Of particular interest, the Practitioner states that Branch
staff are currently focusing on three priority areas in their
prospectus reviews, namely fees and expenses (including whether
explanations are in clear and plain language), investment
objectives and strategies (including the provision of meaningful
information for investors), and conflicts of
interest. According to the Practitioner, staff's intention
is to encourage more consistent disclosure and promote clear,
accurate and understandable disclosure, rather than boilerplate
The Practitioner also took note of the use of the term
"guarantee", reminding filers that in cases where a fund
offers a guarantee, the prospectus and Fund Facts disclosure should
allow investors to fully understand the unique characteristics of
the fund, the fund's investment objectives, the fund's
suitability for investors, the nature of the guarantee and the
consequences of early redemptions or termination of the fund.
Further, Branch staff expect that Independent Review Committee and
shareholder approval be obtained prior to early termination of the
The Practitioner also notes that Branch staff have recently seen
simplified prospectuses where issuers have identified, in the
annual information form, companies that are principal
holders of the funds as "Investor A", "Investor
B", etc. While staff allow that individuals for principal
holders of funds to be referred to as such in a prospectus, privacy
concerns with respect to individuals do not apply to companies. As
such, absent exemptive relief, the names of companies that are
principal holders of a fund must be disclosed in the AIF of
the simplified prospectus.
The Practitioner also expressed concern in respect to the
marketing materials of scholarship plans and with the possible
dilution of securityholders due to recirculation agreements in
the case of closed-end funds.
According to the Practitioner, Branch staff recently conducted
targeted continuous reviews of risk ratings of mutual funds
disclosed in the Fund Facts. On this point, staff noted that, in
the case of mutual funds in the same fund family that had both
a currency hedged fund and an unhedged fund that provided
exposure to the same underlying fund or portfolio, fund
managers typically rate both the currency hedged fund and the
unhedged fund with the same risk rating despite the difference
of volatility of past returns between the funds. In staff's
view the risk ratings for currency hedged funds should be
determined separately from the unhedged counterparts and staff also
reminded filers that a change to a mutual fund's risk level is
a considered a material change under securities legislation.
Finally, Branch staff reminded filers that blacklined versions
of Fund Facts filed for review must show changes, including the
text of deletions and additions from the previously filed version.
Changes must be clearly shown and should not be shown by way of
comment bubbles, and side-by-side comparisons are not considered
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