Gluskin Sheff + Associates Inc.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to permit (i) interfund trading at 'last sale price' based on UMIR Rules, between a manager's pooled funds, and managed accounts.

Applicable Legislative Provisions

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

National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4).

January 12, 2012

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

GLUSKIN SHEFF + ASSOCIATES INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction (the Principal Regulator) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Principal Regulator (the Legislation) for an exemption from the prohibition against a registered adviser knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to (i) the investment portfolio of an associate of a responsible person or (ii) an investment fund for which a responsible person acts as an adviser, to permit the purchase and sale of securities of any issuer (each purchase and sale, an Inter-Fund Trade):

(a) between a Pooled Fund (defined below) and another Pooled Fund or a Managed Account (defined below);

(b) between a Managed Account and a Pooled Fund; and

(c) to occur at the last sale price, as defined in the Market Integrity Rules of the Investment Industry Regulatory Organization of Canada, prior to the execution of the trade (the Last Sale Price) or at the closing sale price (the Closing Sale Price) contemplated by the definition of current market price referred to in paragraph (e) of section 6.1(2) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107), as determined by the Filer in its discretion,

(the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this 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 each of Alberta, British Columbia, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick and Northwest Territories (collectively with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Pooled Fund means an investment fund managed and portfolio managed by the Filer or managed or portfolio managed in the future by the Filer or an affiliate, the securities of which are sold pursuant to exemptions from the prospectus requirement.

Managed Account means an account over which the Filer or an affiliate has discretionary authority, other than an account of a Responsible Person.

Responsible Person has the meaning given to this term in section 13.5(1) of National Instrument 31-103 Registration Requirements and Exemptions and Ongoing Registrant Obligations and includes each officer and director of the Filer who has access to, or participates in formulating, an investment decision or advice in respect of an Inter-Fund Trade.

Certain other defined terms have the meanings given to them below under Representations.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated under the laws of the Province of Ontario. It is registered as a portfolio manager and investment fund manager in each of the Jurisdictions, as an exempt market dealer in Ontario and Saskatchewan and as commodity trading manager in Ontario.

2. The head office of the Filer is located in Toronto, Ontario.

3. The Filer is a public company whose shares are listed on the Toronto Stock Exchange.

4. The Filer or an affiliate is or will be the portfolio manager and/or manager of each Pooled Fund.

5. A Pooled Fund may be an associate of the Filer or an affiliate of the Filer that is a responsible person in respect of another Pooled Fund or a Managed Account, as the Filer or an affiliate of the Filer may be the trustee of a Pooled Fund that is structured as a trust.

6. Each of the Pooled Funds is, or will be, qualified for distribution in the Jurisdictions pursuant to exemptions from the prospectus requirement and will not be a reporting issuer.

7. The Filer and the existing Pooled Funds are not in default of securities legislation in the Jurisdictions.

8. The Filer offers discretionary portfolio management services to clients seeking wealth management or related services under a written agreement (Discretionary Management Agreements) in connection with each Managed Account.

9. Pursuant to the Discretionary Management Agreement entered into with each client, the Filer makes investment decisions for each Managed Account and has full discretionary authority to trade in securities for each Managed Account without obtaining the specific consent or instructions of the client to the trade.

10. The Filer wishes to be able to enter into Inter-Fund Trades of portfolio securities between:

(a) a Pooled Fund and another Pooled Fund or a Managed Account; and

(b) a Managed Account and a Pooled Fund.

11. Inter-Fund Trades will result in benefits to Pooled Fund investors and Managed Account holders such as lower trading costs, reduced market disruption and faster order execution.

12. At the time of each Inter-Fund Trade, the Filer (or its affiliate) will have policies and procedures in place to enable it to engage in the applicable Inter-Fund Trade.

13. When the Filer engages in an Inter-Fund Trade of securities between two Pooled Funds or between a Managed Account and a Pooled Fund it will follow the following procedures:

(a) the portfolio manager of the Filer (or its affiliate) will request the approval of the chief compliance officer of the Filer or his or her designated alternate to execute a purchase or sale of a security by a Pooled Fund or a Managed Account as an Inter-Fund Trade;

(b) upon receipt of the required approval, the portfolio manager of the Filer (or its affiliate) will deliver the trading instructions to a trader on a trading desk of the Filer (or its affiliate);

(c) upon receipt of the trade instructions and the required approval, the trader on the trading desk will execute the trade as an Inter-Fund Trade in accordance with the requirements of paragraphs (c) to (g) of Subsection 6.1(2) of NI 81-107 provided that, for exchange-traded securities, the trader will have the discretion to execute the Inter-Fund Trade at the Last Sale Price of the security, determined at the time of the receipt of the required approval prior to the execution of the trade, or at the Closing Sale Price; and

(d) the policies applicable to the trading desk of the Filer (or its affiliate) will require that all orders are to be executed on a timely basis.

14. The Filer (or its affiliate) will establish an independent review committee (IRC) in respect of each Pooled Fund. The IRC will be composed by the Filer (or its affiliate) in accordance with section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. The mandate of the IRC will include approving purchases and sales of securities between a Pooled Fund and a Managed Account or between two Pooled Funds and the IRC will not approve an Inter-Fund Trade between a Pooled Fund and a Managed Account or between two Pooled Funds unless it has made the determination set out in section 5.2(2) of NI 81-107.

15. If the IRC of a Pooled Fund becomes aware of an instance where the Filer (or its affiliate), as manager of the Pooled Fund, did not comply with the terms of this decision or a condition imposed by the IRC in its approval, the IRC of the Pooled Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the Pooled Fund is organized.

16. The Filer cannot rely on the exemption from Section 13.5 of NI 31-103 contained in subsection 6.1(4) of NI 81-107, as the Pooled Funds and Managed Accounts are not reporting issuers and thus are not subject to NI 81-107.

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 Inter-Fund Trade is consistent with the investment objective of the Pooled Fund or the Managed Account, as applicable;

(b) the Filer (or its affiliate) refers the Inter-Fund Trade that involves a Pooled Fund to the IRC of the Pooled Fund in the manner contemplated by section 5.1 of NI 81-107 and the Filer (or its affiliate) and the Pooled Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade;

(c) if the transaction is with a Pooled Fund or between two Pooled Funds, the IRC of each Pooled Fund has approved the Inter-Fund Trade in respect of that Pooled Fund in accordance with the terms of Subsection 5.2(2) of NI 81-107;

(d) if the transaction is with a Managed Account, the Discretionary Management Agreement or other documentation in respect of the Managed Account contains the authorization of the client for the Filer (or its affiliate) to engage in Inter-Fund Trades; and

(e) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107, except that for purposes of paragraph (e) of subsection 6.1(2) in respect of exchange-traded securities, the trade is executed at the Last Sale Price or the Closing Sale Price of the security.