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Canadian Securities Regulatory Monitor News and Insight

Category Archives: Mutual Funds

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The Finish Line: CSA Publishes Proposed Amendments in Final Phase of Modernization of Investment Fund Product Regulation

Posted in Amendments, Closed-End Funds, CSA, Investment Funds, Mutual Funds

On September 22, 2016, the Canadian Securities Administrators (the “CSA”) published CSA Notice and Request for Comment – Modernization of Investment Fund Product Regulation – Alternative Funds (the “Proposed Amendments”).  The Proposed Amendments represent the final phase of the CSA’s ongoing policy work to modernize investment fund product regulation in Canada (the “Modernization Project”).  While primarily aimed at the development of a more comprehensive regulatory framework for commodity pool mutual funds that are currently governed by National Instrument 81-104 – Commodity Pools (“NI 81-104”), if adopted, the Proposed Amendments will also have a meaningful impact on other types of mutual … Continue Reading

CSA Sets Out Priorities for 2016-2019

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Continuous and Timely Disclosure, CSA, Enforcement, Exempt Market Dealers, Investment Funds, Mutual Funds, Registrants

The Canadian Securities Administrators (CSA) published on July 7, 2016 their priorities for the three-year period 2016 to 2019 under four categories: “Enhanced Investor Protection”, “Fair and Efficient Markets and Reduction of Risks to Market Integrity”, “Enhancement of Enforcement Effectiveness” and “Enhancement of Information Technology”.

The CSA states its strategic objectives without once mentioning the possible impact on it of the proposed national Cooperative Capital Markets Regulatory Authority (CCMRA) some of its members support. On July 22, it was announced that the CCMRA is expected to be operational in 2018.

Enhanced Investor Protection

The CSA proposes to … Continue Reading

Tomorrow, May 18, Registrants Will Receive the OSC’s 2016 Risk Assessment Questionnaire – What Will Your Firm’s Risk Rating Be?

Posted in Exempt Market Dealers, Industry News, Investment Funds, Mutual Funds, OSC, Portfolio Managers, Registrants

For the first time since 2014, the Ontario Securities Commission (OSC) will send Ontario registrants a risk assessment questionnaire (RAQ) that must be completed by portfolio managers, investment fund managers, exempt market dealers, restricted portfolio managers and restricted dealers registered in Ontario. Registrants will receive the 2016 RAQ tomorrow, May 18.

The OSC uses data gathered through the RAQ to apply a risk ranking to firms. Firms with higher risk rankings are more likely to be targeted by the OSC for compliance reviews. As a result, it is important that the RAQ answers be considered … Continue Reading

OSC Sets Out Priorities for 2016-2017

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Enforcement, Exempt Market Dealers, Mutual Funds, OSC, Registrants

The Ontario Securities Commission (OSC) released its draft Statement of Priorities for 2016-2017. The comment period ends May 9th.

Investor Protection Priorities

Advance Best Interest Standard – The OSC will recommend and conduct consultations on regulatory provisions to create a “best interest” standard for advisors. This standard is controversial for some industry participants but the OSC is committed to it. The OSC will also  continue to focus on advisor compensation practices and identify those that are inconsistent with a “best interest” standard.

Compensation Arrangements in Mutual Funds – The OSC will regulate embedded commissions and … Continue Reading

The CSA Proposes Mandatory Standardized Risk Classification Methodology for Mutual Funds and ETFs

Posted in Amendments, Continuous and Timely Disclosure, CSA, Investment Funds, Mutual Funds, Portfolio Managers

The Canadian Securities Administrators (CSA) are proposing to introduce a mandatory standardized risk classification methodology for mutual funds and ETFs (the Proposed Methodology).[1] Fund managers would be required to use the Proposed Methodology to determine the investment risk level of conventional mutual funds (which must be disclosed in the Fund Facts document) and exchange-traded mutual funds (ETFs) (to be disclosed in the proposed ETF Facts document). Currently, fund managers may determine the risk level of a mutual fund using a methodology of their choosing, though the methodology developed by the Investment Funds Institute of … Continue Reading

Mutual Fund Compensation and Reinvestment Practices Face OSC Scrutiny

Posted in Compliance and Supervision, Continuous and Timely Disclosure, Investment Funds, Mutual Funds, OSC, Portfolio Managers

The OSC recently published its 2014 Summary Report for Investment Fund and Structured Product Issuers which includes, among other topics, a summary of key OSC policy initiatives affecting investment fund issuers and highlights of 2014 continuous disclosure and compliance reviews of investment funds The report also sets out OSC Staff observations on key emerging issues and trends for mutual funds.

OSC criticizes reinvestment of distributions by “default”

Some mutual funds offer a choice between making distributions to investors in cash, or in the form of reinvested units. OSC Staff is concerned about mutual funds that set the payment of distributions … Continue Reading

OSC mulling ban on mutual fund trailing commissions for fee-based accounts

Posted in Continuous and Timely Disclosure, Industry News, Investment Funds, Mutual Funds, OSC

The OSC Staff has announced steps it will take to eliminate trailing commissions for fee-based mutual fund series when they file their next annual renewal prospectuses. In the latest edition of the OSC’s Investment Funds Practitioner, OSC Staff expressed the view that a mutual fund series intended for fee-based accounts should not also have a trailing commission embedded in the ongoing cost of the fund series. In Staff’s view, this compensation structure is inconsistent with fee-based mutual fund series because of the extra trailing charge on top of the fee. The OSC Staff maintains this result may be contrary … Continue Reading

Investment Fund Managers – A Regulatory Check-up

Posted in Compliance and Supervision, Continuous and Timely Disclosure, Investment Funds, Mutual Funds, OSC

The Ontario Securities Commission (“OSC”) has recently released two notices providing helpful guidance on the compliance operations of investment fund managers (“IFMs”). This guidance is contained in the 2013 annual review summary report for dealers, advisers and investment fund managers (the “Annual Report”) and a June, 2014 notice reporting on the targeted review of investment fund managers (the “June Report”).

In this post, we summarize OSC findings in its compliance reviews of IFMs as discussed in the Annual Report and June Report.

Issues respecting UDPs and CCOs

IFMs are required to maintain a control and supervisory … Continue Reading

The OSC’s 2014 Risk Assessment Questionnaire Exposes Registrants to Risk of Self-Incrimination

Posted in Exempt Market Dealers, Industry News, Investment Funds, Mutual Funds, OSC, Portfolio Managers, Registrants

For the first time in three years, the Ontario Securities Commission (OSC) has sent Ontario registrants a risk assessment questionnaire that must be completed by portfolio managers, investment fund managers, exempt market dealers, restricted portfolio managers and restricted dealers registered in Ontario. The OSC intends to use the data gathered through the questionnaire to inform its decisions about “which firms require further attention and oversight”.

In some cases, the questionnaire may put recipient registrants at risk of admitting working capital deficiencies, inappropriate marketing practices and other potential violations. As a result, it is important that answers be considered carefully. The … Continue Reading

Investment Fund Amendments Would Bring Sweeping Changes to Closed-End Fund Regime

Posted in Amendments, Closed-End Funds, Continuous and Timely Disclosure, CSA, Investment Funds, Mutual Funds

 Recently, the Canadian Securities Administrators (CSA) released proposed amendments (CSA Proposal) to National Instrument 81-102 – Mutual Funds (NI 81-102) that would impose on closed-end funds certain investment restrictions and operational requirements that currently apply only to conventional mutual funds and exchange-traded funds (ETFs). The CSA Proposal* is likely to be of great interest to managers of closed-end funds, as well as to the entire investment fund community.

In conjunction with the CSA Proposal, the CSA plans to create a comprehensive framework for “alternative funds” through amendments to National Instrument 81-104 – Commodity Pools (NI 81-104). This “Alternative Funds … Continue Reading