Amendments to disclosure rules around individual seg fund contracts and investment funds to take effect in 2026
Nearly seven years after Canadian investors first saw enhanced disclosures of advisor compensation and performance in annual reports under CRM2, Canada’s investment and insurance regulators are taking the next big step on the road towards complete fee and cost transparency.
Today, the Canadian Securities Administrators (CSA) and the Canadian Council of Insurance Regulators (CCIR) have published enhancements to total cost reporting (TCR) disclosure for investment funds and individual segregated fund contracts.
“There's been extensive consultation done with investors, investor advocates and industry, to see if we could come up with something that would both be very helpful to the investor from an investor protection point of view, and could work for the industry,” Stan Magidson, CSA chair and chair and CEO of the Alberta Securities Commission (ASC), told Wealth Professional. “I think we've reached that place.”
A wider lens of disclosure
Under the enhancements developed jointly by the CSA, the CCIR, the Canadian Insurance Services Regulatory Organizations (CISRO), and New Self-Regulatory Organization of Canada (New SRO), clients will have to be provided with annual reports showing ongoing costs of owning mutual funds, ETFs, scholarship plans, and segregated funds.
The cost information has to be disclosed both as a percentage for each fund, as well as an aggregate amount in dollars paid during the statement period. For segregated fund contracts, the aggregate dollar amount should include fund expenses for all seg funds, costs of insurance guarantees, and all other expenses under the contract.
The enhancements to investment fund reporting include amendments to NI 31-103 and its companion policy, 31-103CP. Those securities amendments – which are relevant for all registered dealers, advisors and investment fund managers – are subject to ministerial approval in some jurisdictions. They’re set to take effect on January 1, 2026, with the first annual reports to investors covering the 12-month period ending on December 31 that year.
“We expect New SRO to amend its member rules, policies and guidance to be materially harmonized with the Securities Amendments,” the CSA and CCIR said in today’s notice.
Meanwhile, the enhancements for the insurance sector are codified in the Individual Variable Insurance Contract Ongoing Disclosure Guidance, which will apply to all insurers that offer segregated fund contracts to policyholders. The CCIR expects each of its member jurisdictions to adopt the framework by local guidance or, in certain jurisdictions, by regulation.
‘The best possible outcome’
The TCR enhancements released today are the product of nearly eight years of effort, including the CSA’s continued trajectory from CRM2 and a paper published by CCIR in 2017. The enhancements stem from proposals floated by the CSA and CCIR in April last year, which were subject to a 90-day consultation period.
From an investor-interest perspective, Magidson said regulators wanted to implement the TCR disclosure enhancements as quickly as possible. While industry representatives were also generally supportive of the reform, they raised numerous implementation issues.
“The costs come from all these different participants in the chain. … They would have to gather different information from what they’re gathering today, and there’s also a technology component,” he said. “This was the best possible outcome, because there's now a pathway to implementation that people feel is achievable.”
In the initial proposed amendments, the joint regulators contemplated providing investors and policyholders with quarterly or monthly reports. But following feedback from both market participants and investor groups, as well as stress tests of disclosures with investor advocates, they decided an annual report would alleviate unnecessary regulatory burden and provide a clearer full-year picture for the public.
“If you inundate retail investors with limitless disclosure that's mired in complexity, it completely misses its mark,” Magidson said. “I think we've landed on a very simple metric that's provided to the investor, so they don't have to wade through different obscure types of documents to find the information they need.”
More power to investors
According to Magidson, the CSA and CCIR plan to establish an implementation committee, together with the new SRO, to provide guidance, respond to questions, and assist registrants in operationalizing the TCR enhancements during the transition period.
To help improve investor understanding, the CSA also collaborated with the OSC Investor Office Research and Behavioural Insights Team (IORBIT) to revise the required notifications. It has mandated the inclusion of a notification explaining how investors can act on the fee information in the report be contacting their advisor to discuss their fees, for example, or by considering the impact of fees on their portfolio’s long-term performance.
Following the implementation of fund reporting rules under CRM2 in 2016, the CSA announced a multi-year research project to measure the impact of increased cost transparency on investors’ ability to make informed decisions. As of now, regulators have no plans for research related to the TCR enhancements, but are leaving the door open for it in the future.
“We have not yet determined whether any post-publication research initiatives would be appropriate for the TCR project,” a spokesperson for the CSA told WP. “Any such initiative would be subject to a separate announcement.”
“Our view is that [the report] is going to be helpful to the retail investor if it's easily understandable and accessible, because it allows them to make more informed choices and to ask questions of their advisors,” Magidson said. “This kind of transparency will allow for enhanced competition in the marketplace as well, with these costs being published, so that’s a potential benefit for investors as well.”
