Securities regulators have proposed final rules that aim to modernize certain investment fund product rules, and level the playing field between mutual funds and non-redeemable investment funds.

The Canadian Securities Administrators (CSA) Thursday published final amendments to National Instrument 81-102 Mutual Funds (NI 81-102) and related consequential amendments, as part of its project to modernize fund product regulation.

In the first phase of this project, the CSA introduced amendments to codify existing exemptive relief that had been granted. This latest phase aims to “address any market efficiency, investor protection and fairness issues that arise out of the differing regulatory regimes that apply to publicly offered mutual funds and non-redeemable investment funds.”

“The aim is to achieve fair and consistent product regulation across the spectrum of retail investment funds,” the CSA says of amendments that were initially proposed last year.

The changes include the introduction of core investment restrictions and fundamental operational requirements for non-redeemable investment funds. They also impose enhanced disclosure requirements regarding securities lending by all investment funds, including mutual funds, in an effort to improve transparency around the costs, benefits and risks of this activity; and to keep pace with developing global standards in this area.

The original proposals also contemplated the creation of a more comprehensive regulatory framework for alternative funds. However, the CSA has decided to put off this part of the project for now; and it is also delaying the certain investment restrictions for non-redeemable investment funds, which it has decided are interrelated with the alternative funds proposals.

“By modernizing these important investment fund rules, the CSA aims to create fair and consistent product regulation across the spectrum of retail investment funds,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC).

The amendments announced today will come into force on September 22, and are subject to various transition periods. Following completion of this step, the CSA says that it will consider proposals for an alternative funds framework through additional research and industry consultation.