National Bank Investments Inc.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief from the requirement to send or deliver a fund facts document to purchasers for subsequent purchases of mutual fund securities made pursuant to model portfolios, subject to certain conditions.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 3.2.01(1).

[Translation]

September 8, 2016

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
NATIONAL BANK INVESTMENTS INC.
(the Filer and the Representative Dealer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirement in the Legislation to send or deliver the most recently filed fund facts document in respect of purchases of securities of the Funds (as defined below) (the Pre-Sale Delivery Requirement) that are made in connection with Weighting Changes (as defined below) and Rebalancing Trades (as defined below) pursuant to a model portfolio under the SPS (as defined below) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the Autorité des marchés financiers is the principal regulator for this application;

(b)           the Filer has provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System (c. V-1.1, r.1) (Regulation 11-102) is intended to be relied upon in the jurisdictions of Canada other than the 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.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions (c. V-1.1, r.3), Regulation 11-102, Regulation 81-101 respecting Mutual Funds Prospectus Disclosure (c.V-1.1, r. 38) (Regulation 81-101) and Regulation 81-102 respecting Investment Funds (c. V-1.1, r. 39) (Regulation 81-102) have the same meaning if used in this decision, unless otherwise defined.

Right of Withdrawal means the right, given to a subscriber or a purchaser under the Legislation, to withdraw from a subscription for or a purchase of securities offered in a distribution if the dealer from which the subscriber or the purchaser subscribed or purchased the securities receives written notice evidencing the intention of the subscriber or the purchaser not to be bound by the subscription or the purchase within two business days of receipt of the prospectus, any other document, prescribed by regulation, standing in lieu of a prospectus or any amendment to the prospectus or to such document. In Québec, this right is set forth in section 30 of the Securities Act, R.S.Q. c. V-1.1. Collectively, these rights are referred to as the Rights of Withdrawal.

Funds means all mutual funds for which the Filer or an affiliate of the Filer acts, or will act in the future, as investment fund manager.

Purchaser means each securityholder of the Funds who has entered into the SPS agreement with the Filer.

Representations

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

General

1.             The Filer is a corporation amalgamated under the laws of Canada.

2.             The Filer or an affiliate of the Filer is or will be the investment fund manager of each Fund. The Filer is duly registered as an investment fund manager in each of the provinces of Quebec, Ontario, and Newfoundland and Labrador.

3.             The Filer is also registered as a dealer in the category of mutual fund dealer in the jurisdictions of Canada and acts as the Representative Dealer. The Representative Dealer is a member of the Mutual Fund Dealers Association of Canada.

4.             The head office of the Filer is located in Montréal, Québec.

5.             The Funds are or will be either open-ended mutual fund trusts established under the laws of a jurisdiction of Canada, or corporations governed under the laws of Canada or a jurisdiction of Canada.

6.             The Funds are or will be reporting issuers in one or more of the jurisdictions of Canada and are or will be subject to the provisions of Regulation 81-102.

7.             Securities of the Funds may be purchased through the Representative Dealer and may also be purchased from other dealers (Dealers) that may or may not be affiliated with the Filer.

8.             Each Dealer is, or will be, registered as:

(a)           a dealer in the category of mutual fund dealer under the Legislation and, other than mutual fund dealers registered in Québec, is or will be also a member of the Mutual Fund Dealers Association of Canada; or

(b)           a dealer in the category of investment dealer under the Legislation and a member of the Investment Industry Regulatory Organization of Canada.

9.             Neither the Filer nor the Funds are in default of securities legislation in the jurisdictions of Canada.

Strategic Portfolios Service

10.          The Filer offers an asset allocation service called the Strategic Portfolios Service (the SPS) to prospective Purchasers through the Representative Dealer.

11.          The SPS allows Purchasers to match their risk profile and investment objectives to a model portfolio of Funds (each, a Strategic Portfolio) and then instruct the Filer to allocate their investment into such Funds and rebalance such investments on a predetermined periodic basis.

12.          The SPS can continue to be used by Purchasers of other Dealers who are holding a Strategic Portfolio, but no new Strategic Portfolios can be set up by prospective Purchasers of other Dealers nor can any Purchaser of other Dealers add new money to their chosen Strategic Portfolio.

13.          Each Strategic Portfolio is currently entirely comprised of Funds for which the Filer acts as an investment fund manager and, in the future, each Strategic Portfolio will be entirely comprised of Funds for which the Filer and/or an affiliate of the Filer acts as an investment fund manager.

14.          Investments made by a Purchaser into a Strategic Portfolio are automatically allocated to the Funds that make up the chosen Strategic Portfolio, according to the weightings for each of the Funds contained in the selected Strategic Portfolio, as indicated in the SPS agreement.

15.          Prior to the initial set-up of a new Strategic Portfolio for a Purchaser or prior to a Purchaser adding new money to their chosen Strategic Portfolio, the Filer sends or delivers the fund facts document in respect of each Fund in the chosen Strategic Portfolio to the Purchaser, in accordance with the Pre-Sale Delivery Requirement.

16.          Because of fluctuations in the value of the Funds in each Strategic Portfolio, their weighting will vary from time to time in relation to the established allocation. In accordance with the SPS agreement, on predetermined rebalancing dates, the Filer systematically rebalances the Funds in each Purchaser’s Strategic Portfolio (each, a Rebalancing Trade) back to the established weightings of the Strategic Portfolio if the weighting of at least one of the Funds has varied by more than a predetermined percentage from the weightings originally established for the Strategic Portfolio.

17.          If the Filer desires to change the weightings of one or more current Funds within a Strategic Portfolio (each, a Weighting Change), pursuant to the terms of the SPS agreement, the Filer provides at least 60 days’ prior written notice describing the proposed change to the affected Purchasers.

18.          Weighting Changes and Rebalancing Trades will result in redemptions and purchases of securities of one or more current Funds in the Strategic Portfolio. Such purchases would trigger the Pre-Sale Delivery Requirement for the current Fund(s) in the Strategic Portfolio, unless the Representative Dealer or another Dealer, as applicable, has previously delivered the most recent fund facts document.

19.          If the Filer desires to add a new Fund to a particular Strategic Portfolio (each, a New Fund Change), pursuant to the terms of the SPS agreement, the Filer provides at least 60 days’ prior written notice describing the proposed change to the affected Purchasers and includes the fund facts document for any new Fund added to the Strategic Portfolio as a result of a New Fund Change, in accordance with the Pre-Sale Delivery Requirement.

20.          The Purchaser cannot make any changes to the Funds that make up the chosen Strategic Portfolio, or to the weighting established for each Fund in the Strategic Portfolio.

Reasons supporting the Exemption Sought

21.          Purchasers make their investment decision to invest in the Funds in a Strategic Portfolio when they enter into their SPS agreement. There is no new investment decision made by the Purchaser in respect of Rebalancing Trades or Weighting Changes; neither type of transaction results in a change to the current Funds in the Strategic Portfolio.

22.          Purchasers will receive adequate disclosure about the Funds in their Strategic Portfolio by way of (i) delivery of the funds facts document for all the Funds forming part of the Strategic Portfolio prior to entering into the SPS agreement, (ii) delivery of the fund facts document for a new Fund introduced to the Strategic Portfolio, and (iii) ongoing continuous disclosure.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a)           Each Purchaser is sent or delivered a notice that states:

(i)            subject to paragraph (b), and except as provided for in representation 19 above, the Purchaser will not receive the fund facts document for the Funds in the Strategic Portfolio after the date of the notice, unless the Purchaser specifically requests it,

(ii)           the Purchaser is entitled to receive upon request, at no cost to the Purchaser, the most recently filed fund facts document for the Funds in the Strategic Portfolio by calling a specified toll-free number, or by sending a request by mail or e-mail to a specified address or e-mail address,

(iii)          how to access the fund facts document for the Funds in the Strategic Portfolio electronically,

(iv)          the Purchaser will not have a Right of Withdrawal under the Legislation for Weighting Changes and Rebalancing Trades for the Funds in the Strategic Portfolio, but will continue to have a right of action if there is a misrepresentation in the prospectus of the Funds in the Strategic Portfolio or any document incorporated by reference into this prospectus, and

(v)           the Purchaser may terminate the SPS agreement at any time;

(b)           at least annually following the notice described in paragraph (a), each Purchaser in a Strategic Portfolio is advised in writing of how they can request the most recently filed fund facts document;

(c)           the most recently filed fund facts document is sent or delivered to the Purchaser if the Purchaser requests it;

(d)           the Filer will provide to the principal regulator on an annual basis beginning 60 days after the date upon which the Exemption Sought is first relied upon by a Dealer, either

(i)            a current list of all such Dealers that are relying on the Exemption Sought, or

(ii)           an update to the list of such Dealers or confirmation that there has been no change to such list;

(e)           prior to a Dealer relying on this Decision, the Filer provides to the Dealer:

(i)            a copy of this Decision,

(ii)           a disclosure statement informing the Dealer of the implications of this Decision, and

(iii)          a form of acknowledgement of the matters referred to in paragraph (f) below, to be signed and returned by the Dealer to the Filer; and

(f)            a Dealer seeking to rely on this Decision will, prior to doing so:

(i)            acknowledge receipt of a copy of this Decision providing the Exemption Sought,

(ii)           consent to the Filer providing to the principal regulator on an annual basis the name of the Dealer so long as it relies on this Decision, and

(iii)          deliver to the Filer a signed acknowledgement and agreement binding the Dealer to the foregoing.

“Gilles Leclerc”
Superintendent, Securities Markets
Autorité des marchés financiers