The Securities Commission has granted an exemption to investment funds managed by Canoe Financial LP (Canoe) from certain provisions of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows these funds, which are qualified institutional buyers, to invest in unregistered fixed income securities (144A Securities) without these securities being classified as illiquid assets under NI 81-102.
The exemption was sought because the standard definition of illiquid assets in NI 81-102 includes restricted securities, which could encompass 144A Securities due to their prescribed holding period for public resale to non-qualified institutional buyers. However, 144A Securities are immediately tradable among qualified institutional buyers without a holding period, suggesting they are not inherently illiquid.
The Commission agreed with Canoe’s reasoning that 144A Securities should not be automatically deemed illiquid, as they trade in an active institutional market and can be as liquid or more so than other securities allowed under NI 81-102. The exemption is conditional upon the funds being qualified institutional buyers at the time of purchase and the securities being traded on a mature and liquid market. Additionally, the funds must disclose in their prospectus that they have obtained this exemption.
The decision is based on the belief that this exemption will not compromise investor protection or the public interest, and it will allow funds to access a broader range of investment opportunities in the fixed income market. The Alberta Securities Commission is the principal regulator for this application, and the decision also applies to Ontario and other Canadian jurisdictions where Canoe operates.