The Ontario Securities Commission (OSC) has ruled that a proposed deal that would see portfolio manager, Kingship Capital Corp. (KCC), acquire the investment management contracts for the Pro-Index Funds from Pro-Financial Asset Management Inc. (PFAM) can go ahead after all.
The OSC issued an order Thursday indicating its approval of the proposed transaction between KCC and PFAM, subject to certain conditions.
Under the proposed deal, KCC would acquire all of PFAM’s interests in the investment management contracts for the funds, and in the discretionary managed accounts of PFAM investors. At the same time, a numbered company (known as 238 Inc. in the order), which is a corporation owned by David Hopps, would acquire all of the outstanding shares of KCC.
Earlier this year, the director of the OSC objected to the proposed transaction, and denied approval.
The various players involved sought a new hearing, and the commission has now given its blessing with various conditions, including: that a planned $350,000 investment by Hopps in the resulting company to bolster its capital position goes ahead; that KCC retain a compliance consultant for two years to provide ongoing regulatory compliance assistance to the firm; that while PFAM president and CEO, Stuart McKinnon, can provide services to KCC that do not require him to be registered, he will not be an officer, director or shareholder of KCC; and that KCC’s current owner, Kenneth White, serves as director, president, chief compliance officer and the ultimate designated person of the firm.
The order notes that the OSC director’s objections to the original deal proposal “were appropriate and reasonable in the circumstances”; but that this review represents a fresh consideration of the proposed transaction. It also says that there have been material changes made to the original terms of the deal, and that those changes address the concerns of OSC staff, but do not fully resolve them.
However, following a hearing, the commission ruled that, “On balance, that the transactions on the terms and conditions now proposed are not inconsistent with an adequate level of investor protection and are not prejudicial to the public interest.”
The order also indicates that the transaction will likely be positive for unitholders of the Pro-Index Funds, “given PFAM’s current financial circumstances; and the proposed investment by Hopps in KCC” It suggests that without this deal, “the funds may have to be wound-up and that winding-up could be prejudicial to unitholders of the funds”.