Ontario regulator promises busy fall season for fund companies

Canadian Securities Administrators release report on fund governance (September 11, 2003) With three major initiatives on the horizon, Ontario Securities Commission (OSC) staff acknowledge that fund companies may be feeling under the gun. What’s more, these initiatives all have a November-December due date, upping the pressure on investment product manufacturers to file comments on strictures […]

By Scot Blythe | September 11, 2003 | Last updated on September 11, 2003
4 min read
  • Canadian Securities Administrators release report on fund governance
  • OSC sets proposed timetable for new mutual fund industry rules
  • Regulators prepare mutual fund governance proposal
  • CSA proposes independent oversight of mutual fund managers in canada
  • IFIC blasts CSA’s mutual fund governance proposals
  • Two-page disclosure reports to save fund companies money

    But that’s not the only December project looming for the fund industry. In October, the Joint Forum of Financial Regulators, the conglomerate of Canadian securities, insurance and pension regulators, is to decide on revised rules for point-of-sale documents for mutual and segregated funds. Those rules were originally formulated in consultation paper 81-403 last year. In addition, new rules for funds of funds will come into effect in December 2003, while revisions of NI 81-106, the CSA’s proposal on continuous disclosure for investment funds, will be published for comment in November.

    Silma admits that disclosure documents have not performed as they were expected to. Investors are deluged with so much information, she admits, that they look at it only long enough to slip off the plastic wrapping before tossing them into the blue boxes. Advisors also find them less than useful. Meanwhile, mutual fund and insurance companies are paying to print and mail paper that mostly goes unread.

    “We find that a lot of fund consumers need more information than other investors,” she said, but “the documents are daunting and very difficult for the average person to read and understand.”

    The alternative being presented to the Joint Forum is a “layered” approach to mutual fund and segregated fund disclosure, with four types of documents. The first would be a foundation document that has “static” information such as the fund’s operator but no performance record or other things that may quickly change. Investors must have access to that document, but it need not be delivered.

    Investors would also have access to a continuous disclosure record, with annual and semi-annual financial statements as well as a management discussion and analysis of the fund results.

    A fund summary document would be a one- or two-pager that “would communicate key features that are unique to the fund. It would also clearly highlight the availability of more detailed information in the other documents,” Silma said. The fund summary would have to be given to investors before they purchase a fund.

    Finally, there would be a generic consumer’s guide to mutual and segregated funds, offered by companies “only to those people whom they believe would benefit from it,” Silma said. “We hope that the end result would be that the purchaser would get as much information about the funds they’re purchasing as they wish, but need not be overloaded or overwhelmed by the information.”

    However, former OSC commissioner Glorianne Stromberg said “I still think they should send them out and have the clients say, ‘Stop sending these to me,'” rather than require investors to ask for the documents.

    Do you agree with the OSC’s proposed overhaul of fund company disclosure documents? Or do you agree with Stromberg? Share your thoughts with your fellow advisors in the Talvest Town Hall on Advisor.ca.

    Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

    (09/11/03)

    Scot Blythe

  • Canadian Securities Administrators release report on fund governance
  • OSC sets proposed timetable for new mutual fund industry rules
  • Regulators prepare mutual fund governance proposal
  • CSA proposes independent oversight of mutual fund managers in canada
  • IFIC blasts CSA’s mutual fund governance proposals
  • Two-page disclosure reports to save fund companies money

    But that’s not the only December project looming for the fund industry. In October, the Joint Forum of Financial Regulators, the conglomerate of Canadian securities, insurance and pension regulators, is to decide on revised rules for point-of-sale documents for mutual and segregated funds. Those rules were originally formulated in consultation paper 81-403 last year. In addition, new rules for funds of funds will come into effect in December 2003, while revisions of NI 81-106, the CSA’s proposal on continuous disclosure for investment funds, will be published for comment in November.

    Silma admits that disclosure documents have not performed as they were expected to. Investors are deluged with so much information, she admits, that they look at it only long enough to slip off the plastic wrapping before tossing them into the blue boxes. Advisors also find them less than useful. Meanwhile, mutual fund and insurance companies are paying to print and mail paper that mostly goes unread.

    “We find that a lot of fund consumers need more information than other investors,” she said, but “the documents are daunting and very difficult for the average person to read and understand.”

    The alternative being presented to the Joint Forum is a “layered” approach to mutual fund and segregated fund disclosure, with four types of documents. The first would be a foundation document that has “static” information such as the fund’s operator but no performance record or other things that may quickly change. Investors must have access to that document, but it need not be delivered.

    Investors would also have access to a continuous disclosure record, with annual and semi-annual financial statements as well as a management discussion and analysis of the fund results.

    A fund summary document would be a one- or two-pager that “would communicate key features that are unique to the fund. It would also clearly highlight the availability of more detailed information in the other documents,” Silma said. The fund summary would have to be given to investors before they purchase a fund.

    Finally, there would be a generic consumer’s guide to mutual and segregated funds, offered by companies “only to those people whom they believe would benefit from it,” Silma said. “We hope that the end result would be that the purchaser would get as much information about the funds they’re purchasing as they wish, but need not be overloaded or overwhelmed by the information.”

    However, former OSC commissioner Glorianne Stromberg said “I still think they should send them out and have the clients say, ‘Stop sending these to me,'” rather than require investors to ask for the documents.

    Do you agree with the OSC’s proposed overhaul of fund company disclosure documents? Or do you agree with Stromberg? Share your thoughts with your fellow advisors in the Talvest Town Hall on Advisor.ca.

    Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

    (09/11/03)