CSA eases mutual funds move to T+1

The Canadian Securities Administrators (CSA) are proposing rule changes that would ease the path for mutual funds to join the move to shorten the securities settlement cycle.

The regulators’ proposed revisions to the mutual fund rules are intended to facilitate a decision by funds to voluntarily reduce their trade settlement cycles from trade day plus two (T+2) to T+1, along with the rest of the securities industry.

The Canadian Capital Markets Association is currently planning for the industry to shift to T+1 settlement on May 27, 2024.

The CSA hasn’t mandated that mutual funds join the move to reduce the settlement cycle; however, regulators have said that funds should move to T+1 settlement for primary distributions and redemptions if the standard settlement cycle for listed securities is reduced.

“The proposals are intended to complement the anticipated shift to T+1 in Canada by accommodating a range of settlement cycles for mutual funds, including those that make this change,” the CSA said in a release.

Specifically, the revisions clarify payment dates for transactions, and the time frame for the forced redemption of securities for non-payment would change from three days to two days after the pricing date.

The proposals are out for a 90-day comment period ending Jan. 17.

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.