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 from the Filer on its own behalf and on behalf of existing mutual funds and future mutual funds of which the Filer is the manager and/or adviser and to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (each, an NI 81-102 Fund and collectively, the NI 81-102 Funds), and on behalf of existing mutual funds and future mutual funds of which the Filer is the manager and/or adviser and to which NI 81-102 does not apply (each, a Pooled Fund and collectively, the Pooled Funds and together with the NI 81-102 Funds, the Funds), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer, as the registered adviser of a Fund, from the prohibition in Section 13.5(2)(b)(ii) of National Instrument 31-103 -- Registration Requirements and Exemptions (NI 31-103) to permit the Funds to purchase or sell a security from or to the investment portfolio of an associate of the Filer (a Related Person, as further defined below) (collectively, the Exemption Sought).

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 31-103, 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

The 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 NI 31-103 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 NI 81-102 Funds is or will be a reporting issuer in one or more of the Jurisdictions. The securities of each of the NI 81-102 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 securities of the Pooled Funds are or will be offered for sale only on an exempt basis pursuant to available prospectus and registration exemptions from the prospectus requirements in one or more of the Jurisdictions. None of the Pooled Funds is or will be a reporting issuer.

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

6. An Independent Review Committee (IRC) has been or will be established for each Fund in accordance with the requirements of NI 81-107.

7. The Filer, as the registered adviser of a Fund, will be a responsible person under the Legislation.

8. 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.

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

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

11. A Fund's purchase of debt securities of an issuer from an associate of a responsible person is prohibited under the Legislation (a Restricted Transaction).

12. 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.

13. 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.

14. 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.

15. Associates of the Filer, such as Scotia Capital, do not and will 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 and will be 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