The Securities Commission has granted CIBC Asset Management Inc. an exemption from certain requirements of National Instrument 81-102 Investment Funds (NI 81-102), specifically paragraph 2.8(1)(d) and subparagraph 2.8(1)(f)(i), which pertain to covering positions in derivatives. This exemption allows mutual funds managed by CIBC Asset Management or its affiliates to use options to sell an equivalent quantity of the underlying interest as cover for long positions in forward contracts, standardized futures, or swaps.
The exemption is conditional and includes limitations such as a cap on a fund’s purchase of options for non-hedging purposes to no more than 10% of the fund’s net asset value. The exemption is designed to provide funds with more flexibility to enhance yield and manage exposure to derivatives without over-collateralizing, which can impose additional costs.
The decision is based on the rationale that the risks associated with the positions covered by the exemption are similar to those permitted under paragraph 2.8(1)(c) of NI 81-102, which allows mutual funds to write put options covered by the right or obligation to sell an equivalent quantity of the underlying interest.
The exemption is subject to the condition that funds must hold sufficient cover, either in cash or through offsetting positions, to meet their obligations under the derivatives contracts without recourse to other assets of the fund. The decision will expire upon the enactment of any new securities legislation that addresses the use of cover for the underlying interest of forward contracts, standardized futures, or swaps in compliance with section 2.8 of NI 81-102.