As part of an ongoing effort to modernize the disclosure rules for investment funds, the Canadian Securities Administrators (CSA) is adopting a series of rule changes that streamline funds’ requirements — but the creation of a new report to investors, and a new cost disclosure metric, remains a work in progress.
The CSA has finalized certain rule changes, which will take effect April 22, that aim to reduce the compliance burden on fund managers without degrading investor protection.
The purpose of the reforms is “to modernize the continuous disclosure regime governing investment funds by enhancing the utility of investment fund disclosure for investors while reducing regulatory burden for [fund managers],” the regulators said in a notice.
Specifically, the regulators are eliminating the obligation to make certain disclosures in funds’ financial statements (disclosures that aren’t required under International Financial Reporting Standards [IFRS]).
“The [changes] eliminate the disclosure of multiple classes or series, which provided minimal utility for investors and were unduly burdensome for investment funds,” the notice said.
At the same time, the regulators are also providing funds with exemptions from duplicative disclosure requirements involving related-party transactions and other potential conflicts of interest — a measure that aims to “ensure clear, standardized disclosure … and remove the requirement to file duplicative, more frequent reports, without impacting investor protection or efficiency of the markets.”
The reforms come as part of a broader initiative to revamp fund disclosures that also include a proposal to replace the existing management report on fund performance (MRFP) with a new report that is “more streamlined and significantly less burdensome for fund managers to prepare, and more likely to be read and understood by investors…”
Among other things, that new report would require funds to disclose their fund expense ratio, which combines the management expense ratio (MER) and the trading expense ratio (TER).
The regulators are continuing to work on that part of the project.
Based on the feedback that the CSA received on the initial proposal, which was published in September 2024, it said it will develop and test a revised version of the proposed new report that will go through another consultation and comment period.
The regulators didn’t specify when that publication is expected.
“These changes reflect our commitment to making regulation more efficient and responsive,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC), in a release.
“We are reducing unnecessary burden on fund managers while preserving the integrity of investor disclosure,” he added.