The Securities Commission has granted an exemption to investment funds managed by Lysander Funds Limited, allowing them to treat certain unregistered fixed income securities, known as 144A Securities, as liquid assets. These securities are typically restricted under National Instrument 81-102 Investment Funds (NI 81-102) due to prescribed holding periods that classify them as illiquid assets. However, the exemption acknowledges that 144A Securities can be traded freely among qualified institutional buyers without holding periods, indicating a level of liquidity that justifies the exemption.
The key conditions for the exemption are that the purchasing fund must be a qualified institutional buyer at the time of purchase, the securities must be traded on a mature and liquid market, and they must not be considered illiquid under other parts of NI 81-102. Additionally, the funds must disclose in their prospectus that they have obtained this exemption.
The decision is based on the reasoning that 144A Securities have become a significant and liquid part of the U.S. corporate bond market, and that the exemption will not prevent funds from meeting redemption requests. It also considers that preventing funds from investing in 144A Securities could limit their access to investment opportunities.
The exemption is subject to the condition that the funds continue to meet the requirements for being a qualified institutional buyer and that the liquidity of the 144A Securities is maintained. The decision is made under the authority of sections 1.1, 2.4, and 19.1 of NI 81-102, and is intended to be relied upon in multiple Canadian jurisdictions as per Multilateral Instrument 11-102 Passport System.