The Securities Commission has granted an exemption to GFI Investment Counsel Ltd. (the Filer) from certain prohibitions in National Instrument 31-103, specifically sections 13.5(2)(b)(ii) and (iii), which restrict in-specie transfers between pooled funds and managed accounts. The exemption allows the Filer to transfer securities directly between these entities without the usual restrictions, provided specific conditions are met.
The Filer is registered in various capacities across Canadian jurisdictions and manages both existing and future pooled funds (Funds) and managed accounts for clients. The exemption is intended to facilitate more effective asset management and reduce transaction costs by allowing in-specie transfers, which can be more efficient than selling and repurchasing securities.
Key conditions of the exemption include obtaining client consent, ensuring the securities are consistent with the Fund’s investment objectives, and maintaining equal value between the securities transferred and the Fund Securities being purchased or redeemed. The Filer must also keep detailed records of all in-specie transfers for five years and cannot receive compensation for the sales or redemptions of Fund Securities related to the in-specie transfers, except for nominal administrative charges.
The exemption is contingent on the Filer’s compliance with written policies and procedures, oversight by the Chief Compliance Officer, and the requirement that any illiquid assets transferred are done so on a pro rata basis with at least one independent quote obtained before the transfer.
The decision was made under the securities legislation of Ontario, with the Ontario Securities Commission acting as the principal regulator, and the Filer has indicated reliance on Multilateral Instrument 11-102 Passport System in Alberta, British Columbia, and Québec. The exemption is granted based on the Filer’s representations and is subject to the conditions outlined to ensure the best interests of both the Funds and the Managed Accounts are served.