Staff of the OSC's Compliance and Registrant Regulation Branch today released guidance intended to assist investment fund managers in satisfying the duty to act honestly, in good faith and in the best interest of their funds.
The guidance follows a recent targeted review of a sample of large investment managers that focused on compliance with regulatory requirements for key operational areas such as minimum working capital requirements and custody, securityholder reporting, trust and fund accounting, oversight of service providers, conflicts of interest and sales practices.
Ultimately, branch staff identified a number of areas where deficiencies were found, specifically in respect of (i) sales practices, leading to guidance in respect of meeting the "primary purpose" test and the reasonability of costs; (ii) the allocation of expenses to investment funds; (iii) mutual fund borrowings, including in respect of the interpretation of the term "all borrowings"; (iv) prohibited cross trades; and (v) outsourcing and oversight of service providers.
The staff notice ultimately provides guidance in the form of answers to common scenarios and suggested best practices.
For more information, see OSC Staff Notice 33-743.
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