The Securities Commission granted an exemption to Desjardins Global Asset Management Inc. (the Filer) on behalf of its managed alternative mutual funds (the Alternative Funds) from certain short selling restrictions under Regulation 81-102. The exemption allows the Alternative Funds to short sell index participation units (IPUs) of one or more IPU issuers up to 100% of the fund’s net asset value (NAV) at the time of sale.
The exemption specifically relaxes the following restrictions:
– The Single Issuer Short Restriction, which limits short sales of a single issuer’s securities to 10% of the fund’s NAV.
– The Aggregate Short Restrictions, which limit the combined value of short sales and cash borrowing to 50% of the fund’s NAV.
The decision was based on the rationale that IPUs represent diversified and liquid investments, reducing the concentration risk associated with shorting a single issuer. The exemption is subject to conditions, including compliance with the Aggregate Limit of 300% of the fund’s NAV when combining exposure to short selling, cash borrowing, and specified derivatives. The Alternative Funds must also comply with other applicable requirements of Regulation 81-102 and ensure that short sales are consistent with the funds’ investment objectives and strategies.
The decision was made under the securities legislation of Quebec and Ontario, with the Autorité des marchés financiers acting as the principal regulator. The decision also applies to other Canadian jurisdictions through the Passport System, as outlined in Regulation 11-102. The Alternative Funds’ prospectuses must disclose the ability to short sell IPUs up to 100% of the fund’s NAV, including the material terms of the decision.