CSA seeks to cut frequency of fund filings

In an effort to reduce needless compliance costs for the fund industry, the Canadian Securities Administrators (CSA) are proposing an end to annual prospectus filing requirements for investment funds.

On Thursday, the CSA released a set of proposals on modernizing the prospectus filing system for investment funds. To start, the regulators are planning to shift from annual prospectus renewals to requiring renewals every two years — a move the CSA estimates would save the industry $15.8 million in annual costs without affecting investor protection.

While funds wouldn’t have to renew their prospectuses annually, they’d still have to file Fund Facts disclosures each year.

Given that Fund Facts is now the primary disclosure document that investors use, the information they receive won’t be impacted by allowing prospectus renewals every two years, the regulators said.

Moving to biennial disclosure “will better reflect the shift from the delivery of the prospectus to the delivery of the Fund Facts and ETF Facts to investors and reduce unnecessary regulatory burden imposed by the current prospectus filing requirements under securities legislation on investment funds,” the CSA said in its notice outlining the proposed changes.

To the extent that the cost savings of reduced regulatory filing requirements are passed on to investors, there may also be a benefit to investors in the form of lower fees.

“Our proposed modernization initiative would reduce regulatory burden without affecting the currency or accuracy of information available to investors,” said Louis Morisset, chair of the CSA, and president and CEO of the Autorité des marchés financiers (AMF).

“They will continue to receive the information needed to inform their investment decisions on a regular basis.”

Longer term, the CSA is considering a more fundamental remake of the prospectus filing system. To that end, it’s also consulting on the introduction of a new base shelf prospectus system for investment funds that could further reduce compliance costs.

The CSA said the move to a base shelf prospectus model builds on previous reforms to reduce redundant disclosure requirements by separating the disclosures that need to be updated regularly from those that don’t.

The proposals are out for comment until April 27.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.