NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for an exemption from the restrictions on providing non-monetary benefits to participating dealers and their representatives in paragraph 2.1(1)(b) and subsection 2.2(1) of National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) to extent necessary to permit a member of the organization of mutual funds to directly invite the sales representatives of participating dealers to its education conferences -- Exemption also required from paragraph 5.2(b) of NI 81-105 requiring that the selection of the representatives of a dealer to attend a conference be made exclusively by the dealer, uninfluenced by any member of the organization of a mutual fund -- Exemption granted subject to conditions including that the member of the organization of mutual funds must obtain the written consent of a representative's participating dealer each time prior to directly inviting representative to a conference.
National Instrument 81-105 Mutual Fund Sales Practices, ss. 2.1(1)(b), 2.2(1), 5.2(b), 9.1.
April 1, 2014
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 DIMENSIONAL FUND ADVISORS CANADA ULC (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for exemptions from:
(a) the restrictions on providing non-monetary benefits to participating dealers and their representatives in sections 2.1(1)(b) and 2.2(1) of NI 81-105 Mutual Fund Sales Practices (NI 81-105) to the extent necessary to permit the Filer to directly invite the sales representatives of participating dealers that may distribute mutual funds managed by the Filer and that are members of the Investment Industry Regulatory Organization of Canada, the Mutual Fund Dealers Association of Canada, or are dealers that are duly registered in Quebec (collectively, the Participating Dealers) to the Filer's education conferences; and
(b) the requirement contained in section 5.2(b) of NI 81-105 that the selection of the representatives of a dealer to attend a conference or seminar be made exclusively by the dealer, uninfluenced by any member of the organization of the mutual fund to the extent necessary to permit the Filer to directly invite a Participating Dealer's sales representatives to the Filer's education conferences
(collectively, the Exemption Sought).
Under the Process for Exemptive 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 Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (together, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a portfolio manager in British Columbia, Manitoba, Nova Scotia and Ontario, a registered investment fund manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador and is registered as an exempt market dealer in all provinces of Canada. The Filer has its head office in British Columbia.
2. The Filer is an indirect Canadian subsidiary of Dimensional Fund Advisors LP, formerly Dimensional Fund Advisors Inc. (DFA U.S.).
3. The Filer is or will be the manager, portfolio manager, and promoter of the Dimensional Funds (existing and future) (the Funds). The securities of the Funds are offered or may be offered by simplified prospectus in all the Jurisdictions. The Filer has retained (or will retain) DFA U.S. or other affiliates to act as sub-adviser(s) for the Funds.
4. Each of the Filer, DFA U.S., and other affiliates of the Filer (collectively, the Dimensional Group), is and will be a member of the organization of each of the Funds as defined in section 1.1 of NI 81-105.
5. The Funds are only available to retail investors through sales representatives authorized by the Filer (Approved Representatives).
6. Approved Representatives and the Filer conduct due diligence on each other that includes the following steps:
(a) The Filer will give the representative applying for approval materials about the Dimensional Group and the research behind its investment philosophy.
(b) The Filer's Regional Directors and the representative will meet (in person or by phone) to review and discuss the materials provided by the Filer.
(c) If the Filer and the representative want to take the next step in the due diligence process, the Filer will invite the representative to attend one or more introductory conferences, where in each case basic investing concepts used by the Funds are covered (each an Introductory Conference) to learn about the Dimensional Group's approach to investing. The Filer will only invite representatives to an Introductory Conference who have completed the preliminary stages of the due diligence process.
(d) The Filer will obtain the Participating Dealer's written consent prior to directly inviting the representative to attend the Introductory Conference.
(e) The Filer will enter into a distribution agreement with the Approved Representative's Participating Dealer.
(f) The Filer will authorize the representative as an Approved Representative.
(g) The Filer will request that an Approved Representative provide its clients with written disclosure explaining the Approved Representative's relationship with the Filer.
7. The Filer and other members of the Dimensional Group will also organize and present regular seminars and educational conferences (Educational Seminars) for Approved Representatives. Only Approved Representatives will be invited to attend Educational Seminars. The Filer will obtain the Participating Dealer's written consent prior to directly inviting an Approved Representative to an Educational Seminar.
8. The Filer's Introductory Conferences and Educational Seminars will be held exclusively for educational purposes. Except as exempted under this Decision, the Filer's Introductory Conferences and Educational Seminars will comply in all respects with NI 81-105 including the requirements that:
(a) restrict the location of an Introductory Conference or Educational Seminar to Canada, the continental United States of America, or a location where a portfolio adviser of the Funds carries on business, if the primary purposes of the Introductory Conference or Educational Seminar is the provision of educational information about the investments or activities of the Funds carried on by that portfolio adviser; and
(b) prohibit a member of the organization of the Funds from paying any travel, accommodation or personal incidental expenses associated with the attendance of a representative at an Introductory Conference or an Educational Seminar.
9. The Filer does not provide incentives, agree to provide incentives, or imply that it will provide incentives to Approved Representatives or to potential Approved Representatives going through the mutual due diligence process with the Filer.
10. The Exemption Sought was previously requested by the Filer and granted by an MRRS decision document dated May 24, 2006 for a period of one year, which expired on May 24, 2007. Further relief was requested by the Filer and granted by an MRRS decision document dated May 18, 2007 for a period of two years, which expired on May 18, 2009 and an MRRS decision document May 9, 2009 (the Third Decision), which expires on May 5, 2014. This Decision will replace the Third Decision.
11. The Filer obtained an exemption from NI 81-105 in British Columbia on March 20, 2006.
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:
1. The Filer explains to a representative that they must attend an Introductory Conference in order to become an Approved Representative and may attend Educational Seminars after they become Approved Representatives.
2. The Filer explains to the representative that the Filer must obtain the written consent of the representative's Participating Dealer prior to directly inviting the representative to an Introductory Conference or Educational Seminar.
3. The Filer explains that the representative's Participating Dealer will decide whether the representative can attend an Introductory Conference or Educational Seminar.
4. The Filer obtains the written consent from the person in charge of compliance for the representative at the Participating Dealer prior to directly inviting the representative to each Introductory Conference or Educational Seminar.
5. The Filer requests that an Approved Representative provide its clients with written disclosure explaining the Approved Representative's relationship with the Filer.