NP 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of control of mutual fund manager under s. 5.5(2) of NI 81-102 -- change of control of manager to occur in two steps -- Filers have no current plans to change the manager of the Funds, or to amalgamate or merge the current manager with any other entity, for the foreseeable future.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(2), 5.7(1)(a).
May 30, 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 TOREIGH STUART (the Purchaser) AND ROBERT ANTON AND DAVID SCOBIE (collectively, the Subsequent Purchasers who, together with the Purchaser are referred to herein as the Management Group) AND IN THE MATTER OF MAN INVESTMENTS CANADA CORP. (Man Canada) (the Management Group and Man Canada, collectively, the Filers) AND IN THE MATTER OF THE FUNDS (as defined below)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval of a change of control of the manager of the funds listed in Exhibit "A" (the Funds) in accordance with sections 5.5(2) of National Instrument 81-102 -- Mutual Funds (NI 81-102) and National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple (the Approval 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 (the Principal Regulator); and
(b) the Filers have provided notice that section 4.7 of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon (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 Filers:
1. Man Canada is a privately-owned corporation existing under the Business Corporations Act (Ontario) (the OBCA) with its head office located in Toronto, Ontario. Man Canada is a wholly owned subsidiary of the Man Group Holdings Ltd., a corporation existing under the laws of the United Kingdom (the Parent), with its head office located in, London, United Kingdom.
2. The Parent is a wholly-owned subsidiary of Man Group plc (Man Group), a publicly held corporation existing under the laws of the United Kingdom. The Parent is also a global alternative investment management business providing a range of fund products and investment management services for institutional and private investors globally.
3. Man Canada is the investment fund manager and trustee of the Funds. Man Canada is registered in the following categories under the applicable securities legislation of certain of the Jurisdictions indicated below:
a) the Alberta Securities Commission -- Exempt Market Dealer (EMD) and Portfolio Manager (PM);
b) the British Columbia Securities Commission -- EMD;
c) The Manitoba Securities Commission -- EMD;
d) the Financial and Consumer Services Commission (New Brunswick) -- EMD;
e) the Office of the Superintendent of Securities Service Newfoundland and Labrador -- Investment Fund Manager (IFM);
f) the Nova Scotia Securities Commission -- EMD;
g) the Ontario Securities Commission -- EMD, IFM and PM;
h) the Autorité des marchés financiers (Québec) -- IFM and EMD; and
i) the Financial and Consumer Affairs Authority of Saskatchewan -- EMD.
4. Toreigh Stuart, David Scobie, Martin Schweikhart and Eric Burl are the current directors of Man Canada.
5. Robert Anton is an executive vice-president of Man Canada and is responsible for the distribution of Man Canada's products through various channels and joint venture relationships in Canada.
6. Toreigh Stuart is the Chief Executive Officer, Ultimate Designated Person, Chief Compliance Officer and Advisory Officer of Man Canada in respect of the Jurisdictions described in Paragraph 3 above.
7. Man Canada is not in default of any requirements under applicable securities legislation.
8. Each of the Man Canada AHL DP Investment Fund, the GLG EM Income Fund, and the Man Canada AHL Alpha Fund is a commodity pool structured as an open-end investment trust established under the laws of the province of Ontario.
9. Securities of the Funds are distributed in each of the Jurisdictions under a long form prospectus prepared in accordance with the requirements of National Instrument 41-101 -- General Prospectus Requirements.
10. Each Fund is a reporting issuer under the applicable securities legislation of the Jurisdictions.
11. The Funds are not in default of applicable securities legislation in any of the Jurisdictions.
The Management Group
12. For many years, the day to day operations of Man Canada have been managed by the Management Group, independently of the Parent.
13. Man Canada, under the direction of the Management Group, acts as trustee and manager for each of the Funds, and its duties include: negotiating contracts with certain third-party service providers, including, but not limited to, investment managers custodians, registrars, transfer agents, auditors and printers; maintaining accounting records for the Funds, preparing the reports to unitholders of the Funds and to the applicable securities regulatory authorities; calculating income tax returns and financial and accounting information as required by the Funds; seeking to ensure that unitholders of the Funds are provided with financial statements and other reports as are required from time to time by applicable law; seeking to ensure that the Funds comply with all other regulatory requirements including the continuous disclosure obligations of the Funds under applicable Canadian securities laws; administering purchases, redemptions and other transactions in units of the Funds; arranging for any payments required upon termination of the Funds; and dealing with communications to unitholders of the Funds. These duties have been performed by Man Canada, under the direction of the Management Group. Upon completion of the Proposed Transaction, Man Canada (under a new name) will continue to perform the duties listed above in a manner consistent with past practice.
The Proposed Transaction
14. On March 3, 2014, the Purchaser and the Parent entered into a definitive share purchase agreement (the Purchase Agreement) in connection with a proposed transaction (the Proposed Transaction) pursuant to which the Purchaser will acquire all of the issued and outstanding shares of Man Canada from the Parent. The Purchase Agreement cites the mutual intention of the Purchaser and the Parent to complete the Proposed Transaction on the third business day following the later of: (i) receipt of the approval, or confirmation of non-objection, of the applicable securities regulators in respect of the Approval Sought; (ii) the expiry of the 60-day period following the delivery a written notice of Man Canada to the securityholders of the Funds in connection with the proposed change of control of the manager of such Funds (the Securityholder Notice) and (iii) following the satisfaction or waiver of certain conditions precedent. Following the completion of the Proposed Transaction, the Purchaser and the Subsequent Purchasers will complete a transaction which will result in the ownership of Man Canada being held by the three members of the Management Group.
Change of Control of Manager
15. The Filers propose to complete the change of control of Man Canada in two stages as the Purchase Agreement was entered into between only the Purchaser and the Parent.
16. First, the Proposed Transaction will involve the Purchaser's acquisition of 100% of the issued and outstanding shares of Man Canada. Secondly, the Purchaser is currently structuring a subsequent transaction for the Subsequent Purchasers to acquire shares of Man Canada, which is expected to occur within 90 days of the completion of the Proposed Transaction (the Subsequent Transaction).
17. The Subsequent Transaction will result in the ownership of Man Canada being held by the three members of the Management Group in the following proportions: Toreigh Stuart -- 37.5%, David Scobie -- 31.25%, and Robert Anton -- 31.25%. Each member of the Management Group will hold their interest in Man Canada either directly or through a family trust.
18. Completion of both the Proposed Transaction and the Subsequent Transaction (the Closing Date) will result in the change of control of Man Canada contemplated by the Approval Sought (the Change of Control of Manager).
19. The Purchase Agreement did not include all members of the Management Group, as the final ownership structure of Man Canada by the members of the Management Group had not been determined during the period of negotiation between the Parent and the Management Group over the terms of the Purchase Agreement. Toreigh Stuart executed the Purchase Agreement with the Parent in order to ensure the timely completion of the Proposed Transaction without the delay that would have been required to determine the final ownership structure of Man Canada prior to signing of the Purchase Agreement.
20. Upon completion of the Change of Control of Manager, the Parent will not have any interest or role in the operation of Man Canada.
21. In respect of the impact of the Change of Control of Manager on Man Canada and on the management and administration of the Funds:
a) the Management Group has confirmed that there is no current intention:
(i) to make any substantive changes as to how Man Canada operates or manages the Funds;
(ii) to amalgamate or merge Man Canada with any other IFM;
(iii) immediately following the Closing Date, to change the IFM of the Funds to any other entity, including any affiliate of the Parent or Man Group; and
(iv) within a foreseeable period of time, to change the IFM of the Funds from Man Canada to any other entity, including any affiliate of the Parent or Man Group;
b) the Management Group currently intends to maintain the Funds as a separately managed fund family with Man Canada as its IFM;
c) the Change of Control of Manager is not expected to have any material impact on the business, operations or affairs of the Funds or the securityholders of the Funds;
d) following the Change of Control of Manager, the directors and officers of Man Canada will be unchanged with the exception of the following:
(i) Martin Schweikhart and Eric Burl, who are directors of Man Canada and officers of affiliates of the Parent and Man Group, will tender their resignations as directors of Man Canada;
(ii) Robert Anton will be appointed a director of Man Canada;
e) Man Canada will retain the management teams and supervisory personnel that were in place prior to the Change of Control of Manager;
f) it is not expected that there will be any change in the management of the Funds including the investment objectives and strategies of the Funds, or the expenses that are charged to the Funds as a result of the Change of Control of Manager;
g) the Change of Control of Manager will not adversely affect Man Canada's financial position or its ability to fulfill its regulatory obligations; and
h) upon the Change of Control of Manager, the members of Man Canada's Independent Review Committee (IRC) will cease to be IRC members by the operation of section 3.10(1)(c) of National Instrument 81-107 -- Independent Review Committee for Investment Funds. Immediately following the Change of Control of Manager, the IRC will be reconstituted.
22. Upon completion of the Change of Control of Manager, Man Canada will change its name to a name that does not include the "Man" brand, perform required re-branding activities consistent with its new name (which will include removal of the Man Canada reference from the names of the Funds) and will update the registrations of Man Canada and any registered individuals of Man Canada to reflect the new name of Man Canada.
23. On March 6, 2014, the Securityholder Notice was sent to securityholders of the applicable investment funds managed by Man Canada pursuant to Section 5.8(1) of NI 81-102.
24. On March 10, 2014, notice was filed by Man Canada pursuant to sections 11.9 and 11.10 of National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations in respect of the Proposed Transaction.
25. A press release and material change report describing the Change of Control of Manager were issued and filed by Man Canada on March 3, 2014.
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 Approval Sought is granted.
List of Funds
1. GLG EM Income Fund
2. Man Canada AHL DP Investment Fund
3. Man Canada AHL Alpha Fund