The Canadian Securities
Administrators today announced the adoption of final amendments that will
implement certain aspects of Phase 2 of the
Modernization of Investment Fund Product Regulation Project.
The mandate of Phase 2 involved generally addressing the regulatory
gap between non-redeemable investment funds and mutual funds by
focusing on imposing certain core operational requirements on
publicly offered non-redeemable investment funds that are
generally analogous to the requirements applicable to mutual
The final amendments to be adopted as of September 22, 2014 stem
from proposed amendments published last
year, and will involve the imposition of core
investment restrictions for non-redeemable investment funds while
also enhancing disclosure requirements regarding securities lending
activities by investment funds. The following is a summary of
some of the final amendments that are set to come into force, which
we will review in further detail in subsequent posts.
Notably, the final amendments do not extend to the creation of a
more comprehensive alternative funds framework (planned to be
effected through an overhaul of National Instrument 81-104 Commodity
Pools). As previously announced by the
CSA, the "alternative funds proposals"
have been deferred to allow for further review, along with related
restrictions that were proposed with respect to investments in
physical commodities, short selling, the use of derivatives and
The final amendments that have been approved include investment
restrictions relating to investment concentration and control,
investments in real property, loan syndications and mortgages, the
use of fund-of-fund structures and extending the framework in
respect of securities lending, repurchase and reverse repurchase
transactions currently found in NI 81-102 Mutual
Funds to closed-end funds.
Other elements of NI 81-102 that will be extended to closed-end
funds include requirements relating to conflicts of interest,
and securityholder and regulatory approval of fundamental
changes, which include additional approval requirements that expand
upon those currently found in NI 81-102. Restrictions will
also be imposed in respect of further issuances of securities and
upon funds that issue warrants and rights.
The amendments also introduce new disclosure requirements
intended to better highlight the costs and returns of an investment
fund's securities lending activities, including in respect of
revenue sharing arrangements between a fund and its securities
lending agent. To that end, the amendments will require disclosure,
in the notes to financial statements, of a reconciliation
of the gross amount generated from the securities lending
transactions of the investment fund to the revenue from securities
lending disclosed in the statement of comprehensive
income disclosed under s. 3.2 of NI 81-106 Investment Fund
Proposed amendments were first published by the CSA in
March 2013. In response to comments received, the
CSA have made changes to the final version of the
amendments, including by relaxing some of the originally
proposed investment restrictions and introducing the
securities lending disclosure requirements described above.
While the amendments generally come into force on September 22,
2014, existing funds that are reporting issuers will have until
September 2015 to comply with the relevant amendments concerning
securities lending. The transition period for various of the other
changes extends into 2016.
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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