The Securities Commission granted an exemption to Mulvihill Capital Management Inc. and the associated Proposed ETFs, as well as any future ETFs managed by the Filer or its affiliates, from two specific requirements:
1. Underwriter’s Certificate Requirement: The Filer and each ETF are exempt from the obligation to include an underwriter’s certificate in an ETF’s prospectus. This exemption is based on the reasoning that Authorized Dealers and Designated Brokers do not provide the same services as traditional underwriters in the distribution of Creation Units. They do not participate in the preparation of the prospectus, nor do they receive fees or commissions for distributing ETF Securities. Instead, they profit from arbitrage opportunities and market-making activities.
2. Take-Over Bid Requirements: Any person or company purchasing ETF Securities in the normal course through the facilities of the Toronto Stock Exchange (TSX), the Neo Exchange Inc. (Neo), or another Canadian marketplace is exempt from the take-over bid requirements. The rationale for this exemption is that it would be challenging for Securityholders to exert control over an ETF, monitoring compliance with take-over bid requirements is impractical due to the fluctuating number of outstanding ETF Securities, and the pricing mechanism of ETF Securities discourages attempts to gain control or offer a control premium.
The exemptions are supported by the Securities Act (Ontario) and National Instrument 62-104 Take-Over Bids and Issuer Bids, with the decision considering the unique structure and operation of ETFs, which differ from traditional mutual funds. The decision aims to facilitate the efficient functioning and liquidity of ETF Securities while acknowledging that the risks associated with underwriting and take-over bids are mitigated by the nature of ETFs.