Mutual fund manager AIC Ltd. has received exemptions from a two sections of the Ontario Securities Act, dealing with registration and prospectus requirements, in connection with the writing of over-the-counter covered call options and cash covered put options, subject to certain conditions.
The decision gives AIC an exemption from the two sections, provided that: the portfolio advisor advising the funds with respect to such activities is registered as an adviser and meets the proficiency requirements in Ontario for advising on options; and each purchaser of an OTC option written by the fund is qualified under the ruling, including banks, broker dealers, credit unions, insurance companies, ‘sophisticated’ investors, etc.
The decision notes that the investment manager of the funds, AIC Investment Services Inc., intends to write OTC options on a portion of the securities held in a portfolio to generate additional returns.
The purchasers of OTC options written by the funds will generally be major Canadian financial institutions. Call options will be written only on common shares that are in a portfolio and the call options will be “covered” at all times. As well, the funds may utilize its cash to provide cover to write cash covered put options.
AIC granted exemptions for writing OTC option contracts
Exemptions cover registration and prospectus requirements
- By: IE Staff
- September 24, 2004 September 24, 2004
- 14:25