The Securities Commission has granted an exemption to a group of mutual funds managed by an investment fund manager from the restriction in section 4.1(1) of National Instrument 81-102 Investment Funds (NI 81-102). This restriction typically prevents funds from investing in equity securities during or within 60 days after a distribution if a related dealer is involved as an underwriter. The exemption allows these funds to invest in such distributions outside of Canada, subject to certain conditions.
The decision is based on the argument that the global operations of the related dealers significantly limit the funds’ ability to participate in foreign distributions, resulting in missed investment opportunities and competitive disadvantages. The funds have demonstrated a market necessity for the exemption and have formal policies and procedures to address potential conflicts of interest, which have been approved by their independent review committee (IRC) as per National Instrument 81-107.
The exemption is conditional upon the funds’ investments being consistent with their objectives and strategies, approval by the IRC in accordance with subsection 5.2(2) of NI 81-107, and compliance with certain other conditions similar to those for domestic offerings under section 4.1(4) of NI 81-102. These conditions include the distribution being made through a prospectus or private placement in the foreign jurisdiction, the related dealer being regulated in that jurisdiction, the securities being listed on a stock exchange, and purchases during the 60-day period being made on an exchange. Additionally, details of investments made under this exemption must be reported annually.
The decision was made by the British Columbia Securities Commission, acting as the principal regulator, and also represents the decision of the Ontario Securities Commission.