National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Revocation of prior relief -- relief from the requirement in subsections 5.2(1), (3) and (4) of NI 81-101 to allow dealer to physically deliver or electronically send in a single email attachment or single document accessible through a hyperlink one document containing the fund facts documents of all of the funds in a model portfolio, along with a cover page, in respect of purchases of securities of the funds made pursuant to a model portfolio program, subject to certain conditions -- National Instrument 81-101 Mutual Fund Prospectus Disclosure.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 3.2.01(1), 5.2(1), 5.2(3) and 5.2(4), and 6.1.
August 19, 2020
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 SEI INVESTMENTS CANADA COMPANY (SEI) AND IN THE MATTER OF RICHARDSON GMP LIMITED (the Representative Dealer, and, together with SEI, the Filers)
The principal regulator in the Jurisdiction has received an application from SEI on behalf of the Funds (as defined below) and the Representative Dealer for a decision under the securities legislation of the Jurisdiction (the Legislation):
(a) revoking the decision granted by the principal regulator (the Revocation) on July 15, 2020 (the Prior Decision); and
(b) exempting each Dealer (as defined below) from:
(i) subsection 5.2(1) of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), which prohibits a fund facts document (Fund Facts), if being delivered under the pre-sale delivery requirement for Fund Facts (the Fund Facts Delivery Requirement), from being combined with any other materials or documents;
(ii) subsection 5.2(3) of NI 81-101, which prohibits multiple Fund Facts, if being delivered electronically at the same time, from being combined into a single email attachment or a single document accessible through a hyperlink; and
(iii) subsection 5.2(4) of NI 81-101, which prohibits a Fund Facts, if being delivered or sent under certain exceptions from the Fund Facts Delivery Requirement, from being combined with any other materials or documents, except for certain exceptions (collectively, the Bundling Restrictions)
in order to physically deliver or electronically send, in a single email attachment or a single document accessible through a hyperlink, one document containing the Fund Facts for all the Funds (as defined below) forming part of an SEI Portfolio (as defined below), along with a cover page, in respect of purchases of securities of the Funds under the Service (as defined below) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec, Saskatchewan and Yukon (the Other Jurisdictions, and together with Ontario, the Canadian Jurisdictions).
Terms defined in National Instrument 14-101 Definitions 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 Filers:
SEI and the Funds
1. SEI is an unlimited liability company organized under the laws of the Province of Nova Scotia. The registered office of SEI is located in Toronto, Ontario.
2. SEI is registered as a portfolio manager and an exempt market dealer in each of the Canadian Jurisdictions, and as an investment fund manager in Ontario, Newfoundland and Labrador, and Québec. SEI is also registered under the Commodity Futures Act (Ontario) as an adviser in the category of commodity trading manager.
3. SEI is the investment fund manager of certain mutual funds (the Existing Funds) that form part of the SEI Portfolios model portfolio service described below (the Service). SEI may, in the future, also become the manager of additional mutual funds (the Future Funds and, together with the Existing Funds, the Funds) that will also form part of the Service.
4. Each of the Funds is, or will be, a reporting issuer in one or more of the Canadian Jurisdictions, and subject to the requirements of National Instrument 81-102 Investment Funds (NI 81-102). Securities of the Funds are, or will be, qualified for sale pursuant to a simplified prospectus, annual information form and Fund Facts that have been, or will be, prepared and filed in accordance with NI 81-101.
5. The Funds are, or will be, open-ended mutual funds established under the laws of Ontario.
6. Except as described in representation 16 below, SEI is not in default of securities legislation in any of the Canadian Jurisdictions. The Funds are not in default of securities legislation in any of the Canadian Jurisdictions.
7. Securities of the Funds are, or will be, distributed through dealers that are unaffiliated with SEI, including the Representative Dealer (the Dealers, and each, a Dealer).
8. The Representative Dealer is registered as an investment dealer and is a member of the Investment Industry Regulatory Organization of Canada (IIROC).
9. Each Dealer is, or will be: (a) registered in the applicable Canadian Jurisdictions as a dealer in the category of mutual fund dealer and, other than mutual fund dealers registered in Québec, is, or will be, a member of the Mutual Fund Dealers Association; or (b) registered in the applicable Canadian Jurisdictions as a dealer in the category of investment dealer and is, or will be, a member of IIROC.
10. Except as described in representation 17 below, the Representative Dealer is not in default of securities legislation in any of the Canadian Jurisdictions.
11. Through the Service, SEI constructs and makes available to investors, through Dealers, asset allocation portfolios which are invested exclusively in various combinations of the Funds (the SEI Portfolios, and each, an SEI Portfolio).
12. The Service offers a number of SEI Portfolios, each of which is comprised of a selection of Funds and corresponds to a different investment objective, investment horizon and risk profile. The SEI Portfolios are designed to meet a wide range of investor goals, from capital preservation to maximum growth, and span a broad risk-return spectrum.
13. Each SEI Portfolio is, and will be, comprised entirely of Funds for which SEI acts as investment fund manager.
14. Each SEI Portfolio has a specified target fund allocation that defines the percentage of the portfolio to be invested (the Target Weighting) in each Fund.
15. Each investor in an SEI Portfolio must accept all of the Funds in the SEI Portfolio and the Targeted Weighting of each of those Funds.
16. SEI has received exemptive relief to address compliance with the dealer registration, know-your-client, suitability and account reporting requirements in the Legislation in respect of the Service.
17. SEI and the Representative Dealer, on behalf of each Dealer, have applied for exemptive relief to address compliance with the Fund Facts Delivery Requirement in the Legislation in respect of the Service.
The Exemption Sought
18. Each investor in an SEI Portfolio makes one investment decision, which is the selection of their chosen SEI Portfolio, causing the investor to invest in multiple Funds comprising their chosen SEI Portfolio.
19. The Filer believes that combining all of the Fund Facts for the Funds in an SEI Portfolio in one document, in paper or electronic form in a single email attachment or a single document accessible through a hyperlink, along with a cover page, rather than delivering or sending separate multiple Fund Facts documents:
(a) will allow investors to better understand that an SEI Portfolio is composed of several Funds with their own characteristics;
(b) will facilitate the review of information provided in the Fund Facts of each Fund forming part of the selected SEI Portfolio; and
(c) will not be so extensive as to cause a reasonable person to conclude that the combination prevents the information from being presented in a simple, accessible and comparable format.
20. In the absence of the Exemption Sought, a Dealer would be required to comply with the Bundling Restrictions.
21. The Filers previously obtained relief from the Bundling Restrictions in respect of purchases of securities of the Funds under the Service in the Prior Decision. Due to inadvertence, the Prior Decision did not include conditions 2(b) and (c) below. The Revocation and issuance of a new decision in respect of the Exemption Sought will address this issue.
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:
1. the Revocation is granted; and
2. the Exemption Sought is granted provided that:
(a) when a Fund Facts is required to be delivered or sent to the purchaser, for all the Funds forming part of an SEI Portfolio under the Service, the Dealer physically delivers or electronically sends, in a single email attachment or single document accessible through a hyperlink, one document containing only the following:
(i) the Fund Facts for all the Funds in the SEI Portfolio; and
(ii) a cover page containing:
a. the name of the particular SEI Portfolio;
b. a statement about the delivery of the Fund Facts that make up the SEI Portfolio;
c. the name of each Fund comprising the SEI Portfolio; and
d. the specified Target Weighting for each Fund in the SEI Portfolio;
(b) SEI provides 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; and
(c) prior to a Dealer relying on the Exemption Sought, SEI provides to the Dealer a disclosure statement informing the Dealer of the implications of this decision.