Securities Law & Instruments

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the dealer registration requirement in the Act to permit two related entities, one registered as an investment counsel and portfolio manager, to engage in trades of mutual fund securities from a capital accumulation plan to a LIRA sponsored by the unregistered entity on behalf of members of the CAP -- the registered ICPM will complete know-your-client and suitability analysis on transferring members -- no additional contributions will be permitted within the LIRA, only re-balancings of assets among the funds offered within the LIRA -- transferring members are permitted to transfer their pension assets out of the LIRA to a life income fund, registered pension plan of a subsequent employer, a third party LIRA or a deferred or immediate annuity, at any time -- relief is subject to conditions focussed on proficiency standards applicable to the entity registered as an ICPM and limited market dealer.

Applicable Legislative Provisions

Statutes Cited

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

Rules Cited

National Instrument 81-102 Mutual Funds.

National Instrument 45-106 Prospectus and Registration Exemptions.

Published Documents Cited

Amendments to National Instrument 45-106 Registration and Prospectus Exemption for Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.

September 11, 2009

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

ICMC GROUP RETIREMENT SERVICES INC.

AND

INTEGRA CAPITAL LIMITED

 

RULING

(Subsection 74(1) of the Act)

UPON the application (the Application) of ICMC Group Retirement Services Inc. (GRS) and Integra Capital Limited (ICL) to the Ontario Securities Commission (the Commission) for a ruling, pursuant to subsection 74(1) of the Act, that the dealer registration requirement in section 25(1)(a) of the Act shall not apply to GRS and ICL (including their respective directors, officers, representatives and employees acting on their behalf) where GRS and ICL trade in units of Integra Equity Fund and the Funds (as defined below) included in the Integra LIRA (as defined below) in connection with transfers of units of certain mutual funds from the Daimler Canada CAP (as defined below) to the Integra LIRA and in the case of ICL, any subsequent trades in units of the Funds in the Integra LIRA resulting from a re-balancing by a Transferring Member (as defined below), subject to certain terms and conditions;

AND WHEREAS, for the purposes hereof, the following terms shall have the following meanings:

"CAP Blanket Orders" means blanket orders issued in all provinces other than Ontario, Quebec and Newfoundland and Labrador pursuant to which prospectus and dealer relief was granted to plan sponsors, administrators retained by plan sponsors and mutual funds generally in relation to trades in mutual funds for capital accumulation plans, subject to certain terms and conditions;

"CAP Decision" means a decision of the securities regulators in Ontario, Quebec and Newfoundland and Labrador dated October 17, 2006 pursuant to which prospectus and dealer relief was granted to GRS, plan sponsors and mutual funds, including the Daimler Canada CAP in relation to trades in mutual funds for capital accumulation plans, subject to certain terms and conditions;

"Daimler Canada" means Daimler Trucks Canada Ltd.;

"Daimler Canada CAP" means the defined contribution pension plan of Daimler Canada which is being partially wound up such that members of such plan who are terminated will be required to elect where their assets in the plan should be transferred;

"Fund" means any of Integra Balanced Fund, Integra Canadian Value Growth Fund, Integra Short Term Fund, Integra Canadian Value Growth Fund, Beutel Goodman Income Fund, TD Balanced Index Fund and Templeton Growth Fund, Ltd., each of which will be made available to the Transferring Members under the Integra LIRA;

"Integra" means Integra Capital Management Corporation, the parent company of GRS and Integra Capital Limited; (see 'Note to Draft' in Representation 21 below);

"Integra Equity Fund" means the Integra Equity Fund;

"Integra LIRA" means the locked-in retirement savings plan sponsored by GRS and intended to be used in connection with the Daimler Canada CAP;

"NI 45-106" means National Instrument 45-106 Prospectus and Registration Exemptions;

"NI 81-102" means National Instrument 81-102 Mutual Funds;

"Transferring Members" means members of the Daimler Canada CAP who elect to transfer to the Integra LIRA.

AND WHEREAS any other terms used herein that are defined in National Instrument 14-101 Definitions shall have the same meaning, unless herein otherwise specifically defined, or the context otherwise requires;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON GRS and ICL having represented to the Commission that:

The Applicants

1. GRS is a Canadian corporation governed by the laws of Canada. Its head office is located in Oakville, Ontario. GRS is one of the members of the Integra Group of companies.

2. GRS provides record keeping and trade order services to capital accumulation plans, including the Daimler Canada CAP. Pursuant to the CAP Blanket Orders and the CAP Decision, relief from the prospectus and dealer registration requirements is granted to GRS, plan sponsors and mutual funds, in relation to trades in mutual funds for capital accumulation plans, including the Daimler Canada CAP.

3. ICL is a Canadian corporation governed by the laws of Canada. Its head office is located in Oakville, Ontario. ICL is one of the members of the Integra Group of companies. ICL is the investment fund manager and portfolio manager of mutual funds (within the meaning of the Act) and is registered as an investment counsel/portfolio manager and a limited market dealer.

4. ICL on behalf of GRS analyzes the performance of the funds in capital accumulation plans in connection with the summaries of performance provided to the sponsor of such plans by GRS.

5. Neither GRS nor ICL are in default of securities legislation in Ontario.

The Capital Accumulation Plan and Transferring Members

6. Daimler Canada is the plan sponsor of the Daimler Canada CAP and in that capacity, selected the fund options for the Daimler Canada CAP and negotiated the fees payable by the Daimler Canada CAP Members in respect of each of the fund options.

7. In light of terminations of certain members of Daimler Canada, Daimler Canada is seeking approval of the Financial Services Commission of Ontario to do a partial wind-up of the Daimler Canada CAP. Members in the Daimler Canada CAP who are terminated will have various options, including the ability of Ontario members to transfer the assets to which they are entitled to the Integra LIRA. In addition to the Integra LIRA, the terminated employees will have the option of transferring the assets to a life income fund, a registered pension plan of a subsequent employer, a third party LIRA, or to a deferred or immediate annuity. Transferring Members will not be required to keep their pension assets in the Fund options within the Integra LIRA but will be permitted to transfer their pension assets to a life income fund, a registered pension plan of a subsequent employer, a third party LIRA, or to a deferred or immediate annuity at any time.

8. GRS agreed to sponsor an Integra LIRA to which both union and non-union members in Ontario who so choose, can transfer if they are terminated.

9. As a 'sponsor', GRS will cause the LIRA to be set up with a trust company, as trustee, and GRS and ICL will effectively define the scope of investments that may be invested through the LIRA. The trustee of the Integra LIRA will be CIBC Mellon Trust Company (the Trustee).

10. As not all of the existing fund options under the Daimler Canada CAP are "qualified investments" within the meaning of the Income Tax Act (Canada) (the Tax Act), it is not possible to transfer all existing Daimler Canada CAP fund options to a locked-in retirement savings plan, including the Integra LIRA, and in one case, an existing fund, the UBS Canadian Equity Fund, will not be available in the future. As a result, the Funds included in the Integra LIRA will not be entirely the same as the fund included in the Daimler Canada CAP. A schedule of the funds offered within the Daimler Canada CAP and the Funds that will be options within the Integra LIRA for Transferring Members is attached as Appendix A to this Decision.

11. Each of the Fund options within the Integra LIRA will comply with NI 81-102, including Part 2 of NI 81-102.

12 Replacement funds (the Funds, as referenced above) were selected by ICL and GRS by sourcing a fund from the same manager where possible, with a similar investment objective and a suitable track record and in the event such a fund was not available, a fund managed by a different manager with a similar investment objective and a suitable track record was selected for inclusion in the Integra LIRA. Each replacement Fund selected by ICL and GRS had to be both a qualified investment for a LIRA and offered by prospectus.

13. A Transferring Member is not permitted under the Tax Act to make additional contributions to a LIRA. As a result, the only other trades that can occur after the initial transfer to the Integra LIRA will be for reinvestments of distributions or if the Transferring Member chooses to re-balance the holdings amongst the Funds in the Integra LIRA.

14. Fund options within the Integra LIRA are expected to be static. Should a Fund cease to be a qualified investment for a LIRA or if a Fund is wound up, ICL will give consideration as to whether there should be a replacement fund selected and that selection will be conducted by ICL.

Integra Equity Fund

15. Integra Equity Fund is a reporting issuer but has ceased distribution under a prospectus. As a result, it offers its units solely pursuant to the private placement exemptions available under NI 45-106, the CAP Blanket Orders and the CAP Decision. Integra Equity Fund continues to comply with the investment restrictions and practices of NI 81-102.

16. The Integrity Equity Fund is a "qualified investment" within the meaning of the Tax Act and may accordingly be included within the Integra LIRA.

17. Transferring Members currently invested in the Integra Equity Fund as part of the Daimler Canada CAP will be permitted to transfer their investments in the Integra Equity Fund to the Integra LIRA and to hold their investments indefinitely in the fund, including any reinvestment of distributions, or until they choose to redeem out of the Integra Equity Fund. After the initial transfer of the Integra Equity Fund to the Integra LIRA, no re-balancings of pension assets into the Integra LIRA by Transferring Members will be permitted.

Transfers to, and Re-balancing in, the Integra LIRA

18. All Transferring Members who switch, as part of their transfer to the Integra LIRA, from one of the existing Daimler Canada CAP fund options which are no longer available under the Integra LIRA to one of the substituted Funds will receive a prospectus of the relevant Fund(s).

19. Further, if any Transferring Member subsequently determines to re-balance amongst the Funds in the Integra LIRA, such Transferring Member will receive a copy of the prospectus of the relevant Fund to which he or she transfers.

20. ICL, as a portfolio manager and limited market dealer, will obtain know-your-client and suitability information, and review the Transferring Member's information for purposes of determining whether the trade is suitable for the relevant Transferring Member, from (i) all Transferring Members who switch, as part of their transfer to the Integra LIRA, from one of the existing Daimler Canada CAP fund options which are no longer available under the Integra LIRA to a substituted Fund and (ii) any Transferring Member who subsequently chooses to re-balance his or her assets within the Integra LIRA.

21. ICL will (i) ensure that Transferring Members receive the prospectus of the relevant Fund in the manner described in Representations 18 and 19, (ii) provide trade confirmations and (iii) will perform all other duties required of a dealer under securities legislation.

Fees

22. All Transferring Members will not be charged any sales commission or other fees in connection with a switch of their funds from the Daimler Canada CAP to the Funds under the Integra LIRA or on a re-balancing within the Integra LIRA.

23. The Bank of Montreal ("BMO") has entered into a purchase agreement with Integra Capital Management Corporation (the parent company of GRS) and with GRS pursuant to which it will acquire to group retirement services business of GRS. The purchase transaction is expected to close in late October, 2009. Upon the closing of the transaction, BMO Group Retirement Services, a new wholly owned subsidiary of BMO, will become the recordkeeper for the Integra LIRA.

24. Recordkeeping fees currently payable to GRS, as the current service provider to the Daimler Canada CAP, will continue to be paid to GRS (or its successor BMO Group Retirement Services) for its recordkeeping services to the Integra LIRA. These recordkeeping fees will be based on the same fee schedule charged for such purposes to the Daimler Canada CAP. There are no separate fees payable to any other service provider to the Integra LIRA, including the trustee.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to subsection 74(1) of the Act, that:

(1) GRS and ICL shall not be subject to the dealer registration requirement when the transfer is made from the Daimler Canada CAP to the Integra LIRA in respect of funds held and continued to be held for the benefit of the Transferring Member at the time of the transfer; and

(2) ICL shall not be subject to the dealer registration requirement on certain trades by a Transferring Member provided that in respect of the relevant Transferring Member who:

(i) switches, as part of his or her transfer to the Integra LIRA, from one of the existing Daimler Canada CAP fund options which are no longer available under the Integra LIRA to a substituted Fund, or

(ii) subsequently chooses to re-balance his or her assets within the Integra LIRA;

provided that:

(a) ICL obtains know-your-client and suitability information from, and reviews the Transferring Member's information for purposes of determining whether the trade is suitable for, the relevant Transferring Member;

(b) within the Integra LIRA, re-balancings into, and purchases of, units of the Integra Equity Fund by Transferring Members will not be permitted; and

(c) should a Fund cease to be a 'qualified investment' for a LIRA or should a Fund be wound up, ICL will give consideration as to whether there should be a replacement fund selected and that selection will be conducted by ICL.

"James E.A. Turner"
Vice-Chair
Ontario Securities Commission
 
"Mary G. Condon"
Commissioner
Ontario Securities Commission