Goodman & Company, Investment Counsel Ltd.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Relief granted to portfolio manager to engage the funds it manages in principal trading of debt securities of third parties with a related dealer in the secondary market -- relief conditional on IRC approval and compliance with pricing requirements.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, ss. 13.5(2)(b)(i), 15.1.

National Instrument 81-102 Mutual Funds, ss. 4.2, 19.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, s. 6.2.

May 13, 2011

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

GOODMAN & COMPANY,

INVESTMENT COUNSEL LTD.

(the Filer)

AND

IN THE MATTER OF THE FUNDS

(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer under section 19.1 of NI 81-102, on behalf of existing mutual funds and future mutual funds that may be established in the future subject to National Instrument 81-102 Mutual Funds (NI 81-102) for which the Filer acts as manager and/or portfolio adviser (the Funds), for relief from the requirement in section 4.2 of NI 81-102 (the Exemption Sought) which prevents a mutual fund from purchasing a security from or selling a security to any of the following persons or companies:

1. The manager, portfolio adviser or trustee of the mutual fund;

2. A partner, director or officer of the mutual fund or of the manager, portfolio adviser or trustee of the mutual fund;

3. An associate or affiliate of a person or company referred to in paragraph 1 or 2;

4. A person or company, having fewer than 100 securityholders of record, of which a partner, director or officer of the mutual fund or a partner, director or officer of the manager or portfolio adviser of the mutual fund is a partner, director, officer or securityholder,

if such persons or companies (each a Related Person) are acting as principal.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

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

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

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

In this Decision Document the term Related Person will be used to refer to an associate of the Filer that is a principal dealer (Principal Dealer) in the Canadian debt securities market.

Representations

This decision is based on the following facts represented by the Filer in respect of the Filer and the Funds.

1. The Filer is a corporation existing under the laws of the Province of Ontario, is registered with the OSC as an adviser in the category of portfolio manager, is further registered in that category in each of British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, New Brunswick and Nova Scotia and is registered as a commodity trading manager with the OSC.

2. The Filer is also an investment fund manager within the meaning of National Instrument 31-103 -- Registration Requirements and Exemptions and has applied to the OSC for registration in that capacity as required by the securities legislation of the Jurisdiction of the principal regulator (the Legislation).

3. Each of the Funds is or will be a reporting issuer in one or more of the Jurisdictions. The securities of each of the Funds are, or will be, qualified for distribution in each of the Jurisdictions pursuant to a simplified prospectus and annual information form that has been, or will be, prepared and filed in accordance with securities legislation of each of the relevant Jurisdictions.

4. The Filer and each Fund are not in default of securities legislation in any province or territory of Canada.

5. The manager of the Funds has established, or will establish, an independent review committee (IRC) in respect of each Fund managed or advised by it in accordance with the requirements of NI 81-107.

6. The Bank of Nova Scotia (Scotiabank) is the ultimate parent company of the Filer and of Scotia Capital Inc. (Scotia Capital). The Filer, as an affiliate of Scotiabank, is deemed pursuant to the Legislation to beneficially own the securities owned by Scotiabank (including the securities of Scotia Capital). As Scotiabank beneficially owns more than 10% of the voting shares of Scotia Capital, Scotia Capital may be considered to be an associate of the Filer under the Legislation.

7. Scotia Capital is a Principal Dealer in the Canadian debt securities market, both primary and secondary.

8. The Funds require the Exemption Sought in order to continue to effectively pursue their investment objectives and strategies.

9. A Fund's purchase of debt securities from a Related Person in the secondary market is subject to section 4.2 of NI 81-102.

10. Section 4.3(2) of NI 81-102, which provides certain relief from section 4.2(1), does not provide an exemption from section 4.2(1) for transactions in debt securities issued or fully and unconditionally guaranteed by the federal or a provincial government (Government Debt Securities) or debt securities of an issuer other than the federal or a provincial government (Non-Government Debt Securities) that are neither the subject of public quotations nor inter-fund trades that comply with section 6.1(2) of NI 81-107.

11. The exemption in section 4.3(2) of NI 81-102 would not assist a Fund's purchase or sale of Government Debt Securities or Non-Government Debt Securities from or to an associate of the Filer that is a Principal Dealer, such as Scotia Capital, which are prohibited under the Legislation (a Restricted Transaction).

12. The Filer has made the application for the Exemption Sought so that a Fund may purchase from or sell to a Related Person that is a Principal Dealer, Non-Government Debt Securities or Government Debt Securities in the secondary market.

13. There is a limited supply of Non-Government Debt Securities and Government Debt Securities available to the Funds, and frequently the only source of Non-Government Debt Securities for a Fund may be a Related Person, such as Scotia Capital.

14. The Filer considers granting the Exemption Sought to not be prejudicial to the public interest, given that the decision to transact securities purchases and sales with a Related Person will be made in the best interests of the Funds and free from the influence of a Related Person such as Scotia Capital.

15. The Filer considers that a Fund may be prejudiced if it must refrain from entering into a Restricted Transaction, where to do so is consistent with its investment objective.

16. Associates of the Filer such as Scotia Capital, do not influence the business judgment of the Filer in connection with the determination of the suitability of investments and information and influence barriers are in place. Decisions made by the Filer as to which investments a Fund should hold are based on the best interests of such Fund, without consideration given to the interests of the party with whom a purchase or sale is transacted. This principle is reflected in the policies and procedures that have been and will be implemented and approved by the IRC for dealing with related parties.

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 Exemption Sought is granted provided that:

(a) the purchase or sale is consistent with, or is necessary to meet, the investment objective of the Fund;

(b) at the time of the investment, the IRC has approved the transaction in accordance with section 5.2(2) of NI 81-107;

(c) the Filer, as manager of a Fund, complies with section 5.1 of NI 81-107, and the Filer and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the investment in the securities;

(d) the bid and ask price of the security transacted are readily available, as contemplated by section 6.1(2)(c) of NI 81-107;

(e) a purchase is not executed at a price which is higher than the available ask price and a sale is not executed at a price which is lower than the available bid price;

(f) the purchase or sale is subject to "market integrity requirements" as defined in NI 81-107; and

(g) the Fund keeps the written records required by section 6.1(2)(g) of NI 81-107.

"Vera Nunes"
Manager, Investment Funds
Ontario Securities Commission