The Securities Commission granted an exemption to allow the Royal Canadian Mint to act as custodian for certain investment funds’ bullion assets and for International Depository Services of Canada Inc. to act as a sub-custodian. This decision was made under the National Instrument 81-102 Investment Funds (NI 81-102), which typically requires funds to have a single custodian that meets specific qualifications. The exemption was necessary because the Bank of Nova Scotia, the current sub-custodian for bullion, will cease offering these services, and the Mint is not a qualified custodian under the standard rules of NI 81-102.
The exemption was granted on several conditions, including that the Mint must meet a certain shareholder equity threshold and that the Sub-Custodian to the Mint must either meet this threshold or be guaranteed by an entity that does. The funds can only use the Sub-Custodian to the Mint for bullion held in Canada. Additionally, the Mint must regularly monitor the Sub-Custodian to ensure compliance and include statements in compliance reports about the review process and appropriateness of the Sub-Custodian to hold the funds’ bullion.
The decision was based on the specialized nature of bullion custody, the Mint’s expertise, and the limited number of qualified custodians in Canada. The arrangement will comply with the requirements of Part 6 of NI 81-102, except for the matters covered by the exemption. The decision emphasizes the importance of the Mint’s role in safeguarding the bullion, the need for physical segregation and identification of the funds’ bullion, and the procedures for handling loss, damage, or destruction of bullion.