CSA finalizes mutual fund pre-sale rules

Canadian Securities Administrators (CSA) has published final amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure.

Read: CSA releases Fund Facts mock-up for investors

Now, all dealers selling mutual funds are required to deliver Fund Facts before investors make a decision to buy a conventional mutual fund. These documents:

• must be written in plain language;
• can be no more than two pages, double-sided;
• and they must highlight key information about the mutual funds being considered (this includes data that CSA research has identified as important to investors).

Currently, Fund Facts must be delivered to investors within two days of buying a mutual fund. Once the new rules come into effect, however, dealers must deliver them prior to accepting a purchase instruction from an investor.

Read: Regulators want to know if fund fees sway your advice

“Investors are entitled to clear, easy-to-understand information that will help them decide whether a mutual fund is right for them before they buy it,” says Bill Rice, chair of CSA, and chair and CEO of ASC.

This change brings Canada in line with global regulatory standards, including the International Organization of Securities Commissions Principles regarding point of sale.

Read: Compliance roundup: September 2014

Also, the requirement for pre-sale delivery of the Fund Facts takes effect on May 30, 2016. This will provide industry stakeholders with a transition period to update their systems, develop compliance policies and procedures and provide training to staff.

Moving forward, CSA will continue its work on developing both a standardized mutual fund risk classification methodology and summary disclosure document, and a delivery regime for ETFs.

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