Securities Law & Instruments

Headnote

Relief granted from paragraph 13.5(2)(b) of NI 31-103 to permit trades between investment portfolios of affiliates and limited partnership, all subsidiaries of same parent -- inter-entity trades will comply with conditions of section 6.1(2) of NI 81-107 except for requirements to have an Independent Review Committee and obtain its approval of trades -- contribution transactions will take place at fair value of securities, as defined in IFRS, at the close of business on the business day immediately preceding the date of transfer.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(b), 15.1.

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

February 3, 2014

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the “Jurisdiction”)

AND

IN THE MATTER OF
AVIVA INVESTORS CANADA INC.
(the “Filer”)

DECISION

Background

The Ontario Securities Commission (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for an exemption pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) from section 13.5(2)(b) of NI 31-103, which prohibits a registered adviser from knowingly causing an investment portfolio managed by it to purchase and sell securities from a responsible person or an investment fund for which a responsible person acts as an adviser in order to permit (i) the Filer to allow the Limited Partnership (as defined below) to accept contributions in kind from the Companies (as defined below) in respect of the limited partnership interests to be acquired by the Companies and (ii) the Filer to purchase and sell securities to or from the investment portfolios of the Limited Partnership, the Current Companies and the Future Companies (as such terms are defined below) for which the Filer acts as an adviser (theExemption Sought).

Interpretation

Terms defined in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined. In addition, in this decision:

a. "Current Market Price of the Security" means,

(i) if the security is an exchange-traded security or a foreign exchange-traded security,

A. the closing sale price on the day prior to the transaction as reported on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted, or

B. if there are no reported transactions for the day prior to the transaction, the average of the highest current bid and lowest current ask for the security as displayed on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted, or

C. if the closing sale price on the day prior to the transaction is outside of the closing bid and closing ask, the average of the highest current bid and lowest current ask for the security as displayed on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted; or

(ii) for all other securities, the average of the current values determined on the basis of reasonable inquiry; and

b. "Market Integrity Requirements" means

(i) if the security is an exchange-traded security, the purchase or sale

A. is printed on a marketplace that executes trades of the security; and

B. complies with the market conduct and display requirements of the marketplace, its regulation services provider and securities regulatory authorities; or

(ii) if the security is a foreign exchange-traded security, the purchase or sale complies with the requirements that govern transparency and trading of foreign exchange-traded securities on the foreign exchange or foreign quotation and trade reporting system; or

(iii) for all other securities, the purchase or sale is through a dealer, if the purchase or sale is required to be reported by a registered dealer under applicable securities legislation.

Representations

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

1. The Filer is a corporation incorporated under the laws of Ontario, with its head office located in Toronto, Ontario.

2. The Filer is registered under applicable securities legislation in each of the provinces of Canada, including Ontario, as a dealer in the category of exempt market dealer and as an adviser in the category of portfolio manager.

3. The Filer is not in default of securities legislation in Ontario.

4. The Filer is an indirectly wholly-owned subsidiary of Aviva plc (Aviva) and is an affiliate of Aviva Canada Inc. (ACI), which is also an indirect wholly-owned subsidiary of Aviva.

5. ACI, through its operating subsidiaries, provides property and casualty insurance in Canada. The operating subsidiaries are Aviva Insurance Company of Canada, Traders General Insurance Company, Elite Insurance Company, Scottish & York Insurance Co. Limited, S&Y Insurance Company and Pilot Insurance Company (collectively, the Current Companies), each of which is an insurance company organized under the laws of Canada and a wholly-owned subsidiary of ACI.

6. ACI and the Current Companies are proposing to establish a limited partnership (the Limited Partnership) to hold investments that would otherwise be held individually by the Current Companies. The Current Companies would be the initial limited partners of the Limited Partnership and ACI would be the general partner of the Limited Partnership. The Current Companies would be able, from time to time, to subscribe for additional limited partnership interests in the Limited Partnership and to redeem some or all of their limited partnership interests in the Limited Partnership. The limited partnership agreement that will govern the relationship among the partners of the Limited Partnership will provide that no party may become a limited partner of the Limited Partnership unless it is an insurance company that is a wholly-owned subsidiary of ACI. Further insurance companies that are wholly-owned subsidiaries of ACI (the Future Companies) could in future be admitted as limited partners of the Limited Partnership. (The Current Companies and the Future Companies are referred to herein, collectively, as the Companies.)

7. The Limited Partnership is being formed to manage the investments of the Companies. The pooling of the investment portfolios of the Companies is intended to achieve improved risk management, capital management and operating performance.

8. The Filer currently manages the investment portfolios of the Current Companies, is proposed to act as the manager of the investment portfolio of the Limited Partnership and in the future may manage the investment portfolios of Future Companies.

9. The Current Companies are insurance companies that are regulated by the Office of the Superintendent of Financial Institutions (OSFI) and have applied for and received authorization from OSFI to proceed with the structure of the Limited Partnership.

10. Each Current Company proposes to contribute some or all of its investment portfolio to the Limited Partnership.

11. The Limited Partnership will be an "investment fund" as such terms are defined in the Securities Act (Ontario) (the Act).

12. It is not intended that the Limited Partnership would become a reporting issuer, as such term is defined in the Act, or that its securities would be listed on any stock exchange. None of the Current Companies is a reporting issuer and it is not anticipated that any Future Company would be a reporting issuer.

13. The assets proposed to be contributed by the Companies to the Limited Partnership are investments that will be permitted as investments for the Limited Partnership in accordance with its investment guidelines.

14. The transfer of securities by the Companies to the Limited Partnership on their contribution to it (the Contribution Transactions) will take place at fair value, as defined in International Financial Reporting Standards (IFRS), at the close of business on the business day immediately preceding the date of transfer.

15. Following the formation of the Limited Partnership and the contribution of assets to it by the Current Companies, it is proposed that the Filer be permitted to purchase and sell securities to or from the investment portfolios of any of the Limited Partnership, the Current Companies and the Future Companies for which the Filer is acting as portfolio manager (the Inter-Entity Trades).

16. The objective of the Inter-Entity Trades is to minimize transaction costs, optimize the investment strategies of the Limited Partnership and the Companies and to ensure effective risk management by minimizing market risk due to price fluctuations and market volatility.

17. The Filer has established written policies and procedures relating to trades between clients' investment portfolios that would apply to Inter-Entity Trades involving the Limited Partnership and the Companies.

18. Each of the Limited Partnership and the Companies, as applicable, have or will have entered into an investment management agreement or other documentation with the Filer that permits the Contribution Transactions and Inter-Entity Trades.

19. The Contribution Transactions and Inter-Entity Trades would be made in accordance with the investment guidelines applicable to the Limited Partnership or the Companies, as applicable.

20. The Contribution Transactions and Inter-Entity Trades will be made directly or indirectly for the exclusive and mutual benefit of the Limited Partnership and the Companies, as applicable.

21. In the absence of the relief requested in this application, to the extent that a Company is a responsible person of the Filer (i) the Inter-Entity Trades would be considered a purchase or sale of securities, knowingly caused by the Filer to or from the investment portfolio of a responsible person or an investment fund for which a responsible person acts as an adviser, contrary to Section 13.5(2)(b) of NI 31-103 and, (ii) to the extent that the Filer's appointment as portfolio manager of the Limited Partnership is effective before a Contribution Transaction and the Company party to the Contribution Transaction is a responsible person of the Filer, the Contribution Transaction may be considered, by reason of the Limited Partnership accepting a contribution in kind, a purchase or sale of securities, knowingly caused by the Filer to or from the investment portfolio of a responsible person to an investment fund for which a responsible person acts as an adviser, contrary to section 13.5(2)(b) of NI 31-103.

Decision

The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided that:

1. Each of the Limited Partnership and the Companies are not reporting issuers in Canada;

2. The investment management agreement or other documentation in respect of the investment portfolios of each of the Limited Partnership and the Companies permits the Contribution Transactions and Inter-Entity Trades;

3. The Contribution Transactions and Inter-Entity Trades are consistent with the investment guidelines for the investment portfolios of the Limited Partnership and the Companies, as applicable;

4. In the case of the Contribution Transactions, the transfer of securities by the Companies to the Limited Partnership will take place at fair value, as defined in IFRS, at the close of business on the business day immediately preceding the date of transfer.

5. In the case of the Inter-Entity Trades:

(a) At the time of the Inter-Entity Trade,

(i) the bid and ask price of the security is readily available;

(ii) the Companies or the Limited Partnership party to the Inter-Entity Trade, as applicable receives no consideration other than the purchase price of the security, in the case of the seller, and the only cost for the trade is the nominal cost incurred by the party to print or otherwise display the trade;

(iii) the Inter-Entity Trade is executed at the Current Market Price of the Security;

(iv) the Inter-Entity Trade is subject to Market Integrity Requirements; and

(v) each of the Companies or the Limited Partnership party to the Inter-Entity Trade, as applicable, keeps written records of its Inter-Entity Trades including,

A. a record of each purchase and sale of securities,

B. the parties to the trade, and

C. the terms of the purchase or sale

for five years after the end of the fiscal year in which the trade occurred, the most recent two years in a reasonably accessible place;

(b) Each Inter-Entity Trade represents the business judgment of the Filer uninfluenced by considerations other than the best interests of the investment portfolios of each of the Companies and the Limited Partnership party to the Inter-Fund Trade, as applicable;

(c) Each Inter-Entity Trade is in compliance with the Filer's written policies and procedures relating to trades between clients' investment portfolios that would apply to Inter-Entity Trades involving the Limited Partnership and the Companies; and

(d) Each Inter-Entity Trade achieves a fair and reasonable result for the investment portfolios of each of the Companies and the Limited Partnership.

February 3, 2014

"Marrianne Bridge"
Deputy Director, Compliance and Registrant Regulation
Ontario Securities Commission