The Securities Commission has granted an exemption to investment funds managed by SLGI Asset Management Inc. (SLGI) from certain provisions of National Instrument 81-102 Investment Funds (NI 81-102). This exemption pertains to investments in unregistered fixed income securities, known as 144A Securities, which are traded under Rule 144A of the United States Securities Act of 1933.
The exemption allows funds that are qualified institutional buyers (QIBs) to purchase 144A Securities without these securities being considered “illiquid assets” under NI 81-102. Normally, public resales of 144A Securities to non-QIBs are subject to holding periods, which could classify them as illiquid. However, the exemption recognizes that QIBs can trade these securities freely among themselves without holding periods, indicating a level of liquidity not reflected by the standard definition.
The decision is based on several conditions:
1. The purchasing fund must be a QIB at the time of purchase.
2. The 144A Securities must not be illiquid under part (a) of the definition in NI 81-102.
3. The securities must be traded on a mature and liquid market.
4. The funds must disclose in their prospectus that they have obtained this exemption.
The rationale for the exemption includes the growth and liquidity of the 144A Securities market, the ability of QIBs to trade these securities freely, and the potential for these investments to benefit the funds and their investors. The Commission concluded that granting the exemption would not be prejudicial to the public interest.