Raintree Wealth Management Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from subparagraphs 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to permit in specie transfers between investment funds in the context of the creation of new funds.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(b)(ii)-(iii) and 15.1.

Citation: Re Raintree Wealth Management Inc., 2025 ABASC 29

March 28, 2025

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
RAINTREE WEALTH MANAGEMENT INC.
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each, a Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the prohibitions in sections 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit each of the Existing Funds to sell securities they currently own to any of the New Funds in exchange for units of that New Fund (each an In-Specie Subscription) in connection with the Reorganization (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 section 4.7(1) of Multilateral Instrument 11-102Passport System (MI 11-102) is intended to be relied upon in each of the other provinces of Canada; and

(c) the 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 MI 11-102, National Instrument 14-101 Definitions, National Instrument 81-102 Investment Funds (NI 81-102) and NI 31-103 have the same meaning if used in this decision, unless otherwise defined. The following terms have the following meanings:

(a) Clients means individuals, institutions, and other entities to whom the Filer offers, or may offer, discretionary portfolio management services through a Managed Account;

(b) Discretionary Management Agreement means a written agreement between the Filer and a Client seeking wealth management or related services;

(c) Existing Funds means investment funds that exist, currently named Raintree Preservation Fund and Raintree Growth Fund, to be renamed Raintree Core Fixed Income Fund and Raintree Core Equity Fund respectively in the context of the Reorganization, to reflect the new investment objectives of these funds;

(d) In-Specie Distribution means each in-specie distribution made by each Existing Fund of units of the New Funds to its investors;

(e) In-Specie Transfers means the In-Specie Subscriptions followed by the In-Specie Distributions;

(f) Managed Account means an account managed by the Filer for a Client that is not a responsible person and over which the Filer has discretionary authority;

(g) New Funds means Raintree Enhanced Yield Fund and Raintree Alternative Strategies Fund, both to be created in the context of the Reorganization;

(h) Pooled Funds means, collectively, the Existing Funds and the New Funds; and

(i) Reorganization means the multi-step process including:

(i) establishment of the New Funds,

(ii) the In-Specie Subscriptions;

(iii) the In-Specie Distributions; and

(iv) the rebalancing of certain Managed Accounts to provide exposure to up to four Pooled Funds.

Representations

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

The Filer

1. The Filer is:

(a) a corporation incorporated under the laws of Alberta with its head office in Alberta; and

(b) registered as:

(i) an investment fund manager in Alberta, Ontario, Quebec, and Newfoundland and Labrador, and

(ii) a portfolio manager in each province of Canada.

The Funds

2. Each of the Pooled Funds is, or will be, an investment fund established as a trust under the laws of Alberta, Canada.

3. The Filer is, and will be, the investment fund manager and portfolio manager for each of the Pooled Funds. As such, the Filer is a "responsible person", as defined in section 13.5(1) of NI 31-103, for each of the Pooled Funds.

4. As the Filer is, or will be, the trustee of the Pooled Funds, each such Pooled Fund may be an "associate" of the Filer for the purposes of section 13.5(1) of NI 31-103.

5. The securities of the Existing Funds are, and the securities of the New Funds will be, distributed on a private placement basis pursuant to available prospectus exemptions.

6. Before and after the Reorganization, at least 98% of the securities of the Pooled Funds (in existence at the time) are expected to be held by Clients.

7. None of the Pooled Funds are, or will be, reporting issuers.

8. Each Existing Fund is not, and each New Fund will not be, subject to NI 81-102.

9. The only "illiquid assets" (as defined in NI 81-102) owned by the Existing Funds are securities of funds managed by third party managers (Underlying Funds).

10. Underlying Funds make up no more than 17% of an Existing Fund's net asset value.

11. The Filer and the Existing Funds are not in default of securities legislation in any of the provinces and territories of Canada.

The Managed Accounts

12. The Filer offers discretionary portfolio management services to Clients seeking wealth management or related services under Discretionary Management Agreements.

13. Pursuant to the Discretionary Management Agreement entered into with each Client, the Client appoints the Filer to act as portfolio manager in connection with an investment portfolio of the Client with full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent or instructions of the Client to execute the trade.

14. Currently, the Filer uses its discretionary authority to purchase units of one or both of the Existing Funds for Managed Accounts in order to provide Clients with the benefit of asset diversification and lower commission charges and generally to facilitate portfolio management.

15. Following the Reorganization, the Filer will use its discretionary authority to purchase units of one or more of the Pooled Funds for Managed Accounts in order to provide Clients with the benefit of asset diversification and lower commission charges and generally to facilitate portfolio management.

The In-Specie Transfers

16. It is anticipated that the trades to facilitate the In-Specie Subscriptions and In-Specie Distributions will be submitted on March 31, 2025 and will settle on April 1, 2025.

17. As the Filer is, or will be, the trustee of the Pooled Funds, each Pooled Fund may be an "associate" of the Filer. Accordingly, absent the grant of the Exemption Sought, the Filer (as adviser to each of the Pooled Funds) may be precluded from causing any of the Pooled Funds to purchase or sell a security to any of the other Pooled Funds (each, the Filer's associate). For greater certainty, absent the grant of the Exemption Sought, the Filer could be precluded by the provisions of section 13.5(2)(b)(ii) of NI 31-103 from effecting the In-Specie Subscriptions.

18. As investment fund manager and portfolio manager of each of the Pooled Funds, the Filer is considered a "responsible person" (for the purpose of section 13.5(2)(b)(iii) of NI 31-103) in relation to each of the Pooled Funds. Consequently, absent the grant of the Exemption Sought, the Filer (as adviser to each of the Pooled Funds) is precluded from causing any of the Pooled Funds to purchase or sell a security to any of the other Pooled Funds (for which the Filer, as responsible person, acts as an adviser). For greater certainty, absent the grant of the Exemption Sought, the Filer would be precluded by section 13.5(2)(b)(iii) of NI 31-103 from effecting the In-Specie Subscriptions.

Decision

19. The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

20. The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided that and for so long as the Filer complies with the following terms and conditions:

(a) the Pooled Fund accepting securities pursuant to an In-Specie Subscription would, at the time of payment, be permitted to purchase the securities;

(b) the portfolio securities are acceptable to the Filer, or its affiliate, as portfolio adviser of the New Funds and consistent with each of the New Fund's investment objectives;

(c) the In-Specie Distributions made by each Existing Fund (consisting of units of the New Funds) will be proportionate to their ownership in the Existing Fund, such that each unitholder will hold the underlying assets in the same proportion as before the Reorganization;

(d) the Filer will use the same valuation principles to calculate:

(i) the net asset value of each Pooled Fund;

(ii) the value of assets transferred in the context of In-Specie Subscriptions; and

(iii) the value of assets transferred in the context of In-Specie Distributions.

(e) the Filer will use the same valuation date for all assets transferred in the context of an In-Specie Subscription.

(f) the Filer will value all assets transferred in the context of an In-Specie Subscription as if the securities were portfolio assets of the New Fund, as contemplated by section 9.4(2)(b)(iii) of NI 81-102;

(g) the Filer will value securities of each Underlying Fund transferred in the context of an In-Specie Subscription by reference to the current net asset value of the Underlying Fund provided by the manager of the Underlying Fund;

(h) the Filer will value the liquid assets transferred in the context of an In-Specie Subscription using values provided by its administrator after the close of markets on the day before the In-Specie Transfers are executed;

(i) the Filer will value the units distributed in the context of an In-Specie Distribution on the same valuation day on which the In-Specie Distribution occurs;

(j) prior to the Reorganization, the Filer will send each investor that holds at least one unit in an Existing Fund a notice describing:

(i) the Reorganization,

(ii) the reasons for, and benefits of, the Reorganization,

(iii) a description of any fee changes that will result from the Reorganization,

(iv) a description of the liquidity terms of the New Funds, and

(v) a blacklined copy of the declaration of trust that will govern the Pooled Funds, showing the changes that will be made to the declaration of trust in order to effect the Reorganization;

(k) the notice described in section 20(j) above will inform each unitholder that if they are not satisfied with the changes that will result from the Reorganization, they can redeem their units of the Existing Funds prior to the effective date of the Reorganization;

(l) the Filer will keep written records of all In-Specie Subscriptions, reflecting details of the securities delivered to a Pooled Fund and the value assigned to such securities, for seven years after the In-Specie Subscriptions, with the most recent two years in a reasonably accessible place;

(m) the Filer will keep written records of all In-Specie Distributions, reflecting the details of the units distributed to Managed Accounts for a period of at least seven years after the In-Specie Distributions, with the records for at least the first two years being maintained in a reasonably accessible place;

(n) the Filer will bear all costs of the Reorganization;

(o) the Filer will not receive any compensation in respect of the Reorganization or In-Specie Transfers; and

(p) the Filer will ensure that the Pooled Funds and Managed Accounts will not incur any costs in connection with the In-Specie Distributions.

For the Executive Director:

"Lynn Tsutsumi"
Director, Market Regulation