Vanguard Investments Canada Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to mutual funds for extensions of lapse dates of their prospectuses -- Filer will incorporate offering of the funds under the same offering documents when they are renewed -- Extensions of lapse dates will not affect the currency or accuracy of the information contained in the current prospectuses.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 62(5).
March 26, 2021
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 VANGUARD INVESTMENTS CANADA INC. (the Filer) AND IN THE MATTER OF THE MUTUAL FUNDS LISTED ON SCHEDULE A HERETO (collectively, the Mutual Funds) AND IN THE MATTER OF THE EXCHANGE-TRADED MUTUAL FUNDS LISTED ON SCHEDULE A HERETO (collectively, the ETFs, and together with the Mutual Funds, the Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) that the time limits for the renewal of the simplified prospectus of the Mutual Funds dated May 12, 2020 (the Current Mutual Funds Prospectus) and the time limits for the renewal of the long form prospectus of the ETFs dated January 25, 2021 (the Current ETFs Prospectus, and together with the Mutual Funds Prospectus, the Current Prospectuses) be extended to the time limits that would apply if the lapse date of the Current Mutual Fund Prospectus was September 25, 2021 and if the lapse date of the Current ETF Prospectus was July 31, 2022 (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 this 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 each of the other provinces and territories of Canada (together with Ontario, 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.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of the Canada with its head office located in Toronto, Ontario.
2. The Filer is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador, a portfolio manager in Ontario and Québec, a commodity trading manager in Ontario, and an exempt market dealer in each of the provinces of Canada.
3. Neither the Filer nor any of the Funds is in default of securities legislation in any of the Canadian Jurisdictions.
4. Each of the Funds is an open-ended mutual fund trust established under the laws of Ontario. Each of the Funds is a reporting issuer in each of the Canadian Jurisdictions.
5. Securities of the Mutual Funds are currently qualified for distribution in each of the Canadian Jurisdictions under the Current Mutual Funds Prospectus.
6. The lapse date of the Current Mutual Funds Prospectus is May 12, 2021 (the Current Mutual Funds Lapse Date). Accordingly, under the Securities Act (Ontario) (the Act) and National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), the distribution of securities of each of the Mutual Funds would have to cease on the Current Mutual Funds Lapse Date unless: (i) the Mutual Funds file a pro forma simplified prospectus at least 30 days prior to the Current Mutual Funds Lapse Date; (ii) the final simplified prospectus is filed no later than 10 days after the Current Mutual Funds Lapse Date (i.e. May 22, 2021, which being a Saturday, such filing must be done by May 24, 2021); and (iii) a receipt for the final simplified prospectus is obtained within 20 days after the Current Mutual Funds Lapse Date (i.e. June 1, 2021).
7. Securities of the ETFs are currently qualified for distribution in each of the Canadian Jurisdictions under the Current ETFs Prospectus.
8. The lapse date of the Current ETFs Prospectus is January 25, 2022 (the Current ETFs Lapse Date, and together with the Current Mutual Funds Lapse Date, the Current Lapse Dates). Accordingly, under the Act and National Instrument 41-101 General Prospectus Requirements (NI 41-101), the distribution of securities of each of the ETFs would have to cease on the Current ETFs Lapse Date unless: (i) the ETFs file a pro forma long form prospectus at least 30 days prior to the Current ETFs Lapse Date; (ii) the final long form prospectus is filed no later than 10 days after the Current ETFs Lapse Date (i.e. February 4, 2022); and (iii) a receipt for the final long form prospectus is obtained within 20 days after the Current ETFs Lapse Date (i.e. February 14, 2022).
9. Pursuant to subsections 2.6(1) and 2.6(2) of NI 81-101, the Mutual Funds must file a written consent provided by their auditor no later than May 24, 2021, 10 days after the Current Mutual Funds Lapse Date. Pursuant to subsections 10.1(1), 10.1(1.1) and 10.1(2) of NI 41-101, the ETFs must file a written consent provided by their auditor no later than February 4, 2022, 10 days after the Current ETFs Lapse Date.
10. The fiscal year-end of each of the Funds is March 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 the Funds' most recently completed financial year, which for the Mutual Funds will be June 30, 2021 (the 2020 Mutual Funds Fiscal Year-End) and for the ETFs will be June 30, 2022 (the 2021 ETFs Fiscal Year-End).
11. Pursuant to section 3.1.2 of NI 81-101 and given the 2020 Mutual Funds Fiscal Year-End, the Mutual Fund's auditor will be required to review the Mutual Funds' unaudited interim financial statements for the period ended September 30, 2020. Pursuant to section 4.3(1) of NI 41-101 and given the 2021 ETFs Fiscal Year-End, the ETF's auditor will be required to review the ETFs' unaudited interim financial statements for the period ended September 30, 2021.
12. The Filer must file annual financial statements for the Mutual Funds for the 2020 Mutual Funds Fiscal Year-End by no later than June 30, 2021, which date is after the Current Mutual Funds Lapse Date. The Filer must also file annual financial statements for the ETFs for the 2021 ETFs Fiscal Year-End by no later than June 30, 2022, which date is after the Current ETFs Lapse Date.
13. Considering the time required by the auditors and resources to prepare the prospectus documents commencing from the 2020 Mutual Funds Fiscal Year-End in respect of the Mutual Funds, the Filer submits that it is unworkable to have the final simplified prospectus for the Mutual Funds filed by May 24, 2021 with the auditor's written consent, audited financial statements and auditor's report for the Mutual Funds included.
14. Considering that the 2021 ETFs Fiscal Year-End falls after the deadline for filing the final long form prospectus in respect of the ETFs (i.e. February 4, 2022), the Filer submits that it is not possible to have the final long form prospectus for the ETFs filed by February 4, 2022 with the auditor's written consent, audited financial statements and auditor's report for the ETFs included.
15. As audited financial statements will not be ready by the Current Lapse Dates, the Mutual Funds will need to incorporate by reference unaudited interim financial information (as at September 30, 2020) into the final simplified prospectus for the Mutual Funds, and the ETFs will need to incorporate by reference unaudited interim financial information (as at September 30, 2021) into the final long form prospectus for the ETFs. In order to incorporate by reference the interim unaudited financial statements into the final simplified prospectus for the Mutual Funds and the final long form prospectus for the ETFs, those interim unaudited financial statements must be reviewed by the Funds' auditor in accordance with the relevant standards set out in the Handbook of the Canadian Institute of Chartered Accountants for a review of financial statements.
16. Given that the audited financial statements of the Mutual Funds will be available no later than June 30, 2021, and the audited financial statements of the ETFs will be available no later than June 30, 2022, which is only a few weeks or months, respectively, following the filing of the final simplified prospectus for the Mutual Funds and the final long form prospectus for the ETFs pursuant to the Current Lapse Dates, this review of the interim unaudited financial statements will incur time and expenses which will only be relevant for a short period of time.
17. Extending the Current Mutual Funds Lapse Date to September 25, 2021 and the Current ETFs Lapse Date to July 31, 2022 will provide the time necessary for the Funds' auditor to complete the audit of the Mutual Funds' financial statements for the 2020 Mutual Funds Fiscal Year-End and the ETFs' financial statements for the 2021 ETFs Fiscal Year-End and provide its written consent as required by NI 81-101 in respect of the Mutual Funds, and NI 41-101 in respect of the ETFs, and enable the Filer to renew the Current Prospectuses and fund facts documents, in respect of the Mutual Funds, and ETF facts documents in respect of the ETFs, on a timeline that allows the inclusion of the most current audited financial information each year. In doing so, it will be more efficient and remove unnecessary financial burden on the Funds which is indirectly borne by the Funds' securityholders.
18. There have been no material changes in the affairs of the Funds since the dates of the Current Prospectuses, as applicable. Accordingly, the Current Prospectuses continue to provide accurate information regarding the Funds, as applicable. Given the disclosure obligations of the Filer and the Funds, should any material change in the business, operations or affairs of the Funds occur, the Current Prospectuses and current fund facts document(s) in respect of the applicable Mutual Fund(s), and ETF facts document(s) in respect of the applicable ETF(s), will be amended as required under the Act.
19. New investors of the Funds will receive delivery of the most recently filed fund facts document(s) of the applicable Mutual Fund(s) and/or the most recently filed ETF facts document(s) of the applicable ETF(s). The Current Prospectuses of the Funds will remain available to investors upon request.
20. The Exemption Sought will not affect the accuracy of the information contained in the Current Prospectuses or the respective fund facts document(s) of each of the Mutual Funds, and ETF facts document(s) of each of the ETFs, and will therefore not be prejudicial to the public interest.
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.
Schedule A
Funds