The Securities Commission has granted CIBC Asset Management Inc. (CIBC) an exemption from the multi-layering restriction of National Instrument 81-102 Investment Funds (NI 81-102), which typically prohibits mutual funds from investing in other funds that themselves invest over 10% of their net asset value in other mutual funds. This exemption allows CIBC to implement a three-tier fund structure, with certain conditions.
Under the terms of the exemption:
1. CIBC must be the registered investment fund manager for all funds involved in the three-tier structure.
2. The fund prospectuses must disclose that the funds may invest in reference funds which in turn may invest more than 10% of their assets in third-tier funds without charging additional management or administrative fees.
3. The investments must comply with all other requirements of section 2.5 of NI 81-102, barring any other granted discretionary relief.
4. There must be no duplication of management or administrative fees across the three tiers.
5. The structure must ensure fair treatment of investors and fair allocation of transaction costs.
6. Policies and procedures must be in place to manage liquidity and redemption risks due to cross-ownership within the structure.
7. Each fund must comply with disclosure requirements as if they were directly investing in the third-tier funds.
8. Reference and third-tier funds must not be alternative mutual funds and must not rely on discretionary relief to exceed leverage exposure limits.
The decision is based on the expectation that this exemption will not be prejudicial to the public interest and will maintain fair treatment and investor protection. The Ontario Securities Commission, as the principal regulator, has issued this decision, which is applicable across multiple Canadian jurisdictions.