Administrators believes recommendations – now out for comment – will save fund issuers cost and time
The Canadian Securities Administrators has proposed eight significant changes which they believe will save investment fund issuers cost and time without harming investor protection.
The proposals, stage two of its initiative to reduce regulatory burden, have been put out for comment for 90 days, ending December 11.
Among the changes put forward is an exemption delivering certain Fund Facts disclosures.
Here is a summary of the eight proposals:
1, Consolidate the simplified prospectus and the Annual Information Form
The CSA believes this removes overlapping disclosure between the two forms, repealing requirements that are not meaningful to investors and are difficult to produce, and requirements that are available in other regulatory documents.
2, Investment fund designated website
This allows investment funds to designate a qualifying website in which it can post regulatory disclosure. The idea is that this will create opportunities for disclosure found in printed documents to be moved to the site, reducing burden and cost for the fund managers and issuers.
3, Codify exemptive relief granted in respect of notice-and-access applications
The CSA wants to codify this frequently-granted exemptive relief and extend its availability to man-management solicitation of proxies, consistent with the notice-and-access system set out for non-investment fund reporting issuers.
4, Minimize filings of Personal Information Forms
This will eliminate PIF requirements for certain individuals – individual registrants and permitted individuals who have already submitted the Registration of Individuals and Review of Permitted Individuals form. The idea is this prevents the doubling up of submitted information.
5, Codify exemptive relief granted in Respect of Conflicts applications
Within this proposal, the CSA wants to codify eight types of exemption. These are:
- fund-on-fund investments by investment funds that are not reporting issuers;
- investment funds that are reporting issuers to purchase non-approved rating debt under a related underwriting;
- in specie subscriptions and redemptions involving related managed accounts and mutual funds;
- inter-fund trades of portfolio securities between related reporting investment funds, investment funds that are not reporting issuers and managed accounts at last sale price;
- investment funds that are not reporting issuers to invest in securities of a related issuer over an exchange;
- reporting investment funds and investment funds that are not reporting issuers to invest in debt securities of a related issuer in the secondary market;
- reporting investment funds and investment funds that are not reporting issuers to invest in long-term debt securities of a related issuer in primary market distributions;
- reporting investment funds, investment funds that are not reporting issuers and managed accounts to trade debt securities with a related dealer.
The CSA said: “Investment fund managers have generally been able to demonstrate that the above transactions are beneficial to investors despite evidencing a potential conflict of interest.”
6, Broaden pre-approval criteria for investment fund mergers
The CSA proposes to amend the pre-approval criteria in section 5.6 of NI 81-102 to add a disclosure alternative:
a, where a reasonable person would not consider the terminating investment fund to have substantially similar fundamental investment objectives, valuation procedures and fee structure as the continuing investment fund in the proposed merger and;
b, that applies if the proposed merger is neither a “qualifying exchange” under section 132.2 of the ITA nor a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the ITA.
7, Repeal regulatory approval requirements for change of manager change of control of manager, and change of custodian that occurs in connection with a change of manager
The reason this is possible, according to the CSA, is that since the adoption of these requirements, the NI 31-103 implemented registration requirements for investment fund managers, providing an opportunity for the CSA to assess that new managers have sufficient integrity, proficiency and solvency to adequately carry out their functions.
8, Codify exemptive relief granted in respect of fund facts delivery applications
The is designed to provide relief from the requirement to deliver Fund Facts disclosure for purchases made in managed accounts, by certain permitted clients, and in model portfolios.
Louis Morisset, the CSA chair and president, and CEO of the Autorité des marchés financiers, said: “We are proposing significant changes that will provide cost and time savings to investment funds and their managers without impacting investor protection.
“We continue to prioritize reducing regulatory burden in all areas of Canada’s capital markets, and today’s proposals represent our efforts to date in the investment fund space.”
