The Securities Commission has granted an investment fund managed by Penderfund Capital Management Ltd. an exemption from the illiquid asset concentration limits outlined in section 2.4 of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the fund, as a Qualified Institutional Buyer, to purchase and hold certain fixed income securities (144A Securities) in excess of the usual 10% and 20% net asset value limits for mutual funds and non-redeemable investment funds, respectively. Additionally, the fund can hold these securities beyond the 15% and 25% net asset value limits for mutual funds and non-redeemable investment funds, respectively, without being required to reduce its holdings.
The rationale for the exemption is based on the liquidity and marketability of 144A Securities among Qualified Institutional Buyers, which can be traded without holding periods. The Commission determined that these securities are traded on a mature and liquid market, and that the exemption would not compromise investor protection or the public interest.
The exemption is contingent upon the following conditions:
1. The fund must be a Qualified Institutional Buyer at the time of purchasing 144A Securities.
2. The 144A Securities acquired under the exemption must not be considered illiquid assets under part (a) of the definition in NI 81-102.
3. The 144A Securities must be traded on a mature and liquid market.
4. The fund’s prospectus must disclose the exemption to its investors.
The British Columbia Securities Commission is the principal regulator for the application, and the decision also applies to Ontario and other jurisdictions under the Multilateral Instrument 11-102 Passport System. The decision is made under the securities legislation of the relevant jurisdictions and is in accordance with the test set out in the legislation for granting such an exemption.