The Ontario Securities Commission has granted an exemption from the mutual fund sales practices rule to a labour sponsored investment fund, permitting it to pay certain distribution costs out of fund assets.

Covington Strategic Capital Fund Inc. was granted the exemption to permit it to make distribution cost payments to registered dealers. The exemption was granted on the condition that the distribution costs that are paid out of fund assets are permitted by, and otherwise paid in accordance with the sales rule. The exemption expires on November 30.

The fund was incorporated on November 18, 2003. Its’ sponsor is the Canadian Professional Police Association. It has filed a prospectus offering two series of class A shares.

According to the decision, the fund and its’ manager propose to pay directly to participating dealers certain costs associated with the distribution of the Class A Shares. For Series I Shares: the manager will pay a commission of 10% of the offering price to registered dealers, and, after eight years, it will pay a service fee to registered dealers equal to 0.5% annually of the Net Asset Value of the Series I Shares held by clients

For Series II Shares, the sales commission will be 6%, and, the fund will pay a service fee to registered dealers equal to 0.5% annually of the NAV.

As well, the fund will pay monthly distribution services fee to the manager to reimburse it for financing costs incurred to fund the payment of sales commissions, including an amount for interest and a one-time financing commitment.

The sales practices rule would prohibit the fund from paying the service fees to registered dealers directly.