Northwood Stephens Private Counsel Inc. et al. - NI 52-108 Auditor Oversight, ss. 2.2, 2.2

Decision

Headnote

Application for relief from sections 2.1 and 2.2 of National Instrument 52-108 Auditor Oversight for the purpose of having the Commission accept an auditors' report that was issued one day after the date where the auditors ceased to be a participating audit firm in the CPAB oversight program -- Auditors' withdrawal from CPAB was done in error -- Relief granted provided Auditors are reinstated as a participating audit firm to the CPAB oversight program by a specified date.

Rule Cited

National Instrument 52-108 Auditor Oversight, ss. 2.1, 2.2, 4.1.

December 19, 2005

IN THE MATTER OF

NATIONAL INSTRUMENT 52-108

AUDITOR OVERSIGHT (NI 52-108)

AND

IN THE MATTER OF

NORTHWOOD STEPHENS PRIVATE COUNSEL INC.

(Northwood Stephens)

AND

SILVER GOLD GLATT & GROSMAN LLP (the Auditors)

AND

NSC CANADIAN BALANCED INCOME FUND,

NSC CANADIAN EQUITY FUND, AND

NSC GLOBAL BALANCED FUND

(collectively, the Funds)

 

DECISION DOCUMENT

Background

The Ontario Securities Commission (the Commission) has received a joint application from Northwood Stephens on behalf of the Funds and the Auditors for a decision from the Commission exempting

(a) the Funds from the requirements under section 2.2 of NI 52-108 and

(b) the Auditors from the requirements under section 2.1 of NI 52-108,

such that the Commission may accept the Auditors' Report dated February 8, 2005 issued on the Funds' annual financial statements dated December 31, 2004 (the Requested Relief).

Representations

This decision is based on the following facts represented by Northwood Stephens and the Auditors:

1. Northwood Stephens is a corporation organized under the laws of Ontario. Northwood Stephens is the manager and trustee of the Funds.

2. Each of the Funds is a trust governed by the Amended and Restated Declaration of Trust dated November 30, 2005, made under the laws of the Province of Ontario.

3. Units of the Funds are currently qualified for distribution in the province of Ontario pursuant to a simplified prospectus and an annual information form, respectively, each dated November 30, 2004, as amended by amendment no. 1 dated August 18, 2005 and amendment no. 2 dated October 14, 2005.

4. The Funds are reporting issuers in Ontario. The Funds are not on any list of defaulting reporting issuers maintained by the Commission.

5. The Auditors audited the annual financial statements of the Funds for the year ended December 31, 2004 (the Financial Statements) and issued their Auditors' report thereon (the Auditors' Report) on February 8, 2005. The Financial Statements were filed via SEDAR on May 18, 2005 and mailed to unitholders of the Funds.

6. On October 28, 2005, a pro forma simplified prospectus and annual information form of the Funds were filed under SEDAR project number 845982.

7. On December 7, 2005, in obtaining the Auditors' consent to the use of the Auditors' Report through incorporation by reference in the Funds' final form of the simplified prospectus and annual information form (together, the Final Documents), the Funds were advised by the Auditors that on February 7, 2005, a partner of the Auditors who ceased to be an active partner effective May 1, 2005 (the Non-Active Partner) had purported to withdraw the Auditors from the Canadian Public Accountability Board (CPAB) oversight program (the Program). Despite the fact that the Non-Active Partner had not properly filed a "Notice of Withdrawal" as required by the rules of the CPAB, the Auditors' status as a participant in the Program and their participation agreement with the CPAB was considered terminated. It was consequently determined that the Auditors' Report dated February 8, 2005 had been issued as at a date when the Auditors were no longer a participating audit firm (as that term is defined in NI 52-108), contrary to the requirements of NI 52-108.

8. Up until the date of their withdrawal from the CPAB Program, the Auditors were in compliance with any restrictions or sanctions imposed by the CPAB.

9. On December 8, 2005, having discovered that the Non-Active Partner had withdrawn the Auditors from the CPAB, the Auditors filed an "Intent to Participate" in the Program and the CPAB has indicated to the Auditors that the Auditors' participation in the Program should be reinstated in early 2006.

10. On December 9, 2005, the Auditors issued a letter to the OSC which explained that their withdrawal from the Program was done in error and should not have taken place.

11. On December 12, 2005, the Commission advised that the Auditors and the Funds would need to apply for an exemption pursuant to section 4.1 of NI 52-108 in order that the Funds may be issued a receipt for their Final Documents filed with the Commission on December 9, 2005.

Decision

The Commission is satisfied that the Requested Relief would not be prejudicial to the public interest.

The decision of the Commission is that the Requested Relief is granted, provided that the Auditors are reinstated as a participating audit firm to the CPAB Program no later than February 15, 2006.

"Leslie Byberg"
Manager, Investment Funds Branch
Ontario Securities Commission