Rules could make alternatives as easy to buy as mutual funds

CSA is seeking comments on proposed amendments as part of the final phase of its efforts to modernize investment regulation.

The proposed amendments are primarily aimed at developing a more comprehensive regulatory framework for publicly offered alternative funds (currently called commodity pools). They would also streamline the regulation of non-redeemable investment funds.

The proposals are found in National Instrument 81-102 Investment Funds (NI 81-102) and National Instrument 81-101 Mutual Fund Prospectus Disclosure.

“Once these changes come into effect, investing in alternative funds will basically be as simple as buying a mutual fund – with a similar structure,” noted AIMA Canada COO James Burron in a release.

The net effect of the proposals?

• For the most part, alternative funds will be offered in the same manner as mutual funds, with a simplified prospectus, annual information form and fund facts.
• Alternative funds may be distributed through either IIROC or MFDA representatives.
• Conventional mutual funds will be permitted to invest up to 10% of their net asset value in alternative funds and non-redeemable investment funds, provided that such funds are subject to NI 81-102.

Read: Should average investors use alts?

In a statement, Louis Morisset, CSA chair, said, “In the last decade, the range of investment fund products and strategies in the marketplace has expanded significantly, both in Canada and in other jurisdictions. […] We expect [the proposals] will facilitate more alternative and innovative strategies while at the same time maintaining restrictions that we believe to be appropriate for products that can be sold to retail investors.”

Read: Avoid pitfalls of alternative strategies

The CSA first published an outline for the proposed framework for alternative funds on March 27, 2013. On February 12, 2015, the CSA published an update on the proposed framework in CSA Staff Notice 81-326 Update on an Alternative Funds Framework for Investment Funds.

The proposed amendments can be found here. The comment period closes December 22.

Also read: Hedge funds spending more on compliance

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.