The Ontario Securities Commission granted an exemption to Brompton Funds Limited, allowing its exchange-traded alternative mutual fund, Brompton Enhanced Multi-Asset Income ETF (Top Fund), to invest up to 20% of its net assets in Brompton Split Corp. Preferred Share ETF (Underlying Fund). This decision exempts the Top Fund from the multi-layering restriction in paragraph 2.5(2)(b) of National Instrument 81-102 – Investment Funds (NI 81-102), which typically prevents a fund from investing more than 10% of its net assets in another investment fund that itself invests more than 10% of its net assets in other investment funds.
The exemption was granted under the condition that the investment aligns with the Top Fund’s objectives, there is no duplication of management or incentive fees, and the Underlying Fund, along with the Split Share Corporations and Other Funds it invests in, do not rely on discretionary relief to exceed leverage exposure limits set by NI 81-102. The decision is based on the rationale that this arrangement is an efficient and cost-effective alternative for the Top Fund to achieve its targeted allocation to preferred shares issued by split share corporations and is not prejudicial to the public interest or to the securityholders of the Top Fund. The exemption is subject to several conditions to ensure compliance with the investment objectives and regulatory framework.