Securities Law & Instruments

Headnote

 

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted to exchange-traded mutual funds for extensions of lapse dates of their prospectuses – Filer will incorporate offering of the ETFs under the same offering documents as related family of funds when they are renewed – Extensions of lapse dates will not affect the currency or accuracy of the information contained in the current prospectuses.

 

Applicable Legislative Provisions

 

Securities Act, R.S.O. 1990, c. S.5, as am., s. 62(5).

 

December 27, 2018

 

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

EVOLVE FUNDS GROUP INC.

(the Filer)

 

AND

 

EVOLVE MARIJUANA ETF,

EVOLVE BLOCKCHAIN ETF AND

EVOLVE ACTIVE CORE FIXED INCOME ETF

(the Funds)

 

DECISION

 

Background

 

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) that the respective time limits for the renewal of the long form prospectus of the Evolve Marijuana ETF dated February 5, 2018 (the Evolve Marijuana Prospectus), long form prospectus of the Evolve Blockchain ETF dated February 26, 2018 (the Evolve Blockchain Prospectus), and long form pros-pectus of the Evolve Active Core Fixed Income ETF dated March 21, 2018 (the Evolve Active Prospectus and, together with the Evolve Marijuana Prospectus and Evolve Blockchain Prospectus, the Prospectuses) be extended to those time limits that would apply if the lapse date of each Prospectus were April 6, 2019 (the Exemption Sought).

 

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

 

(i)            the Ontario Securities Commission is the principal regulator for this application; and

 

(ii)           the Filer has provided notice that sub-section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (together with Ontario, the Canadian Jurisdictions).

 

Interpretation

 

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

 

Representations

 

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

 

1.             The Filer is a corporation incorporated under the laws of Ontario. The Filer’s head office is located in Toronto, Ontario.

 

2.             The Filer is registered as a portfolio manager and commodity trading manager in Ontario and as an investment fund manager under the securities legislation of each of Ontario, Québec and Newfoundland and Labrador.

 

3.             The Filer is the investment fund manager of the Funds.

 

4.             Each of the Funds is an exchange-traded mutual fund (an ETF) established under the laws of Ontario, and is a reporting issuer as defined in the securities legislation of each of the Canadian Jurisdictions.

 

5.             Neither the Filer nor any of the Funds are in default of securities legislation in any of the Canadian Jurisdictions.

 

6.             The Funds currently distribute securities in the Canadian Jurisdictions under the Prospectuses.

 

7.             Pursuant to subsection 62(1) of the Securities Act (Ontario) (the Act), the respective lapse dates of the Evolve Marijuana Prospectus, Evolve Block-chain Prospectus, and Evolve Active Prospectus are February 5, 2019, February 26, 2019, and March 21, 2019 (each a Lapse Date, and collectively, the Lapse Dates). Accordingly, under subsection 62(2) of the Act, the distribution of securities of each of the Funds would have to cease on the applicable Lapse Date unless: (i) each of the Funds files a pro forma prospectus at least 30 days prior to the applicable Lapse Date; (ii) the final prospectus is filed no later than 10 days after the applicable Lapse Date; and (iii) a receipt for the final prospectus is obtained within 20 days of the applicable Lapse Date.

 

8.             The Filer is the investment fund manager of four other ETFs (the Other Funds) that currently distribute their securities to the public under two prospectuses: the prospectus of Sphere FTSE Canada Sustainable Yield Index ETF, Sphere FTSE Europe Sustainable Yield Index ETF, and Sphere FTSE Emerging Markets Sustainable Yield Index ETF, which has a lapse date of April 6, 2019, and the prospectus of Evolve Innovation Index ETF, which has a lapse date of April 20, 2019 (collectively, the Other Funds Prospec-tuses).

 

9.             The Filer wishes to combine the Prospectuses and Other Funds Prospectuses into a prospectus dated on or about April 6, 2019 in order to reduce renewal, printing and related costs. Offering the Funds and the Other Funds under one prospectus would facilitate the distribution of the Funds in the Canadian Jurisdictions under the same prospec-tus and enable the Filer to streamline disclosure across the Filer’s fund platform. As the Funds and the Other Funds are managed by the Filer, offering them under the same prospectus will allow investors to more easily compare their features.

 

10.          It would be unreasonable to incur the costs and expenses associated with preparing five separate renewal prospectuses given how close in proxi-mity the Lapse Dates are to one another and to the lapse dates of the Other Funds Prospectuses.

 

11.          The process being undertaken by the Filer to combine the Prospectuses and Other Funds Prospectuses into one prospectus will require additional time in order to properly update and streamline the disclosure of the Funds and the Other Funds. The ETF facts documents for the Funds and the Other Funds will also need to be updated. Given the time required to perform these tasks accurately, the Filer would not have sufficient time to finalize and file the pro forma prospectus combining the Funds and the Other Funds as well as prepare and update the ETF facts documents by at least 30 days prior to the earliest of the Lapse Dates.

 

12.          There have been no material changes in the affairs of each of the Funds since the date of the applicable Prospectus. Accordingly, the Prospec-tus and current ETF facts document(s) of each of the Funds represent current information regarding such Fund.

 

13.          Given the disclosure obligations of the Funds, should a material change in the affairs of any of the Funds occur, the Prospectus and current ETF facts document(s) of the applicable Fund(s) will be amended as required under the Legislation.


14.          New investors in the Funds will receive the most recently filed ETF facts document(s) of the applicable Fund(s). The Prospectuses will still be available upon request.

 

15.          The Exemption Sought will not affect the accuracy of the information contained in the Prospectuses and will therefore not be prejudicial to the public interest.

 

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 Exemption Sought is granted.

 

“Darren McKall”

Manager, Investment Funds and Structured Products

Ontario Securities Commission