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Letter Summary:
The CAC believes in the importance of harmonizing regulations that apply to products perceived by the investing public as belonging to the same category of risk and liquidity, such as mutual funds. This improves investor protection by preventing regulatory arbitrage and mis-selling of products. On the other hand, if products are sufficiently different so as to satisfy a different investment need, the best way to help investors differentiate between these products is through ensuring there is a clear articulated difference in their structure. For example, one can clearly separate those products that are listed on an exchange and are not redeemable versus those products that are not exchange-listed but are redeemable. In all cases, there should be clear prospectus disclosure of those differences. The products should then not be allowed to convert between these structures. We feel that this approach would better help avoid investor confusion than through imposing different investment restrictions on the same types of funds, such as creating a conventional and alternative system for both mutual funds and closed end funds.
Overview of the Council’s Comments:
The CAC acknowledges that CSA Staff Notice 11-324 suggests specific areas of focus for comments on the Proposed Amendments, however, given the scope of the proposals, the CAC wishes to respond more broadly to the following original specific questions for consideration relating to NI 81-102 and NI 81-104.