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CSA – NI-81-102 Proposed Liquidity Risk Management Amendments
Letter Summary:
The Canadian Securities Administrators (CSA) published proposed amendments to National Instrument 81-102 to enhance liquidity risk management (LRM) requirements for all investment funds. The proposals target three areas: LRM frameworks, operational practices, and oversight. Alongside, the CSA released a consultation paper seeking input on further reforms, including LRM tools, asset liquidity classification, and disclosure requirements. The changes aim to codify 2020 guidance, strengthen investor protections, and align with global regulatory developments
Overview of Comments:
The letter outlined the CAC’s response to the CSA’s proposed liquidity risk management reforms for investment funds. The CAC supported the overall direction of the consultation, especially the move to formalize liquidity risk rules and broaden available liquidity management tools, but argued that the proposed governance model placed too much responsibility within compliance rather than an independent risk function. It also urged improvements to liquidity classification, disclosure, regulatory reporting, and coordination on broader macroprudential risks.
Highlights:
The CAC supported the CSA’s effort to strengthen liquidity risk management rules, but said oversight should have rested with an independent risk function, ideally led by a CRO reporting to the board or senior leadership.The CAC supported expanding the liquidity management toolset and making the three existing tools a mandatory minimum baseline, while encouraging broader use of additional price-based and quantity-based tools.
- The CAC accepted the four-category liquidity classification framework only as a baseline and said it should have incorporated price impact, position size, and stressed-market conditions.
- The CAC opposed investor-facing liquidity profile charts in the current form, but supported stronger standardized LMT disclosure and confidential, technology-enabled regulatory reporting.
- The CAC also said the framework should have applied broadly across reporting and non-reporting funds and should have been considered within a wider macroprudential context.