FSRA seeks CRM2-like disclosures for seg funds

The Financial Services Regulatory Authority of Ontario (FSRA) is aiming to bring CRM2-style disclosures to the segregated fund sector.

The regulator announced it will propose a rule that would provide seg fund investors with the kinds of annual disclosures about the costs and performance of their funds that were pioneered by the Canadian Securities Administrators (CSA) under the second phase of its client relationship model (CRM2) reforms.

Recently, the CSA published research that examined the efficacy of those reforms. It found that investors are generally paying less and receiving higher returns from their investment funds since the CRM2 reforms took effect.

That research stopped short of concluding that the reforms were the cause of these trends, but it noted that the industry has evolved the way regulators envisaged when they sought to improve cost transparency.

Now, FSRA is seeking the same sort of reform in the seg fund sector by boosting the information required to be provided to investors to include the embedded fees (such as management fees and trading expenses).

“Ontarians need greater transparency to make informed decisions about their financial futures,” Huston Loke, executive vice-president, market conduct with FSRA, said in a release.

“This rule, if approved, will provide individual segregated fund customers with essential information to help them determine if these investments are right for them and to ensure they understand what fees they are being charged,” he said.

The proposals should make it easier to compare investment funds and seg funds, the regulator noted.

The proposals are out for comment until July 26, and FSRA will hold a webinar on June 19 to review the proposed rule.

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.