1832 Asset Management L.P. and Aurion Capital Management Inc.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from the mutual fund conflict of interest restrictions in the Securities Act (Ontario) to allow mutual funds to invest in securities of an issuer related to the mutual funds' management company -- relief subject to certain conditions.

Applicable Legislative Provisions

Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 111(2),113.

National Instrument 81-107 Independent Review Committee for Investment Funds, s. 5.2(2).

May 29, 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 1832 ASSET MANAGEMENT L.P. ("1832") AND AURION CAPITAL MANAGEMENT INC. ("AURION")

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the "Application") from 1832 and Aurion (together, the "Filers" or the "Managers"), on behalf of the mutual funds listed in Schedule A (each, a "Fund", and collectively, the "Funds"), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation"):

(a) exempting the Funds from the requirements of securities legislation that prohibit a mutual fund from knowingly making an investment in any issuer in which (i) any officer or director of the mutual fund, its management company or distribution company or an associate of any of them has a significant interest, or (ii) any person or company who is a substantial securityholder of the mutual fund, its management company or its distribution company has a significant interest,

so as to enable the Funds to invest in common shares ("Shares") of CI Financial Corp. ("CI") during a secondary offering qualified by way of a short form prospectus (the "Offering") notwithstanding that The Bank of Nova Scotia ("BNS"), a substantial securityholder of each of 1832 and Aurion, has a significant interest in CI (the "Requested Relief").

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 Filers have provided notice that subsections 4.7(1) and 4.7(2) of Multilateral Instrument 11-102 -- Passport System are intended to be relied upon in each of the provinces and territories of Canada (together with the Jurisdiction, the "Jurisdictions").

Interpretation

Unless otherwise defined herein, terms defined in National Instrument 14-101 -- Definitions and National Instrument 81-107 -- Independent Review Committee for Investment Funds ("NI 81-107") have the same meaning in this application.

Representations

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

(a) 1832 is an Ontario limited partnership, which is wholly-owned, indirectly, by BNS. The general partner of 1832 is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned directly by BNS with its head office in Ontario.

(b) 1832 is registered as (i) a portfolio manager in all of the provinces of Canada, and in the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Quebec, and Newfoundland and Labrador; and (iv) a commodity trading manager in Ontario.

(c) Aurion is a corporation established under the laws of Canada. BNS owns 60% of Aurion and intends to acquire the remainder, subject to regulatory approval.

(d) Aurion is registered as (i) a portfolio manager in Alberta, Newfoundland and Labrador, Northwest Territories and Ontario; and (ii) an investment fund manager in Newfoundland and Labrador and Ontario.

(e) 1832 and Aurion (together, the Managers) are affiliates.

(f) 1832 is the manager and/or adviser of the Funds listed in Part 1 of Schedule A.

(g) Aurion is the manager and/or adviser of the Funds listed in Part 2 of Schedule A.

(h) Neither of the Managers, nor any Fund, is in default of securities legislation in any of the Jurisdictions.

(i) BNS is the ultimate parent company of the Managers and of Scotia Capital Inc. ("Scotia Capital"), and therefore each of the Managers, Scotia Capital and BNS are affiliates of one another.

(j) Each of the Funds is an open-ended mutual fund trust, corporation established under the laws of the Province of Ontario. The securities of each of the Funds listed in the left hand columns in Parts 1 and 2 of Schedule A are qualified for distribution in the Jurisdictions pursuant to simplified prospectuses and annual information forms prepared and filed in accordance with the securities legislation of the Jurisdictions. The securities of each of the Funds listed in the right hand columns of Parts 1 and 2 of Schedule A (the "Pooled Funds") are offered for sale only on an exempt basis pursuant to available prospectus and registration exemptions from the prospectus requirements in one or more of the Jurisdictions. None of the Pooled Funds is a reporting issuer.

(k) The investment objective of each Fund permits an investment in the Shares. The portfolio manager(s) responsible for a Fund purchasing the Shares has made an independent investment decision to make the purchase in accordance with his or their fiduciary duties uninfluenced by considerations other than the best interests of the Fund.

(l) The applicable Manager has appointed an independent review committee ("IRC") under NI 81-107 for each of the Funds managed by them. The Managers have sought and obtained, for the Funds managed by them, IRC approval of purchase of Shares under the Offering in accordance with section 5.2(2) of NI 81-107.

(m) The Offering is a bought deal offering of approximately $2.6 billion, pursuant to which 72 million Shares currently owned by BNS will be purchased by an underwriting syndicate (the "Underwriters") or by clients of the Underwriters. The Underwriters will have an over-allotment option which will allow them to purchase up to approximately 10.8 million additional Shares currently owned by BNS.

(n) Following the completion of the Offering, BNS will retain approximately 32.6 million Shares (or 21.8 million Shares if the over-allotment option is fully exercised), representing approximately 11.4% of the issued and outstanding Shares (or 7.7% if the over-allotment option is fully exercised). The current closing date for the Offering is on or about June 17, 2014.

(o) Scotia Capital, with a 27.5% underwriting interest in the Offering, is one of the nine Underwriters that will participate in the Offering. RBC Capital Markets has a 20% interest, and GMP Securities L.P. has a 12% interest. All three Underwriters are bookrunners. Of the remaining six Underwriters, each of four of them has a 10.5% interest. All of the Underwriters other than Scotia Capital are 'independent' ("Independent") of BNS within the meaning of national Instrument 33-105 -- Underwriting Conflicts.

(p) Scotia Capital is an affiliate of each of BNS and the Managers, and therefore the prohibition in Section 4.1 of National Instrument -- Mutual Funds ("NI 81-102") would apply to prevent the Funds from participating in the Offering if the exemption in Section 4.1(4) were not available to the Funds.

(q) The offering price of the Shares being sold pursuant to the Offering is $31.60 ("Offering Price"), which represents a 6.1% discount from the closing price of the Shares as of the close of trading on May 28, 2014.

(r) The Offering Price was not more than the ask price for the Shares on the Toronto Stock Exchange as of the close of business on May 28, 2014.

(s) As of May 28, 2014, there are 285,099,439 Shares outstanding, and 1832 and Aurion collectively exercise control and direction over approximately 941,800 of those Shares.

(t) In the event that the Funds purchase the maximum permitted Shares under this Decision, which is 20% of the Offering, the aggregate value of the Shares based on the Offering Price of the Shares purchased by the Funds together with the value of the Shares managed by the Managers would represent approximately 0.60% of the combined assets under management as of April 30, 2014 by 1832 and Aurion.

(u) No Fund shall participate in the Offering if following its purchase the Fund, together with related Funds, will hold more than 20% of the issued and outstanding Shares;

(v) If the Funds are not permitted to invest in the Offering then in order to purchase Shares they would have to do so over the Toronto Stock Exchange and, as a result, would miss the opportunity to invest in the Shares at the favourable pricing that is available pursuant to the Offering; and, even if they could purchase Shares over the Toronto Stock Exchange, they might not be able to purchase the same number of Shares as they potentially could in the Offering.

Decision

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 Requested Relief is granted provided that:

(a) The purchase of Shares is consistent with the investment objectives of each of the Funds;

(b) The IRC for each Fund managed by the Filers has approved the proposed purchase of Shares in the Offering by that Fund in accordance with section 5.2(2) of NI 81-107;

(c) The Offering is a bought deal offering, being done by way of prospectus with a syndicate of nine Underwriters, eight of which are Independent, and one of which Independent Underwriters is allocated 20% of the Offering;

(d) No Fund shall participate in the Offering if following its purchase the Fund, together with related Funds, will hold more than 20% of the issued and outstanding Shares;

(e) The maximum Shares purchased by the Funds under this Decision will not exceed 20% of the Offering;

(f) No Fund shall participate in the Offering if following its purchase the Fund would have more than 5% of its net assets invested in Shares; and

(g) The Offering Price to be paid by each of the Funds in the Offering shall be no higher than the lowest price paid by any of the arm's length purchasers who participate in the Offering.

"Mary G. Condon"

Vice-Chair

Ontario Securities Commission

 

"James E. A. Turner"

Vice-Chair

Ontario Securities Commission

 

SCHEDULE A

List of Funds

Part 1

FUNDS MANAGED BY 1832

DYNAMIC POWER BALANCED CLASS	DYNAMIC FOCUS+ ALTERNATIVE FUND
DYNAMIC POWER BALANCED FUND	DYNAMIC CONTRARIAN FUND
DYNAMIC POWER CANADIAN GROWTH FUND	1832 CANADIAN VALUE STRATEGY
DYNAMIC POWER MANAGED GROWTH CLASS	1832 EQUITY INCOME STRATEGY
DYNAMIC POWER CANADIAN GROWTH CLASS FUND	DYNAMIC INCOME OPPORTUNITIES
MARQUIS INSTITUTIONAL CANADIAN EQUITY PORTFOLIO	I3 CANADIAN EQUITY FUND
SCOTIA CANADIAN GROWTH FUND
SCOTIA CANADIAN BALANCED FUND
SCOTIA CANADIAN BLUE CHIP FUND
DYNAMIC VALUE FUND OF CANADA
SCOTIA DIVIDEND BALANCED FUND
DYNAMIC VALUE BALANCED FUND
DYNAMIC DIVIDEND ADVANTAGE FUND
DYNAMIC VALUE BALANCED CLASS
DYNAMIC DIVIDEND ADVANTAGE CLASS
DYNAMIC CANADIAN VALUE CLASS
DYNAMIC DIVIDEND INCOME CLASS
DYNAMIC DIVIDEND INCOME FUND
SCOTIA DIVERSIFIED MONTHLY INCOME FUND
SCOTIA CANADIAN DIVIDEND FUND
DYNAMIC DIVIDEND FUND
DYNAMIC STRATEGIC YIELD CLASS
SCOTIA INCOME ADVANTAGE FUND
DYNAMIC STRATEGIC YIELD FUND
DYNAMIC SMALL BUSINESS FUND
DYNAMIC EQUITY INCOME FUND
DYNAMIC ALTERNATIVE YIELD FUND
DYNAMIC PREMIUM YIELD FUND
DYNAMIC INCOME GROWTH OPPORTUNITIES CLASS
DYNAMIC FINANCIAL SERVICES FUND

Part 2

FUNDS MANAGED BY AURION

DYNAMIC AURION CANADIAN EQUITY CLASS

AURION II EQUITY FUND

DYNAMIC AURION TACTICAL BALANCED CLASS