CIBC Asset Management Inc. and CIBC Canadian Banks Covered Call ETF

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- An ETF that invests in a portfolio consisting of the six largest Canadian banks in its investment objectives granted relief from the concentration restriction in NI 81-102, subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.1(1) and 19.1.

July 23, 2025

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CIBC ASSET MANAGEMENT INC. (the Filer) AND IN THE MATTER OF CIBC CANADIAN BANKS COVERED CALL ETF (the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of the Fund, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) relieving the Fund from subsection 2.1(1) of National Instrument 81-102 Investment Funds (NI 81-102), in order to permit the Fund to purchase securities of an issuer, enter into a specified derivatives transaction or purchase an index participation unit even though, immediately after the transaction, more than 10% of the net asset value (NAV) of the Fund would be invested in securities of any issuer (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the application; and

(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 all of the provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Canadian Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Canadian Bank means the Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and The Toronto-Dominion Bank.

Representations

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

1. The Filer is a corporation incorporated under the laws of Canada with its head office located in Toronto, Ontario.

2. The Filer will be the promoter, investment fund manager, trustee and portfolio manager of the Fund and is registered as: (i) a portfolio manager in each of the Canadian Jurisdictions; (ii) an investment fund manager in Ontario, Québec and Newfoundland and Labrador; (iii) a commodity trading manager in Ontario; and (iv) a derivative portfolio manager in Québec.

3. The Fund will be an exchange traded mutual fund governed under the laws of the Province of Ontario.

4. The Filer has filed a preliminary long form prospectus on behalf of the Fund with the securities regulatory authority in each of the Canadian Jurisdictions.

5. The Fund will be subject to NI 81-102, subject to any exemptions therefrom that may be granted by the securities regulatory authorities.

6. The Fund will be subject to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107).

7. The units of the Fund will (subject to satisfying the Toronto Stock Exchange (TSX) original listing requirements) be listed on the TSX.

8. The Fund's investment objective is to seek to provide income and long-term capital appreciation by investing in a portfolio of equity securities of Canadian banks, while mitigating some downside risk through the use of covered call options.

9. In order to achieve its investment objectives, the Fund will invest in an equal weighted portfolio of equity securities of the Canadian Banks. The Fund will, depending on market volatility and other factors, write covered calls options in respect of the securities it holds.

10. The common shares of the Canadian Banks are listed on the TSX.

11. With respect to the Canadian Banks, the Canadian Banks are among the largest public issuers in Canada. The common shares of the Canadian Banks are some of the most liquid equity securities listed on the TSX and are less likely to be subject to liquidity concerns than the securities of other issuers.

12. The liquidity of the common shares of the Canadian Banks is also evidenced by the markets for options in connection therewith. A liquid market for options on the common shares of the Canadian Banks is provided by the Montreal Exchange.

13. The Fund is subject to NI 81-102 and accordingly is not permitted to purchase securities of an issuer, enter into specified derivatives transactions in connection therewith or purchase index participation units if, immediately after the transaction, more than 10% of its NAV would be invested in securities of such issuer pursuant to subsection 2.1(1) of NI 81-102 (the Concentration Restriction).

14. The Fund will invest up to 100% of its NAV in common shares of the Canadian Banks. The Fund will invest in each Canadian Bank on an equal weighted basis. The Fund's Portfolio Securities (as defined below) will be rebalanced semi-annually or as soon as practicable in the determination of the portfolio manager, so that immediately following such rebalancing, the Fund's portfolio issuers are approximately equally weighted.

15. The Fund may sell call options on up to 50% of the securities of each Canadian Bank in the Fund's portfolio (the Portfolio Securities). The Filer may decide, in its discretion, not to sell call options.

16. In order to achieve its investment objectives, the Fund will be required to invest more than 10% of its NAV in securities of one or more Canadian Banks and accordingly the Fund will need an exemption from subsection 2.1(1) of NI 81-102.

17. The ability to invest more than 10% of the Fund's NAV in common shares of the Canadian Banks is fundamental to the Fund's investment strategies and integral to achieving the Fund's investment objectives.

18. If required to facilitate distributions or pay expenses of the Fund, securities of each Canadian Bank will be sold pro-rata across the Fund's portfolio according to their relative market values at the time of such sale.

19. Future subscriptions for Units of the Fund, if any, will be used to acquire securities of each Canadian Bank in the same weights as the Canadian Bank securities exist in the Fund's portfolio, based on their relative market values at the time of such subscription.

20. In the absence of: (i) new subscriptions for Units of the Fund, (ii) sales of Portfolio Securities, if any, required to facilitate distributions, redemptions or pay expenses of the Fund, or (iii) corporate actions of the Canadian Banks such as stock splits or consolidations, it is expected that the number of common shares of each of the Canadian Banks referable to the Fund's portfolio will not change. The Fund's portfolio will not be actively managed by the Filer, and will be rebalanced semi-annually or as soon as practicable in the determination of the portfolio manager.

21. The investment objectives and investment strategies of the Fund, as well as the risk factors associated therewith, including concentration risk, will be prominently disclosed in the prospectus of the Fund, as may be renewed or amended from time to time. The names of the Canadian Banks will also be disclosed in the prospectus of the Fund, as may be renewed or amended from time to time.

22. The Filer notes that, in respect of the Fund, its strategy to acquire securities of the Canadian Banks will be transparent, passive and fully disclosed to investors. The Fund will not invest in securities other than the Canadian Banks securities. In addition, in respect of the Fund, the names of the Canadian Banks to be invested in will be listed in the Fund's prospectus. Consequently, unitholders of the Fund will be fully aware of the risks involved with an investment in the securities of the Fund.

23. Given the proposed composition of the Fund's portfolio, it would be impossible for the Fund to achieve its investment objective and pursue its investment strategy without obtaining relief from the Concentration Restriction.

24. The Units of the Fund will be highly liquid securities, as designated brokers act as intermediaries between investors and the Fund, standing in the market with bid and ask prices for the Units of the Fund to maintain a liquid market for the Units of the Fund. The majority of trading in Units of the Fund will occur in the secondary market.

25. In view of the Filer, the Fund is also similar to a "fixed portfolio investment fund", as such term is defined in NI 81-102, in that it will: (a) have fundamental investment objectives that include holding and maintaining a fixed portfolio of publicly traded equity securities of one or more issuers, the names of which are disclosed in its prospectus; and (b) trade the securities referred to in paragraph (a) only in the circumstances disclosed in its prospectus. The Fund will not be a "fixed portfolio investment fund" as it will be in continuous distribution.

26. The Filer further notes that a "fixed portfolio investment fund" is exempt from the Concentration Restrictions, provided purchases of securities are made in accordance with its investment objectives.

27. Neither the Filer or the Fund is in default of any of its obligations under securities legislation in any of the Canadian Jurisdictions.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that:

(a) the investment in common share of Canadian Banks is made in accordance with the Fund's investment objectives and investment strategies as described in paragraph 14;

(b) the Fund will not purchase Portfolio Securities, enter into any transaction to obtain indirect exposure to Portfolio Securities or purchase index participation units if:

(i) immediately after the transaction, more that 20% of the NAV of the Fund, taken at market value at the time of the transaction, would be invested in such securities; or

(ii) the Fund becomes an insider of any Canadian Bank as a result of such investment;

(c) the Fund's investment strategies disclose that the Fund's portfolio will be rebalanced semi-annually or as soon as practicable in the determination of the portfolio manager; and

(d) the final prospectus of the Fund includes: (i) disclosure regarding the Exemption Sought under the heading "Exemptions and Approvals"; and (ii) a risk factor regarding the concentration of the Fund's investments in the Canadian Banks and the risks associated therewith.

"Darren McKall"
Associate Vice President
Investment Management Division
Ontario Securities Commission

Application File #: 2025/0417

SEDAR+ File #: 6308185