representative,as the case may be, complies with the informed written consentprovisions of paragraph 7.1(1)(a) and the disclosure and consentprovisions of Part 8 of NI 81-105;

2. The Representative advises each clientin advance that any Rebate proposed to be made available bya Representative in connection with the purchase of securitiesof MB Funds or CI Funds (a) will be available to the clientregardless of whether the redemption proceeds are investedin an MB Fund or CI Fund or a Third Party Fund (to a maximumof the commission earned by the Representative on the purchase),and (b) will not be conditional on a purchase of securitiesof the MB Funds or CI Funds;

3. Representatives are not and shall not inthe future be subject to quotas (either express or implied)in respect of the distribution of the MB Funds or CI Fundsand shall continue to be entitled to offer competing ThirdParty Funds to their clients;

4. Except as permitted by NI 81-105, neitherIQON nor any of its affiliates shall provide an incentive(monetary or non-monetary) to any Representative to recommendthe MB Funds or CI Funds over Third Party Funds;

5. The amount of the Proprietary Rebate thatis borne by a Representative is determined by the Representativeand the client; and

6. The Representatives that pay the ProprietaryRebates are not and will not be reimbursed directly or indirectlyfor such payment by IQON or any of its affiliates.

AND PROVIDED FURTHER that this DecisionDocument shall cease to be operative with respect to a DecisionMaker following the entry into force of a rule of that DecisionMaker that replaces or amends section 7.1 of NI 81-105.

June 4, 2003.

"R.B. Bouchard"