The Securities Commission has granted an exchange-traded fund (ETF) an exemption from section 9.4(2) of National Instrument 81-102 Investment Funds (NI 81-102), allowing the ETF to accept digital assets, specifically bitcoin or ether, as subscription proceeds for its units, known as Creation Units. This decision is subject to conditions and is based on the ETF’s need to align the trading price of its units more closely with its net asset value.
Under normal circumstances, subsection 9.4(2) of NI 81-102 restricts mutual funds from accepting anything other than cash or securities as subscription proceeds. However, the ETF argued that allowing digital assets as payment would benefit investors by reducing the premium or discount on the trading price of the ETF units relative to the net asset value per security.
The exemption is conditional on the digital assets being acquired from a regulated exchange, trading platform, or over-the-counter counterparty, and being directly delivered to the ETF’s digital wallet at its custodian or sub-custodian. This is to ensure compliance with laws aimed at preventing money laundering and terrorist financing activities.
The decision was made under the securities legislation of Ontario, with the Ontario Securities Commission acting as the principal regulator. The ETFs involved are managed by CI Investments Inc. and are designed to provide exposure to bitcoin and ether through an institutional-quality fund platform. The ETFs are reporting issuers in all Canadian jurisdictions and are subject to NI 81-102.