Auspice Capital Advisors Ltd. et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted under subsection 62(5) of the Securities Act to permit extension of a prospectus lapse date by 42 days to facilitate the incorporation by reference of more recent financial statements and auditors' consent letter after change of auditor -- no conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5 as am., s. 62(5).

Citation: Re Auspice Capital Advisors Ltd., 2024 ABASC 47

March 18, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF AUSPICE CAPITAL ADVISORS LTD. (the Filer) AND AUSPICE DIVERSIFIED TRUST AND AUSPICE ONE FUND TRUST (the Funds)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdictions (the Legislation) that the time limits for the renewal of the simplified prospectus of the Funds dated February 28, 2023 (the Current Prospectus) be extended to the time limits that would apply if the lapse date of the Current Prospectus was April 10, 2024 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application),

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each jurisdiction of Canada, other than Alberta and Ontario; and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, and National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a quantitative investment specialist that was established in 2006.

2. The Filer is registered as a portfolio manager, investment fund manager and exempt market dealer in Alberta, as a commodity trading manager, investment fund manager and exempt market dealer in Ontario, as an investment fund manager in British Columbia, Québec, and Newfoundland and Labrador, and as an exempt market dealer in British Columbia and Québec. The Filer's head office is in Calgary, Alberta.

3. Each Fund is a mutual fund organized as an open-ended unit trust governed by the laws of the Province of Alberta.

4. Each Fund is an alternative mutual fund as defined in National Instrument 81-102 Investment Funds (NI 81-102).

5. Each Fund is a reporting issuer in each jurisdiction of Canada.

6. Prior to February 28, 2023, the Funds were offered through an offering memorandum only and were not reporting issuers during such prior period.

7. Neither the Filer nor the Funds are in default of securities legislation in any jurisdiction of Canada.

8. The Funds currently distribute securities in each jurisdiction of Canada under the Current Prospectus.

9. Pursuant to section 2.5(2) of NI 81-101, the lapse date of the Current Prospectus is February 28, 2024 (the Lapse Date). Accordingly, under subsection 2.5(4) of NI 81-101, the distribution of securities of each of the Funds must cease on the Lapse Date unless: (i) the Funds file a pro forma prospectus at least 30 days prior to the Lapse Date; (ii) the final prospectus is filed no later than 10 days after the Lapse Date; and (iii) a receipt for the final prospectus is obtained within 20 days of the Lapse Date.

10. The renewal prospectus for the Funds is therefore required to be filed by March 9, 2024 in order for securities of the Funds to continue to be distributed after the Lapse Date.

11. During 2023, the auditor of the Funds was changed from KPMG LLP (KPMG) to EY LLP (EY).

12. The fiscal year-end of each of the Funds is December 31 and, pursuant to section 2.2 of National Instrument 81-106 Investment Fund Continuous Disclosure, the annual financial statements and auditor's report are required to be filed on or before the 90th day after each Fund's most recently completed financial year, which for each Fund since it became a reporting issuer, is the financial period ended December 31, 2023 (the 2023 Fiscal Year-End).

13. The audited financial statements of the Funds for the financial period ended December 31, 2022 (the 2022 Fiscal Year-End) were filed as required on May 15, 2023, with an unqualified audit report (the 2022 Audit Report) from KPMG dated March 16, 2023. An auditors' consent letter from KPMG in respect of these financial statements, also dated March 16, 2023, was also filed on May 15, 2023.

14. Given the change in the auditor of the Funds, the Filer has determined that that it will not be possible to obtain from KPMG the required auditor's consent letter relating to the use of its 2022 Audit Report in the final renewal simplified prospectus of the Funds (the Renewal SP) prior to the date that is 20 days after the Lapse Date. Furthermore, the Filer has determined that the Funds would incur unduly high costs to obtain the consent letter from KPMG.

15. In the circumstances, the Filer considers that it is not in the best interests of the Funds to obtain the required auditor's consent letter relating to the incorporation by reference in the Renewal SP of KPMG's 2022 Audit Report, which would be required to be incorporated by reference into the Renewal SP at this time.

16. EY is in the process of completing the audited financial statements of the Funds for the 2023 Fiscal Year-End, which will be completed by EY on or before March 30, 2024. EY has advised the Filer that it expects to be in a position to provide its consent to the incorporation of its auditor's report on such financial statements by reference in the Renewal SP in early April 2024. EY has also advised that it expects to charge a significantly lower fee for such consent than that requested by KPMG for its consent in respect of the 2022 Audit Report.

17. The Filer considers that it is in the interests of the securityholders of the Funds that the Exemption Sought be granted, such that the Funds may wait to renew the Current Prospectus until the audited financial statements of the Funds for the 2023 Fiscal Year-End are completed and EY is able to provide the required auditor's consent in respect of its report on such financial statements for purposes of the Renewal SP.

18. Extending the Lapse Date to April 10, 2024 will also allow the Filer to update the Fund Facts to include more up-to-date information for the 2023 Fiscal Year-End.

19. Other than the change of the auditor of the Funds, which was previously disclosed, there have not been any other material changes in the affairs of the Funds since the Current Prospectus was filed. Accordingly, the Current Prospectus continues to provide accurate information regarding the Funds.

20. Extending the Lapse Date will also not be prejudicial to anyone buying securities of the Funds between the date hereof and when the Renewal SP is finalized.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.