National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirement in s.3.2(2), NI 81-101 to deliver a fund facts document to investors for subsequent purchases of mutual fund securities made pursuant to pre-authorized investment plans, subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 3.2(2), 6.1.
June 12, 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 TD ASSET MANAGEMENT INC. (TDAM) AND IN THE MATTER OF TD INVESTMENT SERVICES INC. (REPRESENTATIVE DEALER)
The principal regulator in the Jurisdiction has received an application from TDAM on behalf of the mutual funds (the Funds) that are or will be managed from time to time by TDAM or by an affiliate or successor of TDAM (the Filer) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the requirement in the Legislation to send or deliver the most recently filed fund facts document (Fund Facts) at the same time and in the same manner as otherwise required for the prospectus (the Fund Facts Delivery Requirement), not apply in respect of purchases of securities of the Funds on a regularly scheduled basis pursuant to a pre-authorized investment plan, including employee purchase plans, capital accumulation plans, or any other contracts or arrangements for the purchase of a specified amount on a dollar or percentage basis of securities of the Funds (each an Investment Plan) (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 British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (together with Ontario, 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 wholly-owned subsidiary of The Toronto-Dominion Bank and is registered under the Act in the categories of investment fund manager, portfolio manager, exempt market dealer and, under the Commodity Futures Act (Ontario), in the category of commodity trading manager. Its head office is in Toronto, Ontario.
2. The Funds are, or will be, reporting issuers in one or more of the Jurisdictions. Securities of the Funds are, or will be, qualified for sale on a continuous basis pursuant to a simplified prospectus.
3. Neither the Filer, nor any of its Funds, is in default of any of the requirements of securities legislation in any Jurisdiction.
4. Securities of each Fund are, or will be, distributed through dealers which may or may not be affiliated with the Filer (individually, each dealer that distributes securities of a Fund managed by the Filer is a Dealer, and includes the Representative Dealer, and collectively, the Dealers).
5. Each Dealer is, or will be, registered as a dealer in one or more of the Jurisdictions.
6. Certain series of certain of the existing Funds may be purchased through the Representative Dealer.
7. Each of the investors may be offered the opportunity to invest in a Fund on a regular or periodic basis pursuant to an Investment Plan.
8. Under the terms of an Investment Plan, an investor instructs a Dealer to accept additional contributions on a pre-determined frequency and/or periodic basis and to apply such contributions on each scheduled investment date to additional investments in specified Funds. The investor authorizes a Dealer to debit a specified account or otherwise makes funds available in the amount of the additional contributions. An investor may terminate the instructions, or give amended instructions, at any time.
9. Currently, an investor who establishes an Investment Plan (a Participant) receives a copy of the latest simplified prospectus (or Fund Facts) relating to the relevant securities of the Fund at the time an Investment Plan is established or following the first purchase.
10. An agreement of purchase and sale of mutual fund securities is not binding on the purchaser if a Dealer receives notice of the intention of the purchaser not to be bound by the agreement of purchase and sale within a specified time period.
11. The terms of an Investment Plan are such that a Participant can terminate the instructions to the Dealer at any time. Therefore, there is no agreement of purchase and sale until a scheduled investment date arrives and the instructions have not been terminated. At this point, the securities are purchased.
12. Pursuant to the prospectus delivery requirement in the Legislation (the Prospectus Delivery Requirement), a Dealer not acting as agent of the purchaser, who receives an order or subscription for a security of a Fund offered in a distribution to which the Legislation applies, must, unless it has previously done so, send to the purchaser the latest simplified prospectus and any amendment to the simplified prospectus filed either before entering into an agreement of purchase and sale resulting from the order or subscription or not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after entering into such agreement.
13. Currently, the Prospectus Delivery Requirement obligates a Dealer not acting as agent for the applicable investor to send or deliver to all Participants who purchase securities of the Funds pursuant to an Investment Plan, the latest simplified prospectus of the applicable Funds at the time the investor enters into the Investment Plan or following the first purchase and thereafter, any subsequent simplified prospectus or amendment thereto (a Renewal Prospectus).
14. With the implementation of the amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) and consequential amendments as described in Stage 2 of Point of Sale Disclosure for Mutual Funds -- Delivery of Fund Facts (Stage 2 POS), Dealers must deliver the Fund Facts in lieu of delivering the simplified prospectus to all investors, including the Participants, pursuant to the Fund Facts Delivery Requirement, effective June 13, 2014.
15. Pursuant to the Fund Facts Delivery Requirement, a Dealer not acting as agent of the purchaser, who receives an order or subscription for a security of a Fund offered in a distribution to which the Legislation applies, must, unless it has previously done so, send to the purchaser the Fund Facts most recently filed either before entering into an agreement of purchase and sale resulting from the order or subscription or not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after entering into such agreement.
16. The Filer has obtained exemptive relief (PAC Relief) dated October 22, 2004 from the Prospectus Delivery Requirement to deliver the Renewal Prospectus of the Funds to Participants in an Investment Plan unless the Participant asks to receive them.
17. The PAC Relief terminates one year after the publication in final form of any legislation or rule dealing with the Prospectus Delivery Requirement (the Sunset Clause).
18. As a result of the publication of Stage 2 POS on June 13, 2013, the PAC Relief will terminate on June 13, 2014, pursuant to the Sunset Clause.
19. The proposed amendments to NI 81-101 and consequential amendments as described in Stage 3 of the Point of Sale Disclosure for Mutual Funds -- Point of Sale Delivery of Fund Facts, and published for comment on March 26, 2014, contemplate an exception from the Fund Facts Delivery Requirement for Investment Plans (Proposed Exception).
20. Until the Canadian Securities Administrators publish final amendments to implement the Proposed Exception, the Filer would like the Investment Plans to continue to operate in the same manner and using the same process as the existing regime under the PAC Relief with the exception of the delivery of a Fund Facts to a Participant instead of a simplified prospectus.
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. A one-time notice is sent or delivered to current Participants, no later than the next scheduled annual reminder notice required by the Filer's current PAC Relief, in lieu of receiving a Fund Facts for any purchase of securities of the Funds made on or after June 13, 2014 under the Investment Plan, advising the current Participants:
(a) that they will not receive the Fund Facts when they purchase securities of the applicable Fund under the Investment Plan unless
(i) the Participant requests the Fund Facts; or
(ii) the Participant has previously instructed that they want to receive the simplified prospectus, in which case, the Fund Facts will now be sent or delivered in lieu of the simplified prospectus;
(b) that they may request the most recently filed Fund Facts by calling a specified toll-free number or by sending a request via mail or e-mail to a specified address or email address;
(c) that the most recently filed Fund Facts will be sent or delivered to any Participant that requests it at no cost to the Participant;
(d) that the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(e) that they will not have the right to withdraw from an agreement of purchase and sale (a Withdrawal Right) in respect of a purchase of securities of any Funds made pursuant to an Investment Plan, but they will have the right of action for damages or rescission in the event any Fund Facts or document incorporated by reference into any Renewal Prospectus contains a misrepresentation (a Misrepresentation Right), whether or not they request the Fund Facts; and
(f) that they will continue to have the right to terminate the Investment Plan at any time before a scheduled investment date.
2. Investors who become Participants and invest in any Funds on or after June 13, 2014 will be sent or delivered the most recently filed Fund Facts and a one-time notice advising the Participants:
(a) that they will not receive the Fund Facts when they subsequently purchase securities of the applicable Fund under the Investment Plan unless they request the Fund Facts at the time they initially invest in an Investment Plan or subsequently request the Fund Facts by calling a specified toll-free number or by sending a request via mail or e-mail to a specified address or email address;
(b) that the most recently filed Fund Facts will be sent or delivered to any Participant that requests it at no cost to the Participant;
(c) that the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(d) that they will not have a Withdrawal Right in respect of a purchase made pursuant to an Investment Plan, other than in respect of the initial purchase and sale, but they will have a Misrepresentation Right, whether or not they request the Fund Facts; and
(e) that they have the right to terminate an Investment Plan at any time before a scheduled investment date.
3. Following either 1 or 2 above, Participants will be advised annually in writing as to how they can request the Fund Facts and that they have a Misrepresentation Right.
The decision, as it relates to a Jurisdiction, will terminate on the effective date following any applicable transition period for any legislation or rule dealing with the Proposed Exception.