(1) An agreement or declaration of trust by which a person or company acts as manager of an investment fund must provide that the manager is responsible for any loss that arises out of the failure of the manager, or of any person or company retained by the manager or the investment fund to discharge any of the manager’s responsibilities to the investment fund,
(a) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the investment fund, and
(b) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.
(2) An investment fund must not relieve the manager of the investment fund from liability for loss that arises out of the failure of the manager, or of any person retained by the manager or the investment fund to discharge any of the manager’s responsibilities to the investment fund,
(a) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the investment fund, or
(b) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.
(3) An investment fund may indemnify a person or company providing services to it against legal fees, judgments and amounts paid in settlement, actually and reasonably incurred by that person or company in connection with services provided by that person or company to the investment fund, if
(a) those fees, judgments and amounts were not incurred as a result of a breach of the standard of care described in subsection (1) or (2); and
(b) the investment fund has reasonable grounds to believe that the action or inaction that caused the payment of the fees, judgments and amounts paid in settlement was in the best interests of the investment fund.
(4) An investment fund must not incur the cost of any portion of liability insurance that insures a person or company for a liability except to the extent that the person or company may be indemnified for that liability under this section.
(5) This section does not apply to any losses to an investment fund or securityholder arising out of an action or inaction by any of the following:
(a) a director of the investment fund;
(b) a custodian or sub-custodian of the investment fund, except as set out in subsection (6).
(6) This section applies to any losses to an investment fund or securityholder arising out of an action or inaction by a custodian or sub-custodian acting as agent of the investment fund in administering the securities lending, repurchase or reverse repurchase transactions of the investment fund.