The first set of proposed amendments would reduce the frequency of prospectus filings for funds that are in continuous distribution from one year to two by extending the lapse date period for pro forma prospectuses. The purpose is to modernize the prospectus filing model without affecting the currency of the information available to investors. There would be no change to when the Fund Facts or ETF Facts would need to be filed (i.e., still annually), and those documents would continue to provide investors with the disclosure that changes yearly. Funds will still be subject to material change reporting rules. In addition, the CSA is proposing to repeal the requirement to file a final prospectus no more than 90 days after the issuance of a receipt for a preliminary prospectus. It is expected that each jurisdiction will change their filing fees such that the annual filing of the Fund Facts/ETF Facts will incur filing fees instead of the prospectus.
The notice included a consultation paper on whether to publish proposed amendments to permit a base shelf prospectus filing model for investment funds in continuous distribution, similar to corporate issuers in NI 44-102 Shelf Distributions. For investment funds, it is contemplated that the base shelf prospectus could have a lapse date beyond 25 months, and that certain disclosure documents such as the Fund Facts and ETF Facts would be incorporated by reference into the base shelf prospectus and be subject to primary market liability in the event of a misrepresentation. Specific questions are posed on the impact on investor decision making.
Overview of the Council’s Comments:
The Council is generally supportive of the CSA’s burden reduction initiatives, and agree that the Proposed Amendments will result in a reduction of some unnecessary regulatory burden without having a material negative impact on investor protection. However, we do have a concern that the increased time frame may result in some stale information in the prospectuses of certain issuers.
- Our key comments are summarized below:
- We support the proposal for a prospectus to be renewed every two years instead of every year due to the significant cost and resource savings by:
- Investment fund managers on the preparation and filing of prospectuses and related documents, and by
- CSA, as staff members would no longer have to review each prospectus on an annual basis.
- We understand that the savings could be as high as $3 million per issuer group for large bank-affiliated investment fund issuers, and similarly significant when extrapolated across the industry.
- We are in favour of additional targeted (either thematic or issuer-focused) CSA analysis and actions to help mitigate the potential downside of losing the annual review by an issuer, its advisors and regulatory staff.
- Stale information concerns, resulting from the 2-year period, include DEI or ESG-related considerations, evolving industry practices, norms, and related disclosure language.
- Fund Facts and ETF Facts documents should continue to be filed annually and delivered under the current requirements, as they are most likely to be reviewed by end investors.
- We are not currently in favour of the potential new base shelf prospectus filing model, as it would exacerbate the issues relating to potentially stagnant disclosure.