The Securities Commission has granted an exemption to Chou Associates Management Inc. (the Filer) and Chou Associates Fund (the Fund) from certain self-dealing restrictions to allow the Fund to sell illiquid securities to affiliated companies of the Filer. The exemption is conditional on several factors, including approval by the Fund’s independent review committee and a top-up provision if the securities’ value increases within six months post-sale.
Key Facts:
– The Fund holds illiquid securities from Exco Resources Inc. (EXCO), comprising about 23% of its net assets.
– The Filer proposed selling 500,000 EXCO shares to Wintaai Holdings Ltd. and Chou USA Inc. (the Affiliates) to reduce illiquid asset exposure.
– The sale price is based on an independent valuation by Kroll, LLC, with a top-up provision to adjust for value changes after six months.
Reasoning:
– The sale aims to bring the Fund’s illiquid assets within regulatory limits.
– The Affiliates can purchase the securities promptly, which is not possible through market facilities.
– The independent valuation ensures the Fund receives a fair price, protecting unitholders’ interests.
Outcome:
– The exemption is granted under conditions ensuring fairness and transparency, including independent review committee approval, adherence to the agreed sale terms, and record-keeping requirements.
Relevant Laws and Regulations:
– National Instrument 81-102 Investment Funds (NI 81-102) restricts transactions between funds and their affiliates.
– National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) governs transactions involving registered advisers and affiliated entities.
– The exemptions are subject to conditions outlined in the decision to ensure compliance with the spirit of the regulations.