The Canadian Medical Protective Association v. The Queen

The Canadian Medical Protective Association v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2008-04-10
Neutral citation
2008 TCC 33
File numbers
2005-98(GST)G
Judges and Taxing Officers
Donald G.H. Bowman
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Citation: 2008TCC33
Date: 20080410
Docket: 2005-98(GST)G
BETWEEN:
THE CANADIAN MEDICAL PROTECTIVE ASSOCIATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bowman, C.J.
[1] These appeals are from assessments made under the Goods and Services Tax (“GST”) provisions of the Excise Tax Act (“ETA”) for the periods October 15, 2001 to October 15, 2003 and January 1, 2002 to March 31, 2004.
[2] Essentially the issue is whether fees paid by the appellant (“CMPA”) to certain investment managers are exempt from GST because they are “financial services”. The investment managers have the discretionary power to manage the investment of the funds contained in the appellant’s reserve for claim.
[3] The parties entered into a Partial Agreed Statement of Facts (“ASF”). It is attached as Schedule ‘A’ to these reasons.
[4] The ASF was supplemented by the evidence of two witnesses called by the appellant and one by the respondent.
[5] The appellant is a not for profit body corporate. It provides professional liability protection for members of the medical profession as a mutual defence organization. It pays for the legal costs of defending doctors sued for malpractice and, if an award is made against a doctor, the appellant pays it. Despite its strong denials that it is an insurance company, it bears a striking resemblance to insurer except that it is not licensed and it says that, unlike an insurance company, it has no legal obligation to defend a doctor against whom a malpractice claim is made or to pay such a claim. This might come as something of a surprise to a physician who has paid substantial sums of money to the appellant for this sort of protection.
[6] Physicians pay the appellant and the amounts received form part of CMPA’s reserve for claims. The appellant retains the services of investment managers (“IMs”) who invest the appellant’s funds on a fully discretionary basis in two types of accounts: segregated funds and pooled funds.
[7] Segregated funds are not commingled with the funds of other investors. About 75% to 80% of the appellant’s funds are in segregated funds. Pooled funds are investment vehicles in which the funds of the appellant are pooled with those of other investors. The pooled funds make up between 20% and 25% of the total.
[8] In both cases the decisions with respect to the investment of the funds are in the discretion of the IMs. The CIBC Mellon acts as custodian with respect to the investments in segregated funds. The duties and powers of the custodian are set out in paragraph 18 of the ASF. The custodian at all times had legal title to and physical custody of the securities comprising the segregated funds.
[9] The appellant claimed a rebate of the GST on the fees paid to the IMs. The Minister of National Revenue denied the claim. Hence these appeals.
[10] The appellant contends that the services provided to it are financial services within the meaning of paragraphs (a), (b), (c), (d), (f) or (l) in the definition of subsection 123(1) of the ETA and are therefore exempt. The respondent contends that the services do not fall within any of the paragraphs in the definition of “financial service” and are in any event excluded by paragraphs (p), (q) or (t) of the definition. Specifically, the respondent argues that the fees paid in respect of the segregated funds fall under (p) and with respect to the pooled funds, under (q) and that in any event, the segregated funds fall under (t).
[11] Mr. Ezri put the respondent’s case very clearly in his opening statement. He said:
I think my friend was correct in saying that the provision of advice is our alternate argument. Our primary argument here is that they are providing a management service, but we are saying that the management service doesn’t fall into paragraphs A to L because the dominant element of the management service supplied are the skill and abilities of managers and not the mechanical aspects of moving around securities.
. . . . .
My primary position is that it is not advice. That is my ultimate argument. My primary argument is that they are paying for investment management, which is not listed anywhere in A to L.
This is essentially the same argument that was put in the decision rejecting the claim for a rebate. The decision is of sufficient importance that it merits reproduction.
NOTICE OF DECISION
This notice refers to the Goods and Services Tax (GST/HST) General Rebate Application Assessment for the claim period January 1st, 2002 to March 31st, 2004, dated May 6th, 2004.
The Minister of National Revenue has carefully reconsidered the assessment with reference to the information in your notice of objection and renders the following decision.
Your objection is disallowed and the assessment is confirmed.
1. ““The services in issue were supplies described in paragraphs (a), (c), (d), (f), and (l) of the definition of “financial Services” in subsection 123(1) of the Act and are therefore exempt supplies””.
2. “The principal activity of the registrant is not the investing of funds such that paragraph (q) of the definition of “financial service” in subsection 123(1) of the Act would apply to exclude the Services from the definition of an exempt supply of a financial service”.
3. “Paragraph (q) would apply only if the “principal activity” of the registrant is the investing of funds”.
4. By virtue of Subsection 165(1), and the definitions in 123(1), of, “taxable supply” and “Commercial activity”, you maintain that ““an “exempt supply” does not constitute a “commercial activity”, and does not fall within the definition of a “taxable supply”. In the result, an exempt supply is not taxable pursuant to subsection 165(1) of the Act””.
5. “The Services provided to the registrant by the Service Providers included supplies listed in paragraphs (a), (c), (d) and (f) of the definition of “financial service” in subsection 123(1) of the Act and also constituted the “arranging for” such financial services as listed in paragraph (l)”.
6. The “decision of the Tax Court of Canada in The Colleges of Applied Arts and Technology Pension Plan v. The Queen, [2003] G.S.T.C. 143 (“CAAT”) is determinative of this matter since the facts in this Objection are substantially identical to those in CAAT”.
A review of the file and the documentation available was performed and it was determined that:-
1. The registrant entered into service contracts with investment service provider to, independently, manage its investment portfolio.
2. The investment service provider charged the registrant GST on the consideration it paid for their services.
3. The registrant paid the GST to the investment service provider and later filed a General Rebate Application for GST paid in error on the basis that, the services rendered by the investment service provider were exempt supplies covered under the definition of “financial services” in Subsection 123(1) of the Excise Tax Act.
4. The registrant’s rebate application was denied on the grounds that, the supplies of investment management services made by the investment service providers, were taxable supplies and as such, GST was properly charged and paid. The decision to deny the rebate was based on a ruling, number 50019 given to the registrant by the Excise and GST/HST Rulings Directorate (Canada Customs and Revenue Agency) on April 19th, 2004.
5. We have reviewed the ruling, the relevant subsections of the Excise Tax Act and Policy P-077R2. On the basis of the contract between the registrant and the investment service providers and pursuant to Policy P ‑ 077R, the supply made by the investment service providers is a single supply for a single consideration.
6. Furthermore, in accordance with the contract, the supply is primarily one of providing professional investment advice and funds management.
7. The Decision in The Colleges of Applied Arts and Technology Pension Plan v. The Queen, [2003] G.S.T.C. 143 (“CAAT”), as observed by the Judge, has limited application in view of the amendments to the Excise Tax Act in 2000. It is not relevant to this objection.
(Bowie, T.C.C.J) “...since the definition was amended in 2000, retroactive to 1991, the decision in this case will have very limited application. The amending legislation preserved the rights of taxpayers who, like this Appellant, have claimed a refund before July 30, 1998.”
8. A single supply of management services, for a single consideration, is not a “financial service” under the Excise Tax Act.
9. The services provided by the investment service provider do not fall within any of the paragraphs of the definition of “financial services” in subsection 123(1) of the Excise Tax Act.
10. Accordingly, the registrant was the recipient of a taxable supply and was correctly charged GST pursuant to Subsections 165(1) and 221(1) of the Excise Tax Act.
Under the authority of subsection 297(1) of the Excise Tax Act, you were correctly assessed pursuant to subsection 261.(1) of the Excise Tax Act.
[12] Financial service, so far as is relevant to this case, is defined in subsection 123(1) as follows:
“financial service” means
(a) the exchange, payment, issue, receipt or transfer of money, whether effected by the exchange of currency, by crediting or debiting accounts or otherwise,
(b) the operation or maintenance of a savings, chequing, deposit, loan, charge or other account,
(c) the lending or borrowing of a financial instrument,
(d) the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of a financial instrument,
. . . . .
(f) the payment or receipt of money as dividends (other than patronage dividends), interest, principal, benefits or any similar payment or receipt of money in respect of a financial instrument,
. . . . .
(l) the agreeing to provide, or the arranging for, a service referred to in any of paragraphs (a) to (i), or
but does not include
. . . . .
(p) the service of providing advice, other than a service included in this definition because of paragraph (j) or (j.1),
(q) the provision, to an investment plan (as defined in subsection 149(5)) or any corporation, partnership or trust whose principal activity is the investing of funds, of
(i) a management or administrative service, or
(ii) any other service (other than a prescribed service),
if the supplier is a person who provides management or administrative services to the investment plan, corporation, partnership or trust,
. . . . .
(t) a prescribed service;
[13] The Financial Services (GST/HST) Regulations provide, in section 4, as follows:
4. (1) In this section,
“instrument” means money, an account, a credit card voucher, a charge card voucher or a financial instrument;
“person at risk”, in respect of an instrument in relation to which a service referred to in subsection (2) is provided, means a person who is financially at risk by virtue of the acquisition, ownership or issuance by that person of the instrument or by virtue of a guarantee, an acceptance or an indemnity in respect of the instrument, but does not include a person who becomes so at risk in the course of, and only by virtue of, authorizing a transaction, or supplying a clearing or settlement service, in respect of the instrument.
. . . . .
(2) Subject to subsection (3), the following services, other than a service described in section 3, are prescribed for the purposes of paragraph (t) of the definition “financial service” in subsection 123(1) of the Act:
(a) the transfer, collection or processing of information, and
(b) any administrative service, including an administrative service in relation to the payment or receipt of dividends, interest, principal, claims, benefits or other amounts, other than solely the making of the payment or the taking of the receipt.
(3) A service referred to in subsection (2) is not a prescribed service for the purposes of paragraph (t) of the definition “financial service” in subsection 123(1) of the Act where the service is supplied with respect to an instrument by
(a) a person at risk,
(b) a person that is closely related to a person at risk, where the recipient of the service is not the person at risk or another person closely related to the person at risk, or
(c) an agent, salesperson or broker who arranges for the issuance, renewal or variation, or the transfer of ownership, of the instrument for a person at risk or a person closely related to the person at risk.
[14] Whether the services provided by the IMs fall within paragraphs (a), (b), (c), (d), (f) or (l) or whether they fall within the exclusions in (p), (q) or (t) depends essentially upon the nature of the services provided. This is essentially a determination of fact. Indeed, while other provisions are referred to, the primary focus of the enquiry will be on paragraphs 126(d) and 126(l): “the transfer of ownership... of a financial instrument” or “the arranging for” [such a transfer]. This is the appellant’s principal position. The respondent focuses on the expertise of the IMs and from this concludes that the fees were paid for advice. Paragraphs 6 and 7 of the Amended Reply to the Notice of Appeal read as follows:
6. In assessing the Appellant to disallow the rebate claims, the Minister of National Revenue (the “Minister”) relied on the following assumptions, set out in a ruling to the Appellant in April, 2004:
a) the over-arching purpose of hiring an investment manager (“IM”) related to the IM’s expertise in selecting profitable investment products and determining when to trade or sell these products;
b) IM services were provided as a single composite supply for a single consideration;
c) the supply from the IM to the Appellant was primarily one of providing quality investment expertise and advice;
d) the primary service provided by the IM was its expertise in the selection of securities, which was a service other than a financial service set out in paragraphs (a) to (m) of the definition of “financial service” in subsection 123(1) of the Act;
e) the supply of services by the IM was a taxable supply.
7. In confirming the assessment, the Minister relied on the following assumptions:
(a) the supply made by IMs was a single supply for a single consideration;
(b) the supply was primarily one of providing professional investment advice and funds management;
(c) a single supply of management services for a single consideration was not a “financial service” under the Act.
(d) services provided by the IM did not fall within any of the paragraphs of the definition of “financial services” in subsection 123(1) of the Act;
(e) the Appellant was the recipient of a taxable supply.
[15] In determining the nature of the services provided I think it is important to examine three areas:
(a) the investment policies of the appellant;
(b) the provisions in the contract between the appellant and the IMs; and
(c) the oral testimony of representatives of the appellant and of the IMs with respect to the services rendered by the IMs.
[16] I start these with the appellant’s own objectives and policies. Tab 29 of Exhibit A‑2 is called a Statement of Investment Policies and Goals of the Canadian Medical Protective Association (“SIP&G”). It sets out detailed investment objectives of the appellant. I will refer to only a few of the provisions in this 16 page document.
The purpose of the Investment Committee is to establish the investment policy and process for the Association, to review the results in comparison to the approved investment Fund, and to present a report at each Council meeting. The Investment Committee is responsible for establishing the Statement of Investment Policies and Goals, and ensuring that the assets supporting the Reserve for Claims (hereinafter referred to as “the Fund”) are managed in accordance with the guidelines set out in the Statement.
. . . . .
The Fund will be managed externally primarily on an external basis. External management gives the Fund access to the best available investment talent at a cost that, in the Committee’s opinion, compares favourably with the cost of employing such people internally. The use of external managers also permits the Committee to choose managers with complementary styles, thereby creating the opportunity for superior returns without a commensurate increase in investment risk. Exceptions to external management may be considered where cost/benefit analysis indicates a positive return to the Association. These may include the management of cash (money market investments), a specific niche asset class (i.e. a varied portfolio of Real Estate Investment Trust units), or a specific management approach (i.e. synthetic passive index funds). In-house management of funds in transition between managers will also be permitted.
. . . . .
Section 3 – Allocation of Responsibilities
The responsibilities related to the investment management of the Fund have been allocated as follows:
The Investment Committee shall:
• meet at least three times each calendar year;
• establish the Statement of Investment Policies and Goals;
• review the Statement annually, including a re-assessment of the long-term asset mix policy, return expectations, risk tolerance and time horizon;
• select, appoint, monitor and if necessary terminate the Investment Managers and their specific investment mandates, Performance Measurement Company(s), and, if necessary, consultants and any other experts required;
• allocate the Association’s funds among, and provide cash flow information to, Investment Managers;
• select, appoint, monitor and if necessary terminate the Custodian to hold the Fund’s assets;
• review and evaluate, both quantitatively and qualitatively, each Investment Manager’s performance at least annually, including a comparison of the rates of return achieved relative to both the objectives established and the performance of other investment managers with similar mandates, and an assessment of the risk assumed in the pursuit of these objectives;
• monitor the actions of senior management with respect to the implementation of decisions taken, and operational guidelines set by the Investment Committee;
• advise and make recommendations to Council about specific investments; and
• prepare a report to Council following each meeting.
. . . . .
The Investment Managers shall:
• select securities within each asset class, subject to applicable legislation and the constraints and directives contained in this Statement and in any supplementary document provided by the Committee;
• provide the Director of Finance with monthly portfolio reports of all assets of the Fund and monthly reports of all transactions during the period;
• give prompt notice to the Custodian of all purchases, sales and other security transactions;
• reconcile all month end cash and security balances with the statements provided by the Custodian,
• meet with the Committee at least once a year to present their analysis of the investment performance and to describe their current and future investment strategies regarding their specific investment mandate; and
• be governed by the Code of Ethics and Standards of Professional Conduct of the Association for Investment Management and Research.
• provide annually an audited financial statement (including a listing of the securities held) for all pooled funds in which the Association has a financial interest.
. . . . .
The fundamental elements of the Policy and the rationale thereof are set out below:
• The Fund will be invested in Canadian, US and International equities, Canadian fixed income securities, money market instruments and any other asset classes as deemed appropriate by the Committee. Investing in these assets provides a measure of protection against the increases in the inflation-related obligations of the Association. In addition, there are benefits of diversification that can be achieved by investing in a broad range of asset classes.
• while While there is no allocation to real estate or mortgages at this time, the Committee is not restricted in adding either asset class in the future.
• with With the exception of real return bonds, there are no investments available to directly reduce the inflation-related risks of the Association. However, the Canadian real return bond market remains illiquid and narrow in terms of product availability, term and credit rating availability. For these reasons, there will be no specific allocation to real return bonds at this time. Bond managers may acquire real return bonds as part of their portfolio.
- Investment Objectives
• The Fund will be managed on a going concern basis, with the primary objective of maximizing the long-term rate of return in order to help finance ongoing funding payments and thereby provide a measure of stability to the rate of contributions by the members of the Association through their annual membership fees.
. . . . .
- Investment Management Structure
The Committee believes that active management should improve returns and that this potential justifies a modest increase in investment risk, within the limits set forth in this document. Where the Committee believes the efficiency of specific markets or market segments is such that active management has little chance of consistently out performing the benchmark, a passive management approach may be adopted using index funds.
The Fund assets will be managed by each Investment Manager subject to the constraints cited in this policy. The Committee may select a single manager or multiple managers for each of the asset classes, or a combination thereof.
- Management Objectives for the Fund
The performance of the portion of the Fund which is actively managed will be considered satisfactory if the annualised return (after management fees) averaged over moving four year periods meets or exceeds the return that could have been earned by passively investing the Benchmark Portfolio, plus the performance targets set for each asset class.
The performance of the portion of the Fund that is passively managed will be considered satisfactory if the tracking error from the associated index is in the range of plus or minus 10 basis points. While returns that exceed the index are on the surface beneficial to the Association, excessive returns may be an indicator of flaws in the tracking methodology used by the manager, and the index fund may be exposed to greater risk levels than intended. In It is anticipated that the short term tracking error during periods when additional funds are committed to a specific index mandate may exceed the range set out above. The Committee recognizes the incremental transaction costs that are inherent in moving additional money to an existing index fund.
- Management Objectives for Individual Active Managers
The rates of return earned by Investment Managers actively managing the Fund will be considered satisfactory if the annualized return (after management fees) averaged over moving four year periods:
1. Is at least equal to the Consumer Price Index for Canada plus 4.0% per annum (i.e. a 4% real rate of return);
2. Above median performance relative to other investment fund managers using an investment philosophy and objectives similar to those used in the management of the Association’s investments, as measured by a recognized independent performance measurement service; and
3. Consistently exceeds the return that could have been earned by passively investing in the representative benchmark indices listed below (or other benchmarks agreed upon by the Committee and the Investment Managers), by an amount that equals or exceeds the following “Value Added Targets”:
. . . . .
- Reasons for Termination of Investment Managers
The Committee shall consider, as appropriate, whether some or all of the Investment Managers should be replaced. Investment Managers may be replaced from time to time for reasons that may or may not include the following:
• failure by the Active Managers to meet the value added performance targets set out in this section;
• a change in Investment Managers’ ownership or key personnel;
• a desire to change the investment management strucuture;
• a failure to satisfy the requirements of Section Section 3 -;
• a failure to adhere to the investment constraints set out in Section Section 8 -;
• a change in investment style; and
• an increase in investment management fees.
. . . . .
Section 11 – Periodic Review
The guidelines of this Statement reflect the mutual agreement between the Committee and the Manager, as noted in the Investment Counsel Agreement signed by the Investment Manager and the CMPA. It is the intention of the Committee to reassess the guidelines at least annually and more frequently as required. However, if at any time a Manager feels that the guidelines cannot be met or may restrict performance, the Committee should be notified immediately. Upon mutual agreement, the guidelines may then be changed to allow the Manager the necessary latitude to exercise his or her special skills.
[17] The conclusion that I take from the SIP&G is that the Investment Committee has developed very specific guidelines and objectives and the IMs are expected to follow them in the management of this appellant’s investment portfolios. I do not find in this document, however, anything inconsistent with the appellant’s assertion that full discretionary power is given to the IMs to purchase and sell securities under their control within the limits of the rules contained in the SIP&G.
[18] I turn next to the contracts between the appellant and the IMs.
[19] The contract with Phillips, Hager & North Ltd. dated January 1, 1992 contains the following provisions:
We hereby retain you to act as investment counsel and portfolio manager effective January 1, 1992 in connection with our investment portfolio and will provide you with detailed information regarding our investment portfolio under your supervision by that date. The following terms and conditions shall apply:
1. It is understood and agreed that you will hold confidential all information received from us regarding our financial affairs and we will hold confidential all investment advice and information provided by you in connection with our investment portfolio.
2. It is understood and agreed that, subject to any specific guidelines from the Investment Committee given to you in writing, you will have full discretion as to all investment decisions regarding our investment portfolio under your supervision and you are authorized to give instructions to our custodian, Bank of Nova Scotia, 44 King Street West, Toronto, Ontario, with respect to the purchase, sale, exchange and delivery of securities and cash for our account and disbursements relating thereto. Moreover it is provided under the By-Law of the Association that all investments must be authorized for life insurance companies under the Canadian and British Insurance Companies Act, R.S.C., 1970, I-15, as amended from time to time. We undertake to promptly notify our custodian of your authority to act on our behalf in connection with our investment portfolio under your supervision.
3. All securities acquired on behalf of the Undersigned, either at present or in the future, shall be held for safekeeping with the Bank of Nova Scotia, Main Branch, 44 King Street West, Toronto, Ontario. All securities of the Undersigned shall be registered in the name of the nominee of the Bank of Nova Scotia, Bansco & Co. unless otherwise directed by the Undersigned.
4. All securities acquired on behalf of the Undersigned shall be purchased out of moneys which the Undersigned may have to its credit in the Cash account maintained on its behalf with the aforementioned Bank of Nova Scotia, Toronto Main Branch. All cash balances resulting from the receipts arising from the sale or other disposition of securities held for the Undersigned shall be deposited directly to the said Bank of Nova Scotia, Toronto Main Branch for credit to the Undersigned’s Cash Account. Dividends and other cash payments received in respect of such securities shall be deposited directly to the said Bank of Nova Scotia, Toronto Main Branch for credit to the Undersigned’s Cash Account maintained at such Bank.
5. You will furnish to us quarterly reports of our investment portfolio, an advice of each security transaction when effected, and a monthly portfolio valuation and a full list of month-end accruals within ten working days of the end of each month.
6. You are authorized to sign in the name of the Undersigned all declarations, affidavits and certificates of ownership which may be required from time to time in collecting the capital or income receipts for the Undersigned.
7. With respect to all securities held for the Undersigned, the voting rights and powers attached thereto shall be exercised by you. Corporate reports need not be forwarded to the Undersigned unless an express request is made therefor in writing.
. . . . .
10. For your services we will pay you quarterly fees in arrears based on the market value of our investment portfolio under your supervision which will be calculated as set out in Schedule A to this Agreement. The fees payable are as set out in Schedule A to this Agreement which fee schedule will not be revised by you except on 60 days’ notice to us in advance of the quarter in which such fee schedule takes effect. The fee for your services for any period which is less than a full quarter shall be prorated on a daily basis.
11. The Undersigned will not hypothecate any of the securities held by its custodian for the said Account without first advising you of its intention to do so.
12. This Agreement may be terminated by either party upon 30 days’ written notice. On dissolution or winding-up of the Undersigned you may continue to act hereunder without liability until actual notice of such dissolution or winding-up is communicated to you or your authority is otherwise terminated by operation of law.
A similar agreement was entered into with Phillips, Hager & North Ltd. in 1997.
[20] The agreement with Sprucegrove Investment Management Ltd. reads in part:
1.01 The Investor confirms the appointment effective the 1 day of February 1995 of the Investment Manager as its investment manager to provide continuing counsel, advice and professional investment services with respect to the investment of certain assets of the Investor.
1.02 The Investment Manager hereby confirms its acceptance of its appointment as Investment Manager by the Investor, agrees to provide the services described in Section 1.01 hereof, and covenants and agrees with the Investor that it will at all times perform such services in accordance with the terms hereof.
. . . . .
2.01 The Investment Manager undertakes to perform its investment management mandate in accordance with a Statement of Investment Objectives, Guidelines and Constraints mutually agreed upon by the Investor and Investment Manager, a copy of which is attached as Schedule “A”. This Statement may be modified from time to time by agreement between the Investor and the Investment Manager.
2.02 The Investment Manager shall endeavour to allocate investment opportunities among accounts managed by it on the basis of the suitability of the investment for each managed account having regard to: (i) the type of proposed transaction; (ii) the investment merits of the security of securities to be purchased or sold; (iii) the substance of the existing portfolio of the managed account, and (iv) the investment objectives set forth in Schedule “A”.
The Investment Manager shall not be liable for not offering a specific investment opportunity or opportunities to any particular managed account.
2.03 The Investor hereby authorizes the Investment Manager to carry out its investment management duties hereunder through the use of a pooled fund (a “Fund”) described in Schedule “A” hereto. If a Fund is used, the Investor hereby appoints the Investment Manager as its attorney with full power and discretion to take such action, as may be required of a unitholder relative to such Fund. The Investor hereby authorizes the Investment Manager to deduct from the assets available for investment and pay to the relevant regulatory authority, the regulatory fees, if any, payable on account of the purchase on behalf of the Investor of units of a Fund.
. . . . .
3.01 The Investment Manager shall have all powers requisite and necessary to perform its duties in accordance with this Agreement, and for greater certainty, but not so as to limit the generality of the foregoing is hereby authorized and empowered:
(i) to place orders with brokers, investment dealers, banks or trust companies for the purchase and sale of securities, to purchase securities directly from the issuers or holders thereof and to sell securities directly to the issuers thereof or to other persons;
(ii) to buy, sell or exercise rights and warrants to subscribe for securities and to exercise conversion and redemption, extension and retraction privileges pertaining to securities held and to exercise, or direct the exercise of, any and all rights, powers and directions in connection with such securities including, without limitation, the power to vote generally and to consent to any reorganization or similar transaction;
(iii) to retain any assets contributed which are acceptable to the Investment Manager and to direct the sale or other disposition of any assets by private contract or at public auction;
(iv) to give such directions and instructions to custodians and others as may be necessary and appropriate to carry out the investment management mandate;
(v) to purchase derivatives for hedging purposes for a Fund, enter into securities lending arrangements for the portfolio of a Fund and make borrowing arrangements for a Fund on a short-term basis to service redemption and distribution obligations of a Fund.
[21] The State Street Global Advisors, Ltd. Investment Management Contract provides in part:
4. The Manager shall, based on the information furnished by the Client, and together with the Client, establish an investment policy suitable to the Client, having regard to the Client’s needs, objectives and constraints. The investment policy is attached hereto as Schedule A (the “Investment Policy”).
5. The Client hereby undertakes to advise the Manager in writing, with 48 hours’ prior notice, of any amendments to the Investment Policy in order to allow the Manager to review these changes and modify the investment policy and the management of the Client’s Account(s) accordingly.
6. The Client, in accordance with the Investment Policy:
(a) authorizes the Manager to invest all of the assets of the Account in Units of the SSGA MA S&P Stock Index Fund (the “Fund”) consistent with Schedule A, one of the fund part of the State Street Global Advisors Multi-Access Funds;
(b) consents to the pooling of such assets with assets contained in the accounts of other clients of the Manager in the Fund;
(c) mandates the Manager to subscribe, from time to time, in the Client’s name, to Units of the Fund at their respective Unit Value (the “Purchased Units”) in accordance with terms of the Trust Agreement;
(d) mandates the Manager to cause the redemption, from time to time, for the Client’s account of Units of the Fund in response to the Client’s direction; and
(e) hereby agrees and acknowledges that all amounts payable to a Participant in respect of a Fund in accordance with, or as contemplated by Article 9 of the Trust Agreement shall, except to the extent that such Participant is surrendering Units for redemption or otherwise notifies the Trustee in writing and complies with any other conditions prescribed by the Trustee, be automatically reinvested in such Fund by way of the purchase of additional Units or fractions of Units of that Fund at the Unit Value as of the Valuation Date on which such amounts become payable or, if such date is not a Valuation Date, on the next following Valuation Date and, in order to give effect to the foregoing, the Manager shall amend the appropriate Register to reflect the additional Units so purchased in lieu of making any actual cash distribution.
[22] The Alliance Capital Management Canada, Inc. contract contains the following provisions:
Alliance Capital Management Canada, Inc. (the “Adviser”) and the undersigned (the “Client”) hereby agree as of the above date that the Adviser shall act as discretionary investment manager with respect to assets of the Client described below (the “Investment Account”) on the following terms and conditions:
1. The Investment Account
The Investment Account shall initially consist of cash, cash equivalents, stocks, bonds, and other securities or assets the Client places in the Investment Account or which shall become part of the Investment Account as a result of transactions.
The Client may make additions to and withdrawals from the Investment Account provided the Adviser receives at least ten (10) business days’ prior written notice of withdrawals. All cash, securities and other assets in the Investment Account shall be held by such other party as the Client shall designate as trustee or custodian (the “Custodian”). The Adviser shall not be responsible for any custodial arrangements involving any assets of the Investment Account or for the payment of any custodial charges and fees, nor shall the Adviser have possession or custody of any such assets. All payments, distributions and other transactions in cash, securities or other assets in respect of the Investment Account shall be made directly to or from the Custodian, and the Adviser shall have no responsibility or liability with respect to transmittal or safekeeping of such cash, securities or other assets of the Investment Account, or the acts or omissions of the Custodian or others with respect thereto. The Client shall direct the Custodian to furnish to the Adviser from time to time such reports concerning assets, receipts and disbursements with respect to the Investment Account as the Adviser shall reasonably request.
2. Services of Adviser
By execution of this Agreement, the Adviser accepts appointment as investment manager for the Investment Account with full discretion and agrees to supervise and direct the investments of the Investment Account in accordance with the written investment objectives, policies and restrictions of the Client previously furnished to the Adviser as the same may be amended by the Client from time to time. In the performance of its services, the Adviser shall not be liable for any error in judgement or any acts or omissions to act except those resulting from the Adviser’s negligence, willful misconduct or reckless disregard of the terms of this Agreement.
The Adviser shall render to the Client at least quarterly a written report and inventory of the investments in the Investment Account. It is agreed that the Adviser, in the maintenance of its records, does not assume responsibility for the accuracy of information furnished by the Custodian, the Client or any other person.
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7. Discretionary Authority
The Adviser, whenever it deems appropriate and without prior consultation with the Client, may (i) buy, sell, exchange, convert, liquidate or otherwise trade in any stock, bonds and other securities (including money market instruments) and (ii), subject to the provisions of paragraph 9 hereof, place orders for the execution of such transactions with or through such brokers, dealers or issuers as the Adviser in its absolute discretion may select.
It is understood that, to the extent permitted by the written statement of