Canada: OSC Issues Report On Continuous Disclosure Review Of Investment Fund Sales Communications

Last week, the OSC published Staff Notice 81-720 - Report on Staff's Continuous Disclosure Review of Sales Communications by Investment Funds.

The notice summarizes the findings of an OSC targeted continuous disclosure (CD) review of the advertising and marketing materials of publicly offered investment funds and provides related OSC guidance.

Summary of findings:

  • Investment funds are generally in compliance with disclosure requirements related to sales communications;
  • Some basic requirements were frequently not met, such as:
    • the date of first publication for a written sales communication was not provided;
    • sales communications contained only some of the required information and referred the reader to other sources (e.g. the fund's website or prospectus), for more information.

OSC guidance:

"Sales Communication"

The OSC considers the definition of "sales communication" and the parameters set out in Part 15 of National Instrument 81-102 - Mutual Funds (NI 81-102) to be the best-practice standards for marketing materials of all types of investment funds.

The term "sales communication" is broadly defined in NI 81-102:

  • It applies to communications that "relate to" mutual funds, fund managers, companies providing services to them, or a number of other entities;
  • May include:
    • communications that reference a specific fund or fund family;
    • short communications (including tweets or internet banners) if one of their purposes is to induce someone to buy one or more investment funds;
  • Does not include:
    • communication intended to promote a corporate identity or the expertise of a fund manager (i.e. "branding exception"), provided that the marketing material is not about one or more investment funds;
    • documents labeled "for advisor use only", provided that, in addition to this label, a more pro-active effort is made to restrict broad distribution of any internal document not designed as a sales communication to potential investors.

Fairness of sales communications

The OSC adopts the perspective of a retail investor when assessing whether sales communications are fairly presented:

  • Sales communications should be in plain language;
  • Sales communications should not rely on the use of industry jargon, defined terms, or acronyms not easily understood by retail investors;
  • Important facts and risks must be clearly outlined and not "buried" within the disclaimer or fine print;
  • Warnings, disclaimers or qualifications used in sales communications should be consistent with the content of the sales communication, including any headline claims;
  • If a distribution or yield is quantified in a sales communication, the disclosure should specify:
    • the basis of the calculation;
    • the percentage of total distributions comprising reinvested units;
    • whether the yield is calculated based on the net asset value or market price of the fund's securities;
    • the time period covered by the distributions;
    • the key assumptions and the impact of any changes to the key assumptions on the target distribution or yield;
  • Return of capital distributions should not be marketed in a manner that suggests that they represent investment returns.

Misleading sales communications

A sales communication of an investment fund may be misleading when a particular term, phrase, description, illustration or other statement may create an unrealistic expectation or an unjustified sense of safety, particularly from the perspective of the retail investor:

Sales communications regarding commodity pools:

  • Must clearly identify the issuer as a commodity pool;
  • Must explain how the commodity pool differs from a conventional mutual fund;
  • Should not refer to a commodity pool as a "mutual fund".

Exaggerated and unsubstantiated claims:

  • Include vague or exaggerated statements that cannot otherwise be verified such as "superior proven performance" or "superior risk adjusted performance".

"Bait and switch":

  • Sales communications for publicly offered investment funds must:
    • convey the attributes and performance of the investment fund that is actually being offered for distribution;
    • give equal prominence to key information regarding the investment fund that is actually being offered for distribution when the sales communication also highlights the attributes and investment returns of a similar fund offered by the fund manager or an affiliate, but that fund is not available for sale in Canada;
    • all facts that, if disclosed, could materially alter the conclusions reasonably drawn or implied by the comparison;
    • data for each subject of the comparison for the same time periods;
    • a clear explanation of any factors necessary to make the comparison fair and not misleading.

Investment fund risk disclosure in sales communications:

  • Risks associated with the investment fund:
    • must be clearly disclosed and easily visible in marketing, advertisements and other types of communications;
    • must be given equal prominence to disclosure about the potential investment returns and benefits of the fund;
    • must not be downplayed through the "tone" of a sales communication;
  • If a particular benefit is highlighted in a sales communication, any potential risks associated with the investment strategy in achieving the benefit should also be disclosed;
  • Sales communications should clearly disclose:
    • the nature of special risk factors that may not be immediately apparent to the retail investor;
    • any unique characteristics of the fund, particularly if specific risks are associated with the unique feature.

Representative client lists and endorsements in sales communications:

  • Should only include the clients of the fund manager's asset management business;
  • Should not list the clients the fund manager may deal with in another capacity;
  • Are properly used if:
    • there is some nexus between the representative clients listed in the sales communication and the investment fund that is being promoted;
    • the clients listed are investors in the same fund that is the subject of the sales communication or in a similar fund.

Perfomance data

Standard performance data:

  • Should be given equal prominence to any other performance data disclosed in the sales communication;
  • Should not be placed in the disclaimer at the end of the sales communication;
  • Should be regularly updated so as to not become stale or misleading.

Performance Awards:

  • Only awards that the investment fund has won should be used in sales communications;
  • Awards won more than two years ago may be referenced in sales communications only if they are still relevant to the investment fund's current investment objectives and strategies;
  • The name of the award provider, the ranking (if any) and where to go for additional information about the award (including the criteria upon which the award is based) should be included in the sales communication;
  • The type of award must be clearly disclosed (i.e. whether based on fund performance or award to the fund manager or portfolio manager);
  • Awards to the fund manager can be referred to in the sales communications of the fund manager's family of funds, provided the award was not for a specific investment fund.

Hypothetical data

Hypothetical data should not be used in sales communications intended for retail investors because:

  • There is often little indication that the performance shown is hypothetical;
  • Retail investors may not have the investment knowledge to fully understand the risks and limitations of the hypothetical performance data;
  • The disclosure does not or cannot adequately describe the underlying methodology and the risks and limitations of the hypothetical performance data in a manner that is clear and easily accessible to the retail investor within the space limitations of the sales communication.

Hypothetical performance data may be properly used in marketing materials for dealers and their sales representatives if clear and meaningful disclosure is provided regarding the methodology and assumptions used to calculate the hypothetical performance data, and any other relevant factors.

Alternative media

The OSC provides the following guidance for fund managers that use internet advertising such as webpages, banner advertisements, video streaming (such as YouTube), discussion forums, social networking and micro-blogging (such as Twitter):

  • Fund managers should consider the appropriateness of certain new media formats if content limitations prevent the fund manager from providing clear, accurate and balanced messages in the sales communication or insert the required warning language;
  • Warning language must be visible on the same page as the sales communication or within "one click";
  • All information, including disclaimers, should be easily comprehensible to the retail investor on their first viewing of the advertisement;
  • Disclaimers should not scroll too quickly.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.