Vision Capital Corporation

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from section 13.5(2)(b) of NI 31-103 to permit inter-fund trading between certain public funds, pooled funds and managed accounts managed by the same manager subject to conditions, including IRC approval and pricing requirements -- certain trades involving exchange-traded securities permitted to occur at last sale price as defined in the Universal Market Integrity Rules -- relief also granted from conflict of interest trading prohibition in section 13.5(2)(b) to permit in-specie purchases and redemptions by managed accounts and pooled funds subject to conditions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5 and 15.1.

July 29, 2019

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 VISION CAPITAL CORPORATION (Filer)

DECISION

Background

1. The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision (the Exemption Sought) pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) exempting the Filer from the prohibitions in paragraph 13.5(2)(b) of NI 31-103 (the Trading Prohibition) which prohibit a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of an associate of a responsible person, or from or to the investment portfolio of an investment fund for which a responsible person acts as an adviser, in order to permit,

(a) an NI 81-102 Fund (as defined below) to purchase securities from, or sell securities to, a Pooled Fund (as defined below);

(b) a Pooled Fund to purchase securities from, or sell securities to, a Fund (as defined below);

(c) a Managed Account (as defined below) to purchase securities from, or sell securities to, a Fund,

the transactions listed in (a) to (c) above, in the case of exchange-traded securities, to be executed at the Last Sale Price (as defined below) in lieu of the Closing Sale Price (as defined below); and

(d) an NI 81-102 Fund to purchase exchange-traded securities from or sell exchange-traded securities to another NI 81-102 Fund at the Last Sale Price in lieu of the Closing Sale Price

(the transactions described in (a) through (d) above being referred to herein as the Inter-Fund Trades and the requested relief as the Inter Fund Trading Relief); and

(e) the purchase by a Managed Account or Pooled Fund of securities of a Fund, and the redemption of securities of a Fund held by a Managed Account or Pooled Fund, and as payment:

(i) for such purchase, in whole or in part, by the Managed Account or Pooled Fund making good delivery of portfolio securities to the other Fund; and

(ii) for such redemption, in whole or in part, by the Managed Account or Pooled Fund receiving good delivery of portfolio securities from the other Fund

(a purchase or redemption described in paragraph (e) above being referred to herein as an In Specie Transaction).

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

(a) the Ontar$ep:io Securities Commission is the principal regulator for the Application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in respect of the Exemption Sought in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, and the Yukon (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in the Legislation, MI 11-102, National Instrument 14-101 Definitions, NI 31-103, National Instrument 81-102 Investment Funds (NI 81-102), National Instrument 81-106 Investment Fund Continuous Disclosure or National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meanings in this decision, unless otherwise defined. In addition:

"Closing Sale Price" means the closing sale price contemplated by the definition of "current market price of the security" in subparagraph 6.1(1)(a)(i) of NI 81-107 on that trading day;

"Fund" means an NI 81-102 Fund or a Pooled Fund;

"Last Sale Price" means the last sale price, as defined in the Market Integrity Rules of the Investment Industry Regulatory Organization of Canada, prior to the execution of the trade on that trading day where the securities involved in the Inter-Fund Trade are exchange-traded securities (which term shall include Canadian and foreign exchange-traded securities);

"Managed Account" means an existing or future account over which the Filer has discretionary authority for a client and acts as the portfolio manager;

"NI 81-102 Fund" means an existing or future investment fund, as defined in the Legislation, which may be either a mutual fund or a non-redeemable investment fund that is a reporting issuer and subject to NI 81-102 and NI 81-107, for which the Filer acts or will act as the investment fund manager and acts or may act as the portfolio manager in the future; and

"Pooled Fund" means an existing or future investment fund for which the Filer acts or will act as the investment fund manager and acts or may act as the portfolio manager and to which neither NI 81-102 nor NI 81-107 apply.

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of the Province of Ontario, with its registered head office located in Toronto, Ontario.

2. The Filer currently is registered as:

(a) an exempt market dealer, a portfolio manager and investment fund manager under the securities legislation of Alberta, British Columbia, Manitoba, and Ontario;

(b) an investment fund manager and exempt market dealer under the securities legislation of Quebec; and

(c) investment fund manager in Newfoundland and Labrador.

3. The Filer has or will have complete discretion to invest and reinvest the assets of the Funds and Managed Accounts and is or will be responsible for executing all portfolio transactions. Furthermore, the Filer, subject to compliance with applicable securities laws, may act as a distributor of securities of the Pooled Funds not otherwise sold through another registered dealer.

4. The Filer:

(a) acts or may act as the trustee of each Fund that is a trust;

(b) acts or will act as the investment fund manager of each Fund;

(c) acts or may act as the portfolio manager to each Fund; and

(d) acts or will act as the portfolio manager to each Managed Account.

5. The Filer is not in default of the securities legislation of any Jurisdiction.

Funds

6. Each Fund is, or will be, an investment fund that is either a trust established, or limited partnership formed, under the laws of Ontario or another Jurisdiction.

7. Each Fund's reliance on the Exemption Sought will be compatible with its investment objective and strategies.

8. Each NI 81-102 Fund is, or will be, a reporting issuer under the securities legislation of one or more Jurisdictions and whose securities are, or will be, qualified for distribution pursuant to a prospectus and, if applicable, annual information form and fund facts that have been, or will be, prepared and filed in accordance with the securities legislation of those Jurisdictions.

9. The securities of each Pooled Fund are, or will be, distributed on a private placement basis pursuant to the securities legislation of the Jurisdictions and no Pooled Fund is, or will be, a reporting issuer under the securities legislation of any Jurisdiction.

10. An affiliate of the Filer acts or will act as the general partner of each Fund structured as a limited partnership.

11. Each Fund for which the Filer acts or will act as trustee is, or will be, an associate of the Filer.

12. Each existing Fund is not in default of the securities legislation of any Jurisdiction.

Managed Accounts

13. Each Managed Account is, or will be, managed pursuant to an investment management agreement or other documentation which is, or will be, executed by each client who wishes to receive the portfolio management services of the Filer and which provides the Filer full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent of the client to execute the trade.

14. The investment management agreement or other documentation in respect of each Managed Account contains, or will contain, authorization from the client for the Filer to make Inter-Fund Trades and/or enter into In Specie Transactions.

Independent Review Committee

15. Each NI 81-102 Fund has, or will have, an independent review committee (an IRC) in accordance with the requirements of NI 81-107. Each Inter-Fund Trade by an NI 81-102 Fund will be authorized by the IRC of the NI 81-102 Fund under section 5.2 of NI 81-107, and the Filer will comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with such Inter-Fund Trade.

16. Though the Pooled Funds are not, and will not be, subject to the requirements of NI 81-107, each Pooled Fund will have an IRC at the time the Pooled Fund makes an Inter-Fund Trade. The mandate of the IRC of each Pooled Fund will include approving Inter-Fund Trades. The IRC of the Pooled Funds will be composed by the Filer in accordance with section 3.7 of NI 81-107 and the IRC will be expected to comply with the standard of care set out in section 3.9 of NI 81-107.

17. If the IRC of a Pooled Fund becomes aware of an instance where the Filer did not comply with the terms of this decision or a condition imposed by securities legislation or the IRC in its approval, the IRC of the Pooled Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the Jurisdiction under which the Pooled Fund is organized.

Inter-Fund Trades

18. The Filer wishes to be able to permit Inter-Fund Trades of portfolio securities at the Last Sale Price between:

(a) an NI 81-102 Fund and another NI 81-102 Fund, a Pooled Fund or a Managed Account;

(b) a Pooled Fund and another Pooled Fund, an NI 81-102 Fund or a Managed Account; and

(c) a Managed Account and a Pooled Fund or an NI 81-102 Fund.

19. Different sections of NI 31-103, NI 81-102 and NI 81-107 impose different prohibitions and exceptions on different types of Funds with respect to Inter-Fund Trades.

20. The Filer has submitted that because of the various investment objectives and investment strategies utilized by the Funds and Managed Accounts, it may be appropriate for different investment portfolios to acquire or dispose of the same securities directly, rather than with a third party. Authorizing the Inter-Fund Trades may result in such benefits as lower trading costs, reduced market disruption and quicker execution.

21. The Filer has determined that it would be in the best interests of the Funds and Managed Accounts to receive the Inter-Fund Trading Relief because making the Funds and Managed Accounts subject to the same set of rules governing the execution of Inter-Fund Trades will result in:

(a) a consistent and fair result for all the Filer's clients;

(b) cost and timing efficiencies in respect of the execution of Inter-Fund Trades; and

(c) simplified and more efficient monitoring thereof, for the Filer in connection with the execution of Inter-Fund Trades.

22. Each Inter-Fund Trade will be consistent with the investment objectives of the relevant Fund or Managed Account, as applicable.

23. At the time of an Inter-Fund Trade, the Filer will have policies and procedures in place to enable the applicable Funds and Managed Accounts to engage in Inter-Fund Trades.

24. The Filer cannot rely on the exemption codified under subsection 6.1(4) of NI 81-107 unless each party to the transaction is a reporting issuer and the Inter-Fund Trade occurs at the "current market price of the security" which, in the case of exchange-traded securities, includes the Closing Sale Price but not the Last Sale Price.

25. The Filer considers that it would be in the best interests of the Funds and Managed Accounts, as applicable, if an Inter-Fund Trade could be made at the Last Sale Price prior to the execution of the trade, in lieu of the Closing Sale Price, as this will result in the trade being done at the price which is closest to the price at the time the decision to make the trade is made.

26. An Inter-Fund Trade to be effected at the Last Sale Price will be implemented by the Filer as follows:

(a) the Filer, as the portfolio manager, will deliver the trade instruction in respect of a purchase or sale of a portfolio security by a Fund or a Managed Account, as applicable (Party A), to a trader on the Filer's trading desk;

(b) the Filer, as the portfolio manager, will deliver the trade instruction in respect of a purchase or sale of a portfolio security by a Managed Account or another Fund, as applicable (Party B), to a trader on the Filer's trading desk;

(c) the trader on the Filer's trading desk will have the discretion to execute the trade as an Inter-Fund Trade between Party A and Party B at the Last Sale Price of the portfolio security, prior to the execution of the trade;

(d) the policies applicable to the Filer's trading desk will require that all orders are to be executed on a timely basis; and

(e) the trader on the Filer's trading desk will advise of the Last Sale Price.

In Specie Transactions

27. When acting for a Managed Account of a client, the Filer wishes to be able, in accordance with the investment objectives and restrictions of the client, to cause the client's Managed Account to either invest in securities of a Fund, or to redeem such securities, pursuant to an In Specie Transaction.

28. In acting on behalf of a Pooled Fund, the Filer wishes to be able, in accordance with the investment objectives and restrictions of the Pooled Fund, to cause the Pooled Fund to either invest in securities of another Fund, or to redeem such securities, pursuant to an In Specie Transaction.

29. The Filer has determined that effecting the In Specie Transactions will allow the Filer to manage each asset class more effectively and reduce transaction costs for the client, as applicable, and the Funds. For example, In Specie Transactions may:

(a) reduce market impact costs, which can be detrimental to clients and/or the Funds

(b) allow a portfolio manager to retain within its control institutional-size blocks of securities that otherwise would need to be broken and re-assembled.

30. The only cost which will be incurred by a Fund or a Managed Account for an In Specie Transaction is a nominal administrative charge levied by the custodian of the Fund in recording the trades and/or any commission charged by the dealer executing the trade.

31. At the time of each In Specie Transaction, the Filer will have in place policies and procedures governing such transactions, including the following:

(a) each In Specie Transaction involving an NI 81-102 Fund will be referred to its IRC for approval in accordance with the requirements of subsection 5.2(2) of NI 81-107;

(b) the Filer has obtained, or will obtain, the written consent of the relevant client before it engages in any In Specie Transaction in connection with the purchase or redemption of securities of a Fund for the Managed Account;

(c) the portfolio securities transferred in an In Specie Transaction will be consistent with the investment criteria of the Fund or Managed Account acquiring the portfolio securities;

(d) the portfolio securities transferred in In Specie Transactions will be valued on the same valuation day using the same valuation principles as are used to calculate the net asset value for the issue price or redemption price of securities of the Fund;

(e) with respect to the purchase of securities of a Fund, the portfolio securities transferred to the Fund in an In Specie Transaction as purchase consideration for those securities will be valued as if the portfolio securities were assets of the Fund and in accordance with subparagraph 9.4(2)(b)(iii) of NI 81-102;

(f) with respect to the redemption of securities of a Fund, the portfolio securities transferred in consideration for the redemption price of those securities will have a value at least equal to the amount at which those portfolio securities were valued in calculating the net asset value per security used to establish the redemption price of the securities in accordance with paragraph 10.4(3)(b) of NI 81-102;

(g) the valuation of any illiquid securities which would be the subject of an In Specie Transaction will be carried out according to the Filer's policies and procedures for the fair valuation of portfolio securities, including illiquid securities. Should any In Specie Transaction involve the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller, immediately before effecting the In Specie Transaction;

(h) if any illiquid securities are the subject of an In Specie Transaction, the illiquid securities will be transferred on a basis, whether pro rata or otherwise, that fairly represents the portfolio of the Managed Account or Pooled Fund. The Filer will not cause any Pooled Fund to accept an in specie subscription or pay out redemption proceeds in specie if, at the time of the proposed In Specie Transaction, illiquid securities represent more than an immaterial portion of the portfolio of the Pooled Fund;

(i) the Filer will not cause any NI 81-102 Fund to engage in an In Specie Transaction unless the applicable NI 81-102 Fund is in compliance with the portfolio restrictions on the holding of illiquid securities described in section 2.4 of NI 81-102; and

(j) the Funds will keep written records of each In Specie Transaction, including records of each purchase and redemption of portfolio securities and the terms thereof for a period of five years commencing after the end of the financial year in which the trade occurred, the most recent two years in a reasonably accessible place.

32. The Filer has determined that it would be in the interests of the Funds and the Managed Accounts to engage in In Specie Transactions.

33. In Specie Transactions will be subject to:

(a) compliance with the written policies and procedures of the Filer respecting In Specie Transactions that are consistent with applicable securities legislation and the Exemption Sought; and

(b) the oversight of the Filer to ensure that the In Specie Transactions represent the business judgment of the Filer acting in its discretionary capacity with respect to the Funds and the Managed Accounts, uninfluenced by considerations other than the best interests of the Funds and Managed Accounts. The results of the oversight and review by the Filer will be submitted in the form of a report to the Filer's board of directors on a semi-annual basis.

Reasons for Exemption Sought

34. Each Fund for which the Filer acts or will act as trustee is, or will be, an associate of the Filer. Where the Filer is the portfolio manager to a Fund, whether the Fund is a structured as a trust or a limited partnership, the Filer is a responsible person of the Fund. The Filer is or will be a responsible person of each Managed Account. Accordingly, each Fund structured as a trust is, or may be, an "associate" of a "responsible person" of another Fund or Managed Account as such terms are defined in the Legislation.

35. Pursuant to the Trading Prohibition, a Fund or a Managed Account, as applicable, may be restricted from making Inter-Fund Trades and In Specie Transactions with another Fund if:

(a) the second Fund is an associate of a responsible person of the first Fund or of the Managed Account, as applicable, which will be the case on each occasion that the second Fund is structured as a trust; or

(b) a responsible person of the first Fund or the Managed Account, as applicable, is a portfolio manager to the second Fund, which may be the case for each second Fund.

36. The Filer, as the portfolio manager to a Pooled Fund or Managed Account, cannot rely upon the exemption from paragraph 13.5(2)(b) of NI 31-103 codified in subsection 6.1(4) of NI 81-107 because such codified relief is not available in the context of the Pooled Funds and Managed Accounts.

37. Absent the granting of the Exemption Sought, the Filer may be prohibited from engaging in Inter-Fund Trades and In Specie Transactions due to the Trading Prohibitions.

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 provided that:

Inter-Fund Trades

1. In connection with Inter-Fund Trades:

(a) the Inter-Fund Trade is consistent with the investment objective of the Fund or the Managed Account, as applicable;

(b) the Filer refers the Inter-Fund Trade to the IRC of the Fund involved in the manner contemplated by section 5.1 of NI 81-107, and each of the Filer and the IRC of the Fund complies with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade;

(c) the IRC of each Fund has approved the Inter-Fund Trade in respect of that Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(d) if the transaction is with a Managed Account, the investment management agreement or other documentation in respect of the Managed Account contains or will contain the authorization of the client to engage in Inter-Fund Trades and such authorization has not been revoked; and

(e) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107, except that for purposes of paragraph (e) of subsection 6.1(2) in respect of exchange-traded securities, the trade may be executed at the Last Sale Price.

In Specie Transactions

2. In connection with an In Specie Transaction where a Managed Account acquires securities of a Fund:

(a) if the transaction involves the purchase of securities in an NI 81-102 Fund, the IRC of the NI 81-102 Fund has approved the In Specie Transaction on behalf of the NI 81-102 Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(b) the Filer and the applicable IRC comply with section 5.4 of NI 81-107 in respect of any standing instructions the applicable IRC provides in connection with the In Specie Transaction;

(c) the Filer obtains the prior written consent of the client of the Managed Account before it engages in the In Specie Transaction, and such consent has not been revoked;

(d) the Fund would, at the time of payment, be permitted to purchase the portfolio securities;

(e) the portfolio securities are acceptable to the portfolio manager of the Fund and meet the investment criteria of the Fund;

(f) the value of the portfolio securities is at least equal to the issue price of the securities of the Fund for which they are used as payment, valued as if the portfolio securities were portfolio assets of that Fund;

(g) the account statement next prepared for the Managed Account describes the portfolio securities delivered to the Fund and the value assigned to such portfolio securities; and

(h) the Fund keeps written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the portfolio securities delivered to the Fund and the value assigned to such portfolio securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place.

3. In connection with an In Specie Transaction where a Managed Account redeems securities of a Fund:

(a) if the transaction involves the redemption of securities in an NI 81-102 Fund, the IRC of the NI 81-102 Fund has approved the In Specie Transaction on behalf of the NI 81-102 Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(b) the Filer and the applicable IRC comply with section 5.4 of NI 81-107 in respect of any standing instructions the applicable IRC provides in connection with the In Specie Transaction;

(c) the Filer obtains the prior written consent of the client of the Managed Account before it engages in the In Specie Transaction, and such consent has not been revoked;

(d) the portfolio securities meet the investment criteria of the Managed Account acquiring the portfolio securities and are acceptable to the Filer;

(e) the value of the portfolio securities is equal to the amount at which those portfolio securities were valued by the Fund in calculating the net asset value per security used to establish the redemption price;

(f) the account statement next prepared for the Managed Account describes the portfolio securities received from the Fund and the value assigned to such portfolio securities; and

(g) the Fund keeps written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place.

4. In connection with an In Specie Transaction where a Pooled Fund purchases securities of a Fund:

(a) if the transaction involves the purchase of securities in an NI 81-102 Fund, the IRC of the NI 81-102 Fund has approved the In Specie Transaction on behalf of the NI 81-102 Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(b) the Filer and the applicable IRC comply with section 5.4 of NI 81-107 in respect of any standing instructions the applicable IRC provides in connection with the In Specie Transaction;

(c) the Fund acquiring the portfolio securities would, at the time of payment, be permitted to purchase the portfolio securities;

(d) the portfolio securities are acceptable to the portfolio manager of the Fund acquiring the portfolio securities and meet the investment objective of such Fund;

(e) the value of the portfolio securities is at least equal to the issue price of the securities of the Fund issuing the securities for which they are used as payment, valued as if the portfolio securities were portfolio assets of that Fund; and

(f) each Fund keeps written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered to the Fund and the value assigned to such portfolio securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place.

5. In connection with an In Specie Transaction where a Pooled Fund redeems securities of a Fund:

(a) if the transaction involves the redemption of securities in an NI 81-102 Fund, the IRC of the NI 81-102 Fund has approved the In Specie Transaction on behalf of the NI 81-102 Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(b) the Filer and the applicable IRC comply with section 5.4 of NI 81-107 in respect of any standing instructions the applicable IRC provides in connection with the In Specie Transaction;

(c) the portfolio securities are acceptable to the portfolio manager of the Pooled Fund and are consistent with the investment objective of the Pooled Fund acquiring the portfolio securities;

(d) the value of the portfolio securities is equal to the amount at which those securities were valued by the Fund in calculating the net asset value per security used to establish the redemption price; and

(e) each Fund keeps written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the portfolio securities delivered by the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place.

6. The Filer does not receive any compensation in respect of any In Specie Transaction and, in respect of any delivery of portfolio securities further to an In Specie Transaction, the only charges paid by the Managed Account or the applicable Fund is the commission charged by the dealer executing the trade (if any) and/or any administrative charges levied by the custodian.

"Neeti Varma"

Manager,

Investment Funds and Structured Products Branch

Ontario Securities Commission