The Canadian Securities Administrators (the "CSA")
have published for a 90‐day comment period proposed
amendments to National Instrument 81‐101 that are
intended to implement Stage 2 of the point of sale disclosure
framework originally published in October 2008 by the Joint Forum
of Financial Market Regulators.
Stage 1, which came into force January 1, 2011, obligated mutual
funds to produce and file a "Fund Facts" document, make
it available on the fund's or its fund manager's website
and provide it free of charge to investors on request. The Fund
Facts document is a plain language document, no more than two pages
(double‐sided) in length, which highlights information
that the CSA have determined to be critical to a potential
investor's understanding of the fund, including past
performance, risks and the cost of investing.
Stage 2 will require delivery of the Fund Facts to investors
within two days of purchase of a mutual fund security. Delivery of
the Fund Facts is intended to satisfy the prospectus delivery
requirement under securities legislation; this does not impact a
fund's other obligations in respect of the prospectus, which
must still be provided to investors on request. Current rights to
damages or rescission, or to withdraw from purchase, will be
retained but are now triggered upon delivery (or failure to
deliver) the Fund Facts. Similarly, as the Fund Facts are
incorporated by reference into a fund's prospectus, rights
arising from misrepresentation are retained but now encompass
disclosure in the Fund Facts.
The CSA have also proposed amendments to the contents of the
Fund Facts document. In particular, the document must disclose all
fees and expenses payable by the investor when buying, holding,
selling or switching units or shares of a fund. The amendments also
restrict the documents that may be attached to or bound with the
Fund Facts (to be limited to purchase confirmations, other Fund
Facts, a prospectus, an AIF, management reports of fund performance
and financial statements) and restrict the order in which the
documents can be attached or bound. The instrument does not purport
to restrict the ability of a fund or dealer to provide investors
with non‐educational material with a prospectus or AIF
(such as promotional brochures) as currently permitted, but those
materials cannot be "included within, wrapped around, or
attached or bound to" either type of document.
No changes have been proposed to filing requirements. The Fund
Facts must continue to be filed concurrently with a fund's
simplified prospectus and AIF, and the certificate of the fund,
which confirms the disclosure in those documents, applies to the
Fund Facts in the same way that it applies to all documents
incorporated by reference into the simplified prospectus.
Similarly, no changes have been proposed to the obligations related
to material change and amendment requirements.
The CSA have requested that any comments on the proposed
amendments be submitted prior to November 10, 2011.
Any mutual fund manager that did not obtain exemptive relief to
begin the early reliance on Fund Fact delivery in lieu of a
prospectus (as was contemplated in the CSA's notice issued
February 24, 2011) are urged to ensure that their operations
procedures are readied for the expected implementation of Stage 2
of the point of sale disclosure framework.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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