Canada: March 2014 Investment Funds Practitioner: Issues And Tips

The Ontario Securities Commission (OSC) recently released a new edition of the Investment Funds Practitioner, providing an overview of recent issues arising from applications for exemptive relief, prospectuses and continuous disclosure documents filed by investment funds. This legal update summarizes certain key issues and provides tips for investment funds issuers.

Applications for exemptive relief

Issue: In deciding whether to approve a proposed merger of public investment funds, the OSC raised questions concerning changes in the way performance fees were calculated for certain of the merging funds and how those changes were made, including whether the necessary securityholder approval was obtained.

Tip: Part 5 of National Instrument 81-102 – Mutual Funds requires the approval of securityholders in order to effect certain fundamental changes to an investment fund. Securityholder approval may be required if the method of calculating performance fees would change for any of the funds under the proposed merger.

Prospectus delivery relief

Issue: Certain filers have obtained exemptive relief from the prospectus delivery requirement for pre-authorized purchase plans. These exemptive relief orders will terminate by June 13, 2014, the date that Stage 2 of the Point of Sale disclosure initiative becomes effective, requiring delivery of Fund Facts in lieu of a prospectus.

Tip: Filers might wish to seek exemptive relief from the new requirement to deliver Fund Facts in lieu of a prospectus in respect of pre-authorized purchase plans in effect after June 13, 2014. The OSC has proposed the adoption of a statutory exemption in Stage 3 of the Point of Sale disclosure initiative, but such statutory exemption, if adopted, is unlikely to be in place as of June 13, 2014.

Bullets in prospectuses

Issue:  The OSC is of the view that management fees are material information that must be included in preliminary prospectuses of investment funds.

Tip: Investment funds are encouraged to include the management fee information in their preliminary prospectuses in order to avoid a delay in obtaining a receipt for either the preliminary or final prospectus.

Flow-through limited partnerships

Issue: The OSC has observed that recent flow-through limited partnership prospectuses have included annualized after-tax returns but not annualized before-tax returns. Recently, filers have expressed the view that presenting annualized before-tax and after-tax returns for standard performance periods of 1-, 3-, 5- and 10-year periods is not relevant or useful for investors.

Tip:  In a flow-through limited partnership prospectus, the OSC will allow disclosure of annualized after-tax returns of prior flow-through limited partnerships managed by the same manager provided that annualized before-tax returns are also disclosed. The OSC is generally prepared to accept annualized before-tax and after-tax returns for the period from the date of inception of the flow-through limited partnership to the date of the rollover so long as all relevant assumptions are clearly disclosed.

Issue: The OSC has noted that "finder's fees" paid to related entities that source investment opportunities in resource issuers' securities for flow-through limited partnerships represent a conflict of interest matter under National Instrument 81-107 – Independent Review Committee for Investment Funds.

Tip: Such finder's fees arrangements should be referred to the fund's independent review committee for the independent review committee's recommendation and should be disclosed in the fund's prospectus.

Portfolio disclosure of cash

Issue: The OSC received an inquiry as to how to appropriately disclose cash and money market funds in a fund's management report of fund performance (MRFP).

Tip: The OSC views cash as a portfolio holding and as a result cash must be included in a summary of the investment portfolio. In "top 25" disclosure, the OSC expects cash and cash equivalents to be disclosed on a line separate from an investment in a money market fund. However, in the portfolio breakdown, holdings in money market funds can be grouped into the same category as cash and cash equivalents. The same methodology applies for disclosure in the fund's Fund Facts document and quarterly portfolio disclosure.

Fixed income funds

Issue: The OSC has undertaken a review of the risk management processes used by portfolio managers of fixed income funds. The OSC noted that portfolio managers have engaged in shortening fixed income portfolio durations and investing in floating rate instruments.

Tip: The OSC encourages portfolio managers of fixed income funds to assess the impact of various factors including interest rate spikes, widening spreads and elongated periods of higher volatility in the fixed income markets, by conducting scenario analysis testing for those factors.

Tip: The OSC encourages managers to stress test and assess the sources of the fund's liquidity during normal periods as well as high redemption periods and lengthened periods of reduced liquidity.

Tip: The OSC encourages funds to continue providing robust disclosure in the MRFP regarding risks that have arisen due to recent events as well as the potential impact of recent actions by central governments regarding fixed income portfolios. The OSC also encourages funds to consider increasing the frequency of monitoring their risk ratings given the elevated volatility in the current fixed income markets.

Fund Facts – new delivery and filing requirements

Issue: On June 13, 2013, final amendments were published with respect to Stage 2 of the Point of Sale disclosure initiative, which when phased in will require delivery of a Fund Facts document in lieu of a prospectus within two days of the sale of a mutual fund security. The form of Fund Facts has also been amended.

Tip: As of January 13, 2014, a mutual fund that files a preliminary or pro forma simplified prospectus and annual information form must concurrently file a Fund Facts in the amended form for each class or series of the mutual fund so offered. In any event, amended Fund Facts must be filed for each retail mutual fund no later than May 13, 2014.

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

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.

Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright Canada LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright Canada LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions