The Securities Commission granted an exemption from the fund multi-layering restriction in paragraph 2.5(2)(b) of National Instrument 81-102 (NI 81-102), allowing an exchange-traded alternative mutual fund (the Top Fund) to invest in related alternative funds (the Underlying Funds) managed by the same manager, which in turn may hold more than 10% of their net assets in other investment funds (the Third Tier Funds). This exemption is subject to conditions that prevent duplication of fees, ensure fair treatment of investors, and maintain investor protection policies for liquidity and redemption risks.
The decision is based on the rationale that the investment by the Top Fund in the Underlying Funds is an efficient and cost-effective means to implement investment strategies and is in the best interests of the Top Fund. The exemption is conditional on compliance with several requirements, including disclosure obligations, management of liquidity risk, and adherence to investor protection policies.
The relevant legislative provisions underpinning the outcome are National Instrument 81-102 Investment Funds, specifically section 2.5(2)(b) concerning multi-tier investment prohibitions, and section 19.1, which allows for exemptions. The decision also references Multilateral Instrument 11-102 for the passport application process and National Instrument 81-106 for continuous disclosure requirements.