Regulators have granted Mackenzie Financial Corp. an exemption from the requirement to get unitholder approval to change the objectives of a couple of funds due to measures introduced in the federal budget, which effectively eliminated the tax benefits of so-called “character conversion” transactions.
Thursday’s OSC Bulletin includes a decision handed down by the Ontario Securities Commission (OSC) that gives Mackenzie relief from the requirement to obtain the approval of fund unitholders before changing the fundamental investment objectives of a mutual fund.
Specifically, the firm is changing the objectives of funds that engaged in certain derivatives transactions that have since been impacted by measures that were introduced in the 2013 federal budget eliminating the tax benefits of these sorts of transactions. Funds used these transactions to distribute returns as capital gains, rather than income, in order to gain beneficial tax treatment.
According to the decision, the firm sought relief from the obligation to get approval for amendments to the investment objectives of affected funds to eliminate references to these character conversion transactions, among other changes.
The OSC granted the exemption on the condition that the funds’ unitholders are sent a written notice that sets out the changes to the funds’ objectives, the reasons for the changes, and detailing the fact that the funds will no longer be able to use derivatives to distribute returns that are treated as capital gains under the tax rules. The notice must be sent at least 60 days before the effective date of the change to the investment objectives.