National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Section 6.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) -- Relief from the requirement to send the fund facts document in s. 3.2(2) of NI 81-101 -- A registered dealer, or a fund manager on behalf of a registered dealer, wants relief from the requirement to deliver a fund facts document -- The dealer offers pre-authorized investment plans (PAPs); investors that have already invested in the PAP will (i) receive a notice that they will not receive a fund facts document with subsequent purchases unless they request delivery, that they do not have a withdrawal right but continue to have a misrepresentation right, and that they have the right to terminate their plan at any time and (ii) receive an annual notice indicating how to request the fund facts document and that they have a misrepresentation right; new investors will receive the current fund facts document together with notices similar to those sent to prior investors; the relief will terminate on the coming into force of new provisions related to PAPs.
June 13, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF HSBC GLOBAL ASSET MANAGEMENT (CANADA) LIMITED (the Filer) AND IN THE MATTER OF ASSANTE CAPITAL MANAGEMENT LTD. (the Representative Dealer)
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer on behalf of the mutual funds that are or will be managed from time to time by the Filer or by an affiliate or successor of the Filer (the Funds) for a decision under the securities legislation of the Jurisdictions (the Legislation) that the requirement in the Legislation for a dealer to send the latest prospectus filed or required to be filed and any amendment to that prospectus, filed or required to be filed, at the time and manner prescribed by the Legislation (the Prospectus Delivery Requirement) and the requirement in the Legislation to deliver or send the 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 to any Dealer (as defined below) for purchases of securities of the Funds under a pre-authorized investment plan (each an Investment Plan), including any contracts or arrangements for the purchase of a specified amount of securities of the Funds on a regularly scheduled basis, but not including a Contractual Plan (as defined below) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application;
(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, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (the Other Jurisdictions); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, National Instrument 81-101 Mutual Fund Prospectus Disclosure and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
In this decision, Contractual Plan means a contract or other arrangement for the purchase of securities of a mutual fund by payments over a specified period or by a specified number of payments where the amount deducted from any one of the payments as sales charges is larger than the amount that would have been deducted from that payment for sales charges if deductions had been made from each payment at a constant rate for the duration of the plan.
This decision is based on the following facts represented by the Filer:
1. the Filer's head office is located in British Columbia;
2. the Funds are, or will be, reporting issuers in one or more of the Jurisdictions and the Other Jurisdictions;
3. securities of the Funds are, or will be, qualified for sale on a continuous basis under a simplified prospectus;
4. the Filer and its Funds are not in default of securities legislation in any jurisdiction of Canada;
5. 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 collectively, the Dealers);
6. each Dealer is, or will be, registered as a dealer in one or more of the Jurisdictions and Other Jurisdictions;
7. securities of the existing Funds may be purchased through the Representative Dealer and/or other Dealers;
8. a Dealer or the Filer may offer an investor the opportunity to invest in a Fund on a regular or periodic basis under an Investment Plan;
9. 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; and an investor may terminate the instructions, or give amended instructions, at any time;
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 (a Withdrawal Right);
11. under an Investment Plan, a Participant may terminate the instructions to the Dealer at any time; there is no agreement of purchase and sale until a scheduled investment date arrives and the instructions have not been terminated; and at this point, the securities are purchased;
12. under NI 81-101, a simplified prospectus is a prospectus for the purposes of the Legislation and so the requirement under the Legislation to deliver or send a prospectus of a mutual fund to a person or company is satisfied by delivering or sending a simplified prospectus for the mutual fund;
13. under a passport decision document dated August 26, 2011 and granted by the Ontario Securities Commission (OSC) as principal regulator on behalf of each of the other jurisdictions of Canada, the Filer obtained exemptive relief to permit Dealers who sell securities of the Funds to deliver or send the most recently filed Fund Facts to satisfy the Prospectus Delivery Requirement;
14. an investor who establishes an Investment Plan (a Participant) will therefore receive 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;
15. under 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, subject to the regulations, send to the purchaser before entering into the written confirmation of the agreement of purchase and sale resulting from the order or subscription, or not later than midnight on the second business day after entering into the agreement, the latest prospectus filed or required to be filed, with respect to the security, and any amendment to that prospectus, filed or required to be filed;
16. currently, the Prospectus Delivery Requirement requires a Dealer, not acting as agent for the applicable investor, to send to all Participants who purchase securities of the Funds under an Investment Plan, the latest simplified prospectus of the applicable Funds at the time the investor enters into the Investment Plan and thereafter, any subsequent simplified prospectus or amendment to such simplified prospectus (a Renewal Prospectus);
17. 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 to all investors, including the Participants, under the Fund Facts Delivery Requirement, effective June 13, 2014;
18. under 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 or deliver to the purchaser the Fund Facts most recently filed at the same time and in the same manner as otherwise required for the prospectus;
19. under NI 81-101, the Prospectus Delivery Requirement does not apply if a Dealer complies with the Fund Facts Delivery Requirement;
20. under the Exemption Sought, Dealers are not able to make use of the exemption described in Representation 19 for subsequent purchases under the Investment Plan because the Fund Facts are delivered or sent only for the initial purchase under the Investment Plan;
21. under BC Instrument 81-507 Exemption from prospectus delivery requirement for pre-authorized purchase plans (BC Blanket Order), the Prospectus Delivery Requirement does not apply for Investment Plans with securityholders in British Columbia, however, the BC Blanket Order is revoked effective June 13, 2014;
22. under a passport decision document dated November 24, 2009 and granted by the OSC as principal regulator on behalf of the Other Jurisdictions, the Filer obtained exemptive relief (PAC Relief) 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;
23. the PAC Relief for the Filer terminates one year after the publication in final form of any legislation or rule dealing with the Prospectus Delivery Requirement (the Sunset Clause);
24. the publication of Stage 2 POS on June 13, 2013 results in the Sunset Clause causing the PAC Relief to terminate on June 13, 2014;
25. 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); and
26. 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.
Each of the Decision Makers 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 Makers under the Legislation is that the Exemption Sought is granted provided that:
1. a Dealer or the Filer sends or delivers a one-time notice to current Participants, no later than the next scheduled annual reminder notice required by the Filer's current PAC Relief or the BC Blanket Order, 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 that:
(a) Participants 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, a Dealer or the Filer will now send or deliver the Fund Facts in lieu of the simplified prospectus;
(b) Participants 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) a Dealer or the Filer will send or deliver the most recently filed Fund Facts to any Participant that requests it at no cost to the Participant;
(d) the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(e) Participants will not have a Withdrawal Right in respect of a purchase of securities of any Funds made under 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) Participants will continue to have the right to terminate the Investment Plan at any time before a scheduled investment date;
2. a Dealer or the Filer will send or deliver to investors who become Participants and invest in any Funds on or after June 13, 2014 the most recently filed Fund Facts and a one-time notice advising the Participants that:
(a) Participants 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) a Dealer or the Filer will send or deliver the most recently filed Fund Facts to any Participant that requests it at no cost to the Participant;
(c) the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website;
(d) Participants will not have a Withdrawal Right in respect of a purchase made under 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) Participants have the right to terminate an Investment Plan at any time before a scheduled investment date; and
3. following either (1) or (2) above, a Dealer or the Filer will advise Participants annually in writing as to how the Participant can request the Fund Facts and that the Participant has a Misrepresentation Right.
The decision will terminate on the effective date following any applicable transition period for any legislation or rule dealing with the Proposed Exception.