CSA Investment Fund Regulatory Burden Reduction for Investment Fund Issuers
The CSA has proposed a number of initiatives to reduce the regulatory burden on investment funds, including by codifying routine exemptive relief, reducing the obligation to file documents with duplicative information and using web-based technology to provide certain information about funds. The proposed amendments would permit, for example, private funds to invest in other private funds, in specie payments and redemptions and cross-trades between funds under numerous conditions (including for the latter trades, the creation of an IRC for private funds involved in such trades). For public funds, the annual information form and simplified prospectus would be consolidated, and managers would need to designate a qualifying website on which to post regulatory disclosures. The pre-approval criteria for fund mergers and reorganizations would also be relaxed and the regulatory approval requirements for a change of manager, change of control of a manager or change of custodian that occurs in connection with a change of manager would be repealed.
Overview of the Council’s Comments:
We are very supportive of the CSA’s ongoing efforts to reduce the regulatory burden for registrants and Issuers. This proposal concentrated on eight proposed “workstreams” in order to eliminate redundant or unnecessary regulatory requirements for investment funds, which will require amendments to various national instruments and policies. Our comments to each workstream are highlighted below.
Work stream One: Consolidate the Simplified Prospectus and the Annual Information Form
The proposal to consolidate the annual information form (“AIF”) into the simplified prospectus for mutual funds in continuous distribution is a good solution to the issue of duplicative disclosure. As suggested in the notice, some elements of disclosure required in an AIF do not provide incremental benefit to investors. We further propose that the CSA consider whether continuous disclosure documents such as the interim Management Report of Fund Performance are still as beneficial to investors and their advisors, given the individualized reporting to investors provided in the annual investment performance report required by CRM2.
Work stream Two: Investment Fund Designated Website
The Proposed Amendments would require reporting investment funds to designate a qualifying website to post regulatory disclosure in part to improve the accessibility of disclosure for investors. We highlighted to the CSA that clarity could be helpful with respect to regulators’ expectations on how a change or update to the posted disclosure should be communicated to investors and that a potential consideration for Stage 2 of the regulatory burden reduction project would be to categorize or clarify which disclosure found on the website must be pushed to investors or potential investors and which information can be available only on demand from the designated website.
Work stream Three: Codify Exemptive Relief Granted in Respect of Notice-and Access Application.
This Work stream would introduce a notice-and-access system to solicit proxies, similar to what currently exists for other reporting issuers. We are supportive of this harmonization amongst public issuers, as well as of initiatives that help reduce paper disclosure.
Work stream Four: Minimize Filings of Personal Information Forms
We support the proposal to eliminate the duplicative PIF requirements, where filing requirements via the National Registration Database (“NRD”) system are substantially equivalent.
Work stream Five: Codify Exemptive Relief Granted in Respect of Conflicts Applications
We believe that it will be beneficial to codify common exemptive relief, and we would support additional work to level the playing field and save the time, cost and effort involved in obtaining relatively routine discretionary relief.
Work stream Six: Broaden Pre-Approval Criteria for Investment Fund Mergers
We agree with the proposal to change the pre-approval criteria for investment fund mergers to align with frequently granted discretionary approvals.
Work stream Seven: Repeal Regulatory Approval Requirements for Change of Manager, Change of Control of a Manager, and Change of Custodian that Occurs in Connection with a Change of Manager
We support the proposal to repeal regulatory approval requirements in the enumerated circumstances. A requirement to obtain regulatory approval before the information circular is sent to security holders is unnecessarily burdensome and requires the investment fund manager to build in additional time to obtain approvals.
Work stream Eight: Codify Exemptive Relief Granted in Respect of Fund Facts Delivery Applications
We are particularly supportive of the initiative to conform the Fund Facts to certain disclosure required by the ETF Facts document. These changes and others in future could reduce the need to have multiple versions of a document when substantially the same product is distributed through different vehicles.
We also support the proposal to exempt conventional mutual funds from the Fund Facts delivery requirement for purchases made in managed accounts or by permitted clients that are not individuals, as the delivery of such pre-sale disclosure generally is not required by the portfolio manager or permitted client making the investment decision.