Durham Asset Management Inc. and Dami Corporate Bond Fund
Securities Act (Ontario) section 147 -- Relief granted to extend the time limit pertaining to the distribution of securities of an investment fund under its simplified prospectus by 137 days -- Due to an administrative error, the fund failed to file a pro forma prospectus in accordance with the timelines stipulated for a renewal of a prospectus under the legislation, as a result of which the prospectus lapsed -- Relief granted subject to a 90-day cancellation right being given to investors who purchased securities of the fund after the lapse date -- Securities Act (Ontario).
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5 as am., s. 147.
IN THE MATTER OF THE SECURITIES ACT, R.S.O 1990, CHAPTER S.5, AS AMENDED (the Act) AND IN THE MATTER OF DURHAM ASSET MANAGEMENT INC. (the Filer) AND DAMI CORPORATE BOND FUND (the Fund)
The Ontario Securities Commission (the Commission) has received an application from Durham Asset Management Inc. (the Filer), as investment fund manager of DAMI Corporate Bond Fund, (the Fund) for an order pursuant to section 147 of the Act that the time limit pertaining to the distribution of securities of the Fund under its simplified prospectus, fund facts and annual information form dated June 15, 2021 be extended to October 29, 2022 (the Exemption Sought).
This order is based on the following facts represented by the Filer.
A. The Filer
1. The Filer is a corporation under the laws of Ontario with its head office in Ajax, Ontario.
2. The Filer is registered as an investment fund manager, portfolio manager, exempt market dealer and commodity trading manager in Ontario.
3. The Filer is the manager, trustee and portfolio manager of the Fund.
4. Neither the Filer nor the Fund is in default of securities legislation in any jurisdiction, except as stated herein with respect to the lapse date of the Fund.
B. The Fund
5. The Fund is an open-ended mutual fund trust established under the laws of Ontario and is a reporting issuer as defined in the securities legislation of Ontario.
6. Securities of the Fund are currently distributed in Ontario pursuant to a simplified prospectus, fund facts and annual information form, each dated June 15, 2021 (together, the Current Prospectus).
7. The Fund is not listed on any stock exchange.
8. The Fund is authorized to issue an unlimited number of Series A, Series F, and Series I Trust Units, of which, as of the date of this decision 742.20 Series A Units, 43,263.52 Series F Units, and 0.0 Series I Units are issued and outstanding.
C. Exemption Sought
9. Due to an administrative error, the Fund failed to file a pro forma prospectus in accordance with the timelines stipulated for a renewal of a prospectus under the Act.
10. As a result, the Current Prospectus of the Fund lapsed on June 15, 2022 (the Lapse Date) and the Fund was required to cease the distribution of securities on the Lapse Date.
11. New investors in the Fund received delivery of the most recently filed fund facts of the Fund. The Current Prospectus of the Fund is available upon request.
12. There have been no material changes in the affairs of the Fund since the date of the Current Prospectus. Accordingly, the Current Prospectus represents the current information of the Fund.
13. The Fund suspended all sales of units effective August 25, 2022.
14. During the period between the Lapse Date and the date that sales were suspended (the Interim Period) the Fund sold 17,208.2 units having an aggregate value of $157,000.00.
15. The Filer intends to file a renewal prospectus for the Fund (the Renewal Prospectus) and obtain a final receipt therefore on or before October 29, 2022.
16. Granting the Exemption Sought would not affect the accuracy or currency of the information contained in the Current Prospectus nor would it be prejudicial to the public interest or the existing securityholders as there has been no material change in the affairs of the Fund since the date of the Current Prospectus.
17. Given the disclosure obligations of the Fund, should a material change in the affairs of the Fund occur, such change will be disclosed in an amendment to the Current Prospectus.
18. All purchasers of units prior to the receipting of the Renewal Prospectus will receive delivery of the most recently filed fund facts document(s) of the Fund and the Current Prospectus will still be available upon request.
19. If the Exemption Sought is not granted, it would be necessary to prepare and file a preliminary prospectus in respect of the Fund in order to re-qualify the distribution of the Fund's securities. It would be impractical to file a preliminary prospectus for the Fund and more efficient to grant the Exemption Sought in order to enable the Fund to continue the distribution of its securities under the Current Prospectus, subject to the terms of this order, until such a time as a final receipt is issued for the Renewal Prospectus.
The Director is satisfied that this order meets the test set out in the Act for the Commission to make the order.
The order of the Director under section 147 of the Act is that the Exemption Sought is granted to the Fund provided that:
1. Every security holder of record of the Fund who purchased securities of the Fund during the Interim Period (each, an Affected Securityholder) is provided with the right:
(a) to cancel (Cancellation Right) such trades within 90 days of the receipt of a statement (the Statement of Rights) describing the Cancellation Right, which is to be mailed by the Filer to the Affected Securityholder; and
(b) to receive, upon the exercise of a Cancellation Right, the purchase price paid on the acquisition of such securities and all fees and expenses incurred in effecting such purchase.
2. The Filer mails a copy of the Statement of Rights and a copy of this order to each Affected Securityholder no later than 10 days after the date of this decision; and
3. If the net asset value per security of the Fund on the date that an Affected Securityholder exercises the Cancellation Right is less than the price per security paid by the Affected Securityholder at the time of purchase, the Filer shall reimburse the difference to the Fund.
Dated this 13th day of September, 2022.