Last week, the Ontario Securities Commission released a notice reporting on staff's continuous disclosure review of investment funds' portfolio holdings. Ultimately, the report found that funds' continuous disclosure could be improved in order to provide "more meaningful information" regarding portfolio composition and how a fund's investments align with the investment objectives set out in the fund's prospectus.
Specifically, the report noted a few key trends: (i) the use of portfolio categories that did not reflect the unique characteristics of the fund as set out in its investment objectives; (ii) inconsistencies in the categories used across different disclosure documents of the fund to describe the investments in the portfolio; and (iii) the use of broad, generic categories rather than more specific categories that would provide more meaningful information on portfolio composition and the alignment with investment objectives.
Ultimately, OSC Staff issued comments on 120 of the 203 funds reviewed. While none of the funds were required to refile disclosure documents, OSC staff indicated that they expect improved disclosure in the future. Specifically, the notice states that of the fund managers receiving comment letters, 33% have committed to improving the portfolio listing in their financial statements, 36% will improve portfolio categorization in their Management Reports of Fund Performance and 26% will improve the categorization of the investment mix in their Fund Facts.
The notice also encourages investment fund managers to consider the guidance provided in the notice in preparing continuous disclosure. For more information, see OSC Staff Notice 81-717.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
