On June 19, 2009, the Canadian Securities Administrators (CSA)
published proposed amendments to National Instrument 81-101
Mutual Fund Prospectus Disclosure (Proposed Rule), Forms
81-101F1 Contents of Simplified Prospectus and 81-101F2
Contents of Annual Information Form and Companion Policy
81-101CP Mutual Fund Prospectus Disclosure (the Companion
Policy). New Form 81-101F3 Contents of Fund Facts Document
is part of the Proposed Rule. The Proposed Rule and Companion
Policy together are referred to as the Instrument.
The Instrument, along with related amendments, comprises the
first phase of the CSA's proposed approach to implement the
shared vision of securities and insurance regulators to provide
investors with more meaningful and effective disclosure of mutual
funds and segregated funds, as described in Framework 81-406
Point of sale disclosure for mutual funds and segregated
funds (Framework), which was published by the Joint Forum of
Financial Market Regulators (Joint Forum) on October 24, 2008.
We discussed in a
previous article the features of an initial proposal for the
Framework, i.e., a point of sale disclosure regime, including a new
fund summary document called 'Fund Facts,' delivery
options, cancellation rights, and the regulatory requirements for
preparing, filing and delivering the Fund Facts document. Under the
initial Framework, the Fund Facts document was required to be
delivered before the investor made the decision to buy any mutual
Following a comment and consultation period, the Joint Forum
published the Framework, which reflected modifications in certain
respects of the initial Framework, including modifications in
response to industry concerns about the potential preparation and
delivery costs and disruptions to the sales process.
The Fund Facts document is central to the Instrument and to the
Framework. The delivery requirements have been modified slightly
from the initial Framework, but still provide for delivery at a
time and in a way that allows investors to easily link the
information they receive about a mutual fund to the purchase they
As under the Framework, the Instrument requires the Fund Facts
document to be filed concurrently with the mutual fund's
simplified prospectus and annual information form. The certificate
for the mutual fund applies to the Fund Facts, just as it applies
to all documents incorporated by reference into the simplified
The existing statutory rights of investors that apply for
misrepresentations in a prospectus will apply to misrepresentations
in the Fund Facts. As under the Framework, the Instrument
contemplates replacing the current withdrawal and rescission rights
under securities legislation with a single, harmonized two-day
cancellation right for investors that applies to all mutual fund
purchases. The purpose of the right is to give investors the
reasonable opportunity to change their minds if they have been sold
a mutual fund they do not really want. It is not intended to
protect investors from a short-term decline in market value.
The Instrument contemplates a staged implementation, with the
requirement to prepare and file the Fund Facts document becoming
effective earlier than the new delivery requirements. The CSA
currently propose a two-year transition period for delivery of the
Fund Facts following the effective date of the Instrument. During
this period, the Fund Facts document would not be required to be
delivered to the investor, but would be required to be prepared,
filed concurrently with the mutual fund's next filed simplified
prospectus and annual information form, and posted on the website
of the mutual fund, mutual fund family or the manager.
The CSA have invited comments on the Instrument and related
amendments by October 17, 2009.
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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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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