Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Plan Sponsors, CAP Members and service provider exempted from the prospectus requirements in the Legislation in respect of trades in securities of mutual funds to tax-assisted capital accumulation plans, subject to certain terms and conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 25, 53, 74(1).

Rules Cited

National Instrument 81-102 -- Investment Funds.

National Instrument 45-106 -- Prospectus and Registration Exemptions.

Published Documents Cited

Amendments to NI 45-106 -- Registration and Prospectus Exemption for Certain Capital Accumulation Plans, October 21, 2005 (2005), 25 OSCB 8681.

Guidelines for Capital Accumulation Plans -- Joint Forum of Financial Market Regulators, May 28, 2004.

TRANSLATION

March 15, 2019

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 ROYAL BANK OF CANADA (the Filer)

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer on behalf of the Filer (including its directors, officers, representatives, employees and agents), any Plan Sponsor (as defined herein) and any Fund (as defined herein), for a decision under the securities legislation of the Jurisdictions (the Legislation) that

(a) the dealer registration requirements of the Legislation will not apply to the Filer (including the directors, officers, employees, representatives and agents of the Filer, when acting on behalf of the Filer) in respect of trades in the securities of a Fund to a Plan (as defined herein), sponsored by the Plan Sponsor, subject to certain terms and conditions (the Filer Dealer Registration Relief);

(b) the dealer registration requirements of the Legislation will not apply to the Plan Sponsor in respect of trades in the securities of a Fund to a Plan, sponsored by the Plan Sponsor, subject to certain terms and conditions (the Plan Sponsor Dealer Registration Relief and together with the Filer Dealer Registration Relief, the Dealer Registration Relief); and

(c) the prospectus requirements of the Legislation will not apply in respect of the distribution of securities of Funds to a Plan, sponsored by the Plan Sponsor, subject to certain terms and conditions (the Prospectus Relief);

(collectively, 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, CQLR, c. V-1.1, r. 1 ("Regulation 11-102") is intended to be relied upon:

(i) in Newfoundland and Labrador, Nunavut and Yukon in respect of a trade to a CAP (as defined herein);

(ii) in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan, Yukon, and the Northwest Territories in respect of a trade to a Non-Tax Assisted Plan;

(iii) in Newfoundland and Labrador, Nunavut and Yukon in respect of the distribution of securities of Funds to a Plan; and

(c) the decision in respect of the Plan Sponsor Dealer Registration Relief and the Prospectus Relief is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Definitions and Interpretation

Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3, Regulation 11-102 and Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations, CQLR, c. V-1.1, r.10, have the same meaning if used in this decision, unless otherwise defined. Capitalized terms used in this decision have the following meanings:

"CAP" has the meaning given to the term "capital accumulation plan" in section 1.1. of the CAP Guidelines, namely, a tax assisted investment or savings plan that permits the members of the plan to make investment decisions among two or more options offered within the plan. The term CAP includes a defined contribution registered pension plan (DCPP), a group registered retirement savings plan (RRSP), a group registered education savings plan, a group tax-free savings plan, and a deferred profit sharing plan (DPSP) and in Quebec and Manitoba, includes a simplified pension plan;

"CAP Blanket Exemption" means blanket exemptions in the form of the Proposed CAP Exemption adopted in all jurisdictions of Canada other than the Non-Blanket Order Jurisdictions;

"CAP Guidelines" means the Guidelines for Capital Accumulation Plans published in May 2004 by the Joint Forum of Financial Market Regulators;

"Fund" means a mutual fund as defined in section 1 of the Securities Act (Québec), CQLR, c. V-1.1, whether offered by prospectus or pursuant to prospectus exemptions in the Legislation, and which in both cases, comply with Part 2 of Regulation 81-102 respecting Investment Funds, CQLR, c. V-1.1, r. 39 (Regulation 81-102);

"Member" means a current or former employee of an employer, or a person who belongs, or did belong, to a trade union or association or:

(a) his or her spouse;

(b) a trustee, custodian or administrator who is acting on his or her behalf, or for his or her benefit, or on behalf of, or for the benefit of, his or her spouse; or

(c) his or her holding entity, or a holding entity of his or her spouse,

that has assets in a Plan, and includes a person that is eligible to participate in a Plan;

"Non-Blanket Order Jurisdictions" means Québec, Ontario, Newfoundland and Labrador, Nunavut and the Yukon;

"Non-Tax Assisted Plan" means an investment or savings plan that meets the definition of a CAP in the CAP Guidelines and that is administered in accordance with the CAP Guidelines, but for the fact that it is non-tax assisted;

"Plan Sponsor" means any employer, board of trustees, trade union or association that has established a Plan or the administrator or a service provider that has been appointed to administer a Plan or any combination of these entities, which uses the services of the Filer in respect of such Plan;

"Plans" means, depending on the context in which it is used, collectively, CAPs, Non-Tax Assisted Plans or both, and a "Plan" means any one of them; and

"Proposed CAP Exemption" means exemptions relating to CAPs which were published by the Canadian Securities Administrators (the "CSA") on October 21, 2005 in proposed amendments to Regulation 45-106 respecting Prospectus Exemptions, CQLR, V-1.1, r. 21 (formerly Regulation 45-106 respecting Prospectus and Registration Exemptions).

Representations

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

General

1. The Filer is a Schedule I Canadian chartered bank incorporated under the Bank Act (Canada) S.C. 1991, c.46 (the Bank Act). The head office of the Filer is located in Montreal, Quebec. The Filer is not registered as a dealer, advisor or investment fund manager under the securities legislation of any jurisdiction or province or territory of Canada.

2. The Filer is not in default of any of the requirements of the Legislation.

3. The Filer proposes to launch a service offering which provides an integrated, digital solution to sponsors of defined contribution pension plans and other types of retirement plans and their members (collectively, RBC Group Advantage Plan Services).

4. RBC Group Advantage Plan Services will enable Plan Sponsors to design Plans which offer Members the opportunity to invest in one or more Funds. The Funds may include exchange-traded funds, conventional mutual funds which are qualified by prospectus for distribution to the public and private mutual funds which are offered pursuant to exemptions from the prospectus requirement, provided that such private mutual funds comply with the investment restrictions set out in Part 2 of Regulation 81-102. Initially, the Filer expects that all Funds offered to Members will be managed by a registered affiliate of the Filer; however, Funds managed by registered unaffiliated managers may be offered in the future.

5. RBC Group Advantage Plan Services will offer recordkeeping of Member data, as well as transaction processing in respect of Member accounts, production and delivery of Member statements as required under pension standards legislation and/or the applicable recordkeeping agreement, services for processing changes to Member accounts such as termination, death, retirement or a change in marital status and related services.

6. The Filer will not be primarily responsible for the design of any particular Plan. However, RBC Group Advantage Plan Services will make document templates available to Plan Sponsors which have been pre-approved by the Canada Revenue Agency to assist Plan Sponsors with Plan design.

7. The Filer will not provide investment advice to Plan Sponsors or select investments for Plans. The Filer will provide information to Plan Sponsors about the group of Funds which the Plan Sponsor may make available for investment through its Plan. Each Plan Sponsor will ultimately decide whether to offer the Funds for investment through its Plan.

8. Generally, Members will enrol in Plans/open accounts and select Funds for investment through an online portal provided by RBC Group Advantage Plan Services (each, a Portal). On the Portal, investment decision-making tools will be available to Members to assist them to select Funds and make related investment decisions within the Plan, including, but not limited to, generic asset allocation models, retirement planning tools, calculators and projection tools to help Member determine contribution levels and project future balances.

9. The Filer will provide trade execution services in respect of the Funds through its executing agent, The Royal Trust Company.

10. The Filer will be a selling agent of all Funds offered through RBC Group Advantage Plan Services.

11. The Filer is permitted to trade in the securities of the Funds with Plans and their Members under the Securities Dealing Restrictions (Banks) Regulations made under section 415 of the Bank Act.

12. The Filer will not provide investment advice to Members or engage in discretionary decision making for Member accounts.

13. Once a Member has selected one or more Funds for investment on the Portal, order instructions will be transmitted automatically to the Filer, and the Filer or its affiliate will execute such instructions directly with the Funds (which would include the execution of orders on the relevant stock exchange for Funds that are exchange traded).

Proposed CAP Exemption and CAP Blanket Exemption

14. The Filer has not applied for the Filer Dealer Registration Relief in Ontario because it is exempt from the registration requirement pursuant to subsection 35.1(1) of the Securities Act (Ontario). As a result, the Filer will not be receiving a decision about the Filer Dealer Registration Relief from the regulator in Ontario.

15. The Filer, the Plan Sponsors and the Funds intend to trade within Plans and/or to Members in accordance with the conditions set out in the Proposed CAP Exemption and adopted in the form of the CAP Blanket Exemption in all jurisdictions of Canada, other than the Non-Blanket Order Jurisdictions. The Proposed CAP Exemption and the CAP Blanket Exemption contemplate both dealer registration and prospectus exemptions, where required.

16. Though no equivalent to the CAP Blanket Exemption has been adopted in the Non-Blanket Order Jurisdictions, CSA Notice Request for Comment on Proposed Exemptions for Certain Capital Accumulation Plans published on October 21, 2005 (Supplément du Bulletin de l'Autorité des marchés financiers, vol. 2, no 42) states that, in Ontario and Quebec, the conditions described in the Proposed CAP Exemption will be used as template of standard conditions and terms of relief for applicants who apply for an exemption from the registration or prospectus requirements in connection with trades in mutual fund securities to a CAP.

Non-Tax Assisted Plan Exemption

17. The Filer desires to provide similar services to Plan Sponsors in respect of Non-Tax Assisted CAPs, to those it provides to Plan Sponsors in respect of CAPs, including trading in the Funds as part of its administrative services.

18. Some Plan Sponsors seek to offer Members the opportunity to invest in Non-Tax Assisted Plans that would not constitute CAPs, as defined in the CAP Guidelines, the Proposed CAP Exemption or the CAP Blanket Exemption. Such Non-Tax Assisted Plans may include non-registered employee saving plans, which are non-registered savings plans to which excess contributions to a CAP are directed, and certain other non-registered accounts.

19. Non-Tax Assisted Plans are often established in conjunction with CAPs because Canadian tax legislation imposes a limit on the amounts that may be contributed to a CAP. The benefit formula under a Plan Sponsor's benefit program sometimes results in contributions that exceed that tax limit. Non-Tax Assisted Plans allow for those excess contributions to be invested in the same manner as the tax assisted contributions. These excess contributions are not expected to be significant and will be limited by the calculation set out in Condition 1.U) of this decision and subject to the remaining conditions set out in this decision.

20. Non-Tax Assisted Plans operate in the same manner as tax assisted CAPs in terms of the relationship between Members and Plan Sponsors, and the duties, rights and responsibilities of Members and Plan Sponsors and the services that the Filer will provide. The only significant difference between the two types of Plans is the tax assisted nature of one and not the other.

21. Each Member of a Non-Tax Assisted Plan of a Plan Sponsor that is serviced by the Filer will also be a member of the Plan Sponsor's CAP.

22. The Filer will provide services to the Non-Tax Assisted Plans in accordance with the CAP Guidelines and, in a similar manner to the related CAPs for the applicable Members. The Filer will provide services to only those Non-Tax Assisted Plans which originate out of Plan Sponsor's CAPs for which the Filer provides services.

Decision

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. for the Dealer Registration Relief:

(a) the Plan Sponsor selects the Funds that Members will be able to invest in under the Plans;

(b) the Plan Sponsor establishes a policy, and provides Members with a copy of the policy and any amendments to it, describing what happens if a Member does not select a Fund;

(c) in addition to any other information that the Plan Sponsor believes is reasonably necessary for a Member to make an investment decision within the Plan, and unless that information has previously been provided, the Plan Sponsor provides the Member with the following information about each Fund the Member may invest in:

(i) the name of the Fund;

(ii) the name of the manager of the Fund and its portfolio adviser;

(iii) the fundamental investment objective of the Fund;

(iv) the investment strategies of the Fund or the types of investments the Fund may hold;

(v) a description of the risks associated with investing in the Fund;

(vi) where a Member can obtain more information about each Fund's portfolio holdings; and

(vii) where a Member can obtain more information generally about each Fund, including any continuous disclosure;

(d) the Plan Sponsor provides Members with a description and amount of any fees, expenses and penalties relating to the Plan that are borne by Members, including:

(i) any costs that must be paid when a Fund is bought or sold;

(ii) costs associated with accessing or using any of the investment information and decision-making tools provided by the Plan Sponsor;

(iii) the management fees paid by the Funds, if any;

(iv) the operating expenses paid by the Funds;

(v) recordkeeping fees;

(vi) any costs for transferring among investment options, including penalties, book and market value adjustments and tax consequences;

(vii) account fees; and

(viii) fees for services provided by the Filer, or other service providers;

which fees, penalties and expenses may be disclosed on an aggregate basis, if the Plan Sponsor discloses the nature of the fees, expenses and penalties, and the aggregated fees do not include fees that arise because of a choice that is specific to a particular Member;

(e) the Plan Sponsor has, within the past year, provided the Members with performance information about each Fund or class or series of Fund securities the Members may invest in, including:

(i) the name of the Fund for which the performance is being reported;

(ii) the performance of the mutual fund, including historical performance for one, three, five and ten years if available;

(iii) a performance calculation that is net of investment management fees and Fund expenses;

(iv) the method used to calculate the Fund's performance return calculation, and information about where a Member could obtain a more detailed explanation of that method;

(v) the name and description of a broad-based securities market index, selected in accordance with Regulation 81-106 respecting Investment Fund Continuous Disclosure, CQLR, c. V-1.1, r. 42, for the Fund, and corresponding performance information for that index; and

(vi) a statement that past performance of the Fund is not necessarily an indication of future performance;

(f) the Plan Sponsor has, within the past year, informed Members if there were any changes in the choice of mutual funds that Members could invest in and where there was a change, provided information about what Members needed to do to change their investment decision, or make a new investment;

(g) the Plan Sponsor provides Members with investment decision-making tools that the Plan Sponsor reasonably believes are sufficient to assist them in making an investment decision within the Plan;

(h) the Plan Sponsor must provide the information required by paragraphs (b), (c), (d) and (g) prior to the Member making an investment decision under the Plan;

(i) if the Plan Sponsor makes investment advice from a registrant available to Members, the Plan Sponsor must provide Members with information about how they can contact the registrant; and

(j) the maximum amount that may be contributed in respect of a Member to a Non-Tax-Assisted Plan in a given year is limited to any positive difference between:

(i) the maximum amount contributable for that year to the applicable CAP under its terms; and

(ii) the maximum dollar limit provided in the Income Tax Act (Canada) (the ITA) for the applicable CAP,

provided that this maximum amount that may be contributed in respect of a Member to the Non-Tax-Assisted Plan in a given year shall not exceed an amount equal to the "money purchase limit", as defined in the ITA, for the year.

In this paragraph j), the amount determined under subparagraph (i) shall be no more than 18% of the Member's "earned income" as defined in the ITA.

In this paragraph j), the "maximum dollar limit" means each of the following:

(A) the "money purchase limit" as defined in the ITA (in the case where the applicable CAP is a DCPP);

(B) the "RRSP dollar limit" as defined in the ITA (in the case where the applicable CAP is an RRSP);

(C) one-half of the "money purchase limit" (in the case where the applicable CAP is a DPSP); and

(D) any applicable maximum fixed dollar contribution prescribed under the ITA (in the case of any other type of CAP);

2. for the Prospectus Relief:

(a) the conditions set forth in condition 1 above are met;

(b) each of the Funds complies with Part 2 of Regulation 81-102; and

(c) where a Member chooses to invest in a Fund offered by prospectus selected by the Plan Sponsor as an investment option for a Non-Tax-Assisted Plan, one or more of the following, as applicable, will be made available upon demand to the Member:

(i) the current prospectus of the Fund;

(ii) Fund Facts document; or

(iii) a summary disclosure document or exchange-traded mutual fund facts document;

3. before a Fund first relies on this decision, the Fund must file a notice in the form found in Appendix C of the Proposed CAP Exemption in each jurisdiction or province or territory of Canada in which the Fund expects to distribute its securities;

4. this Decision, as it relates to the Dealer Registration Relief will terminate upon the coming into force in the securities legislation of an exemption from the dealer registration requirement for trades in a security of a mutual fund to a CAP or 90 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to create such an exemption;

5. this Decision, as it relates to the Prospectus Relief will terminate upon the coming into force in securities legislation of an exemption from the prospectus requirement for the distribution of a security of a mutual fund to a CAP or 90 days after the Decision Maker publishes in its Bulletin a notice or a statement to the effect that it does not propose to create such an exemption.

Hugo Lacroix
Superintendent (interim)
Securities Markets

Sentry Investments Inc. and Sean Driscoll -- s. 144

File No. 2019-33

IN THE MATTER OF SENTRY INVESTMENTS INC. and SEAN DRISCOLL

Lawrence P. Haber, Commissioner and Chair of the Panel

September 20, 2019

ORDER Section 144 of the Securities Act, RSO 1990, c. S.5

WHEREAS the Ontario Securities Commission held a hearing in writing to consider an application made by CI Investments Inc. (CI), to vary the terms of an order issued by the Commission on April 5, 2017 (the Order) relating to a Settlement Agreement entered into on March 31, 2017, among the parties to this matter (the Application);

ON READING the Application dated August 23, 2019, and considering the Affidavit of Anne Ramsay dated August 22, 2019, including that Sentry was amalgamated with CI on June 1, 2018, and on reading that Staff of the Commission consents to the Application and Sean Driscoll does not oppose the Application;

IT IS ORDERED THAT:

1. paragraph 3(a) of the Order is removed; and

2. clauses are added at the end of the Order to read:

5. CI Investments Inc. ("CI") shall:

a. cause the Consultant to submit by December 31, 2019 a letter (the "Attestation Letter"), expressing its conclusions on whether the revised internal controls, policies and procedures relating to sales practices set out in the Plan (as have now been incorporated into CI's internal controls, policies and procedures) were working appropriately and adequately followed, administered and enforced for the 9-month period commencing July 1, 2018;

b. cause the Consultant to submit by December 31, 2019, a letter (the "Transition Letter") expressing its conclusions on whether the transition of the Sentry Funds to CI occurred without error and whether the functions related to transfer agency, fund accounting and trust accounting have been fully integrated into CI;

c. cause the Consultant to include with the Attestation Letter and the Transition Letter (collectively, the "Letters") a description of the testing performed to support the conclusions contained in each of the respective Letters;

d. cause the Consultant to submit such additional reports as may be requested by the OSC Manager for the purpose of satisfying the OSC Manager that the conclusions expressed in the Letters are valid; and

e. provide the Consultant with reasonable access to all of CI's books and records necessary to complete its mandates and shall require its officers, directors and employees to cooperate fully with the Consultant with respect to its work.

6. CI authorizes the Consultant to communicate with Staff about its work in relation to the Letters without restriction.

"Lawrence P. Haber"