The Securities Commission has approved an investment fund reorganization involving Mackenzie Financial Corporation (the Filer) and certain mutual funds under its management (the Reorganizing Funds) and affiliated Canada Life Funds. The reorganization did not meet all pre-approval criteria, particularly regarding tax deferral and the provision of fund facts documents to unitholders prior to approval. However, the Commission granted relief to allow top funds managed by the Filer or its affiliates to invest in the reorganized funds, which may hold more than 10% of their net asset value (NAV) in securities of corresponding limited partnerships (LP Funds) and other investment funds.
The decision was based on the Filer’s representations, which included the Filer’s registration details, compliance status, and the structure of the Reorganizing Funds, Canada Life Funds, and LP Funds. The Filer proposed reorganizations to enable unitholders to transfer to corresponding Canada Life Funds in a tax-efficient manner, avoiding significant capital gains realization. The reorganizations were structured as Qualifying Dispositions under section 107.4 of the Income Tax Act (Canada), allowing for tax-deferred transfers.
The Commission’s approval was contingent on unitholder approval at a special meeting and subject to conditions to prevent duplication of fees and ensure transparency in portfolio holdings. The conditions also required compliance with portfolio holdings disclosure requirements as if the investments were made directly in the LP Funds.
The relevant legislative provisions cited include National Instrument 81-102 Investment Funds, sections 2.1(1), 2.5(2)(b), 5.5(1)(b), 5.6(1), and 19.1(2), as well as the Income Tax Act (Canada). The decision also referenced National Instrument 81-107 Independent Review Committee for Investment Funds and National Instrument 81-106 Investment Fund Continuous Disclosure. The approval was granted with the understanding that the reorganizations would achieve a fair and reasonable result for the funds involved.