Include disclosure in burden reduction, IFIC asks regulators
Following the Canadian Securities Administrators’ (CSA) request for comments on reducing the burden for investment fund issuers, the Investment Funds Institute of Canada (IFIC) has urged regulators to revisit “requirements that are no longer necessary or no longer serve their intended purpose,” including those pertaining to fund disclosure.
“Investors, advisors and regulators each have different information needs, and the ultimate objective must be to provide disclosure that is both meaningful to each stakeholder and delivered in the manner each prefers,” IFIC President and CEO Paul Bourque said in a statement.
Welcoming the CSA’s proposal to consolidate the simplified prospectus (SP) and annual information form (AIF), IFIC argued that the introduction of Fund Facts and ETF Facts has rendered the current regime of disclosure for investment fund issuers.
It highlighted several recommended courses of action, including:
- Reassessing the content of the consolidated SP to assess the relevance of the disclosure to investors, registrants, and regulators;
- The requirement for fund issuers to annually renew and file a prospectus, along with all accompanying documents aside from the Fund Facts or ETF Facts documents;
- Removing duplicative information within the same document, including parts of long-form prospectuses for ETF issuers, as well as between the prospectus and Fund Facts or ETF Facts;
- Removing duplicated information across documents;
- Establishing a form of information circular tailored specifically to fund issuers; and
- Reassessing the quarterly fund portfolio disclosure requirement for funds that provide more frequent portfolio transparency, as well as Management Reports of Fund Performance (MRFP) and financial statements.
A proposed requirement for fund issuers to set up designated websites for investment fund information, IFIC added, should provide for flexibility in designing, building, and maintaining the site.
“[W]e recommend the CSA also consider which disclosure must be ‘pushed’ to the investor and which disclosure can be available for investors to ‘pull’ from the designated website,” the group added, proposing that MRFPs and financial statements be hosted on the site given investors’ low opt-in rates for such information.
And while it commended the OSC’s efforts to conduct a quantitative cost-benefit analysis for separate workstreams, IFIC called on the CSA to perform “more robust” analyses in the future. Some considerations, which it said were based on its members’ experiences, were:
- The cost of external counsel generally used by the CSA does not reflect fees that issuers pay for specialised securities and tax law expertise or the use of a variety of external counsel staff;
- Regulatory change management entails operational costs that go beyond adapting compliance programs — including the need to review, interpret, and implement changes to rules or guidance;
- The fact that changes affecting websites or public-facing documents come with translation and typesetting costs; and
- Aside from a review of internal processes and policies, changes such as the consolidation of the SP and AIF as well as codification of conflicts release may require the use of external counsel advice.