National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to mutual fund trust for extension of the lapse date of prospectus -- Filer will incorporate offering of the proposed fund under the same offering documents when prospectus is renewed -- Extension of lapse date will not affect the currency or accuracy of the information contained in the current prospectus.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S. 5, as am., ss. 62(5).
January 3, 2020
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF VISION CAPITAL CORPORATION (the Filer) AND IN THE MATTER OF VISION ALTERNATIVE INCOME FUND (the Fund)
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdiction (the Legislation) that the time limits for the renewal of the simplified prospectus of the Fund be extended to the time limits that would be applicable as if the lapse date of the simplified prospectus of the Fund was April 15, 2020 (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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the provinces of Canada and in the Yukon (the Jurisdictions).
Terms defined in National Instrument NI 81-101 Definitions (NI 81-101) and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of the Province of Ontario, with its head office located in Toronto, Ontario.
2. The Filer is currently registered as a portfolio manager, investment fund manager and exempt market dealer in the provinces of Ontario, British Columbia, Alberta and Manitoba, as an investment fund manager and exempt market dealer in the Province of Quebec and as an investment fund manager in Newfoundland and Labrador.
3. The Filer is the manager and trustee of the Fund.
4. The Fund is an open-ended mutual fund trust established under the laws of the Province of Ontario pursuant to a master declaration of trust.
5. The Fund has been authorized to distribute its securities in each of the provinces of Canada and the Yukon under an Amended and Restated Simplified Prospectus dated July 19, 2019 amending and restating the Amended and Restated Simplified Prospectus dated March 15, 2019 amending and restating the Amended and Restated Simplified Prospectus dated February 27, 2019, amending and restating the Simplified Prospectus dated February 6, 2019 (the Current Prospectus).
6. The Fund is a reporting issuer as defined in the securities legislation of each of the Jurisdictions. Neither the Fund nor the Filer is in default of securities legislation in any of the Jurisdictions.
Reasons for Exemption Sought
7. Pursuant to subsection 62(1) of the Securities Act (Ontario) (the "Act"), the lapse date for the Current Prospectus is February 6, 2020 (the Current Lapse Date).
8. Pursuant to subsection 62(2) of the Act, the distribution of securities of the Fund would have to cease on the Current Lapse Date unless:
i. the Fund files a pro forma simplified prospectus at least 30 days prior to the Current Lapse Date;
ii. the final simplified prospectus is filed no later than 10 days after the Current Lapse Date; and
iii. a receipt of the final simplified prospectus is obtained within 20 days after the Current Lapse Date.
9. Pursuant to sections 2.6(1) and 2.6(2) of NI 81-101, the Fund must file a written consent provided by its auditor no later than February 16, 2020, 10 days after the Current Lapse Date.
10. The fiscal year-end of the Fund is December 31 and, pursuant to section 2.2 of National Instrument 81-106 Investment Fund Continuous Disclosure, the annual financial statements and auditor's report are required to be filed on or before the 90th day after the Fund's most recently completed financial year, which for the Fund will be its first financial year-end of December 31, 2019 (the 2019 Fiscal Year-End).
11. It is expected the Fund will receive the written consent of its auditor at the same time that the financial statements and auditor's report for the 2019 Fiscal Year-End are issued, which is expected to occur on or about March 30, 2020.
12. While it might be technically possible for the auditor to complete its audit of the Fund's 2019 Fiscal Year-End financial statements and issue the report by February 16, 2020, the audit for the 2019 Fiscal Year-End will not be completed by such date unless the auditor agrees to expediate the normal process. This would increase costs being indirectly borne by the Fund's securityholders.
13. In the absence of audited financial statements, key data such as the Fund's management expense ratio will not be available at the time of renewal, so the renewal documents will not contain all the information that will be available after the audit.
14. Alternatively, if the Exemption Sought is not granted, in accordance with section 3.1.2 of NI 81-101 the firm's auditor will be required to review the Fund's interim financial statements. In doing so, additional costs will be incurred and these costs will recur annually. This is not in the best interest of the securityholders.
15. Rather than facing this audit challenge each year and placing an unnecessary financial burden on the Fund and indirectly onto the Fund's securityholders, it would be more efficient and cost effective to extend the lapse date of the Current Prospectus to April 15, 2020. This extension will provide the time necessary for the auditor to complete the audit of the Fund's financial statements for the 2019 Fiscal Year-End, and file the final simplified prospectus, annual information form and fund facts, along with the written consent of the auditor, as required by NI 81-101.
16. The Filer is preparing to launch a new alternative mutual fund in early 2020 (the Proposed Fund). The Filer wishes to combine the simplified prospectus of the Fund with the prospectus of the Proposed Fund and offer both funds under the same simplified prospectus and annual information form. The investment strategy of the Proposed Fund will require exemptive relief and the Filer cannot be certain that relief will be obtained in time to include the Proposed Fund in the renewal prospectus for the Fund under the Current Lapse Date.
17. The Filer wishes to combine the prospectus of the Fund with the prospectus of the Proposed Fund in order to reduce the cost of renewing the prospectus of the Fund and on-going printing and related costs. Offering the Fund and the Proposed Fund under one prospectus would facilitate the distribution of such funds in the Jurisdictions under the same prospectus and enable the Filer to streamline disclosure across the Filer's fund platform. As the Fund and the Proposed Fund are managed by the Filer, offering them under the same prospectus would allow investors to more easily compare their features.
18. It would be impractical to alter and modify all the dedicated systems, procedures and resources required to expeditiously prepare the simplified prospectus, annual information form and fund facts documents (collectively, the Offering Documents) of the Proposed Fund, and unreasonable to incur the costs and expenses associated therewith, so that the Offering Documents of the Proposed Fund can be filed earlier with the renewal simplified prospectus, annual information form and fund facts documents (the Renewal Documents) of the Fund.
19. The Filer may make minor changes to the features of the Fund as part of the process of renewing the Current Prospectus. The ability to file the simplified prospectus of the Fund with that of the Proposed Fund will ensure that the Filer can make the operational and administrative features of the Fund and the Proposed Fund consistent with each other, if necessary.
20. In the absence of this decision, NI 81-101 requires that the Fund file a final simplified prospectus, annual information form and fund facts along with the written consent of the auditor by February 16, 2020. If the Exemption Sought is not granted, it will be necessary to renew the Current Prospectus twice within a short period of time in order to consolidate the simplified prospectus of the Fund with the simplified prospectus of the Proposed Fund.
21. The Filer proposes:
a) to file a combined preliminary and pro forma simplified prospectus, annual information form and fund facts in respect of the Fund and the Proposed Fund by March 16, 2020; and
b) to file the final simplified prospectus, annual information form and fund facts in respect of the Fund and Proposed Fund along with the written consent of the auditor on or about April 25, 2020.
22. There have been no material changes in the affairs of the Fund since the date of the Current Prospectus, other than those for which amendments have been filed. Accordingly, the Current Prospectus represents current and accurate information regarding the Fund.
23. Given the disclosure obligations of the Filer and the Fund, should any material changes occur, the Current Prospectus will be amended as required under the Legislation.
24. New investors who purchase securities of the Fund after February 6, 2020 will be sent or delivered the most recently filed fund facts documents of the Fund. The amended and restated simplified prospectus dated July 19, 2019 amending and restating the amended and restated simplified prospectus dated March 15, 2019 amending and restating the amended and restated simplified prospectus dated February 27, 2019, amending and restating the simplified prospectus dated February 6, 2019 and the amended and restated annual information form dated July 19, 2019 amending and restating the amended and restated annual information form dated March 15, 2019 amending and restating the amended and restated annual information form dated February 27, 2019, amending and restating the annual information form dated February 6, 2019 will still be available to investors upon request.
25. The Exemption Sought will not affect the currency or accuracy of the information contained in the Current Prospectus and therefore will not be prejudicial to the public interest.
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.