The Securities Commission has granted an exemption to BMO Asset Management Inc. and the investment funds it manages (Top Funds) from certain conflict of interest investment restrictions and reporting requirements. This exemption allows the Top Funds, which are reporting issuers, to invest in related underlying investment funds and collective investment schemes (Underlying Funds and Underlying Investments) that are not reporting issuers, subject to conditions.
Key facts:
– The Filer (BMO Asset Management Inc.) is registered as an investment fund manager and portfolio manager across various Canadian jurisdictions.
– The Top Funds are reporting issuers distributed to investors via prospectus and are subject to National Instrument 81-102 (NI 81-102) and National Instrument 81-107 (NI 81-107).
– The Underlying Funds and Underlying Investments are managed by the Filer or its affiliates but are not reporting issuers and not subject to NI 81-102.
– The Filer sought relief from prohibitions against investing in entities where the fund or related parties have a significant interest, as well as from certain self-dealing restrictions and fund-on-fund investment requirements.
Reasoning:
– The exemption is granted on the basis that investments by Top Funds in the Underlying Funds and Underlying Investments are consistent with their investment objectives and strategies.
– The exemption is believed to provide Top Funds with efficient and cost-effective access to diversified alternative and private asset classes.
– The exemption is subject to conditions to ensure that the investments are made in the best interests of the Top Funds and do not result in inappropriate fee duplications or conflicts of interest.
Outcome:
– The Top Funds are permitted to invest in the Underlying Funds and Underlying Investments, provided they comply with conditions such as treating these investments as illiquid assets, obtaining approval from an independent review committee, and ensuring transparency in reporting and fee structures.
– The exemption is conditional upon the Top Funds adhering to the illiquid asset restriction in section 2.4 of NI 81-102 and obtaining independent review committee approval for purchases of securities in related underlying funds or schemes.
Relevant laws and regulations:
– Securities Act (Ontario), sections 111(2), 111(4), and 117(1)
– National Instrument 31-103, section 13.5(2)(a)
– National Instrument 81-102, paragraphs 2.5(2)(a) and (c)
– National Instrument 81-107, Independent Review Committee for Investment Funds
– Multilateral Instrument 11-102 Passport System
The decision is based on the belief that the exemption will benefit the Top Funds and their investors by providing access to a broader range of investment opportunities while maintaining appropriate safeguards against conflicts of interest and fee duplications.