The Canadian Securities Administrators wants to overhaul point-of-sale disclosure for both mutual funds and segregated funds.

The CSA says that it in the next few months it plans to begin drafting the rules that would implement the findings of a consultation paper published last year. Today, it is publishing a summary of the 30 comments it received on that paper, as well as its responses. The comment period closed a year ago today.

The paper proposed to:

  • introduce a new fund summary document would be delivered to investors prior to investing in a mutual fund;
  • make available a consumers’ guide geared at novice investors that would explain mutual funds and segregated funds;
  • enhance continuous disclosure; and
  • develop a new foundation document that would contain the detailed information about the mutual fund.



The CSA says the comments it received were generally supportive, but that they also raised a number of issues still being considered. It notes that the proposed consumers’ guide was popular, but that there is controversy over the issue of who would be responsible for delivering the guide, whether delivery would be mandatory and whether any consequences would attach to non-delivery.

Also, the industry sought consolidated fund family documents, rather than one document per fund, but consumer-respondents tended to favour documents prepared on a per-fund basis. The fund industry also favours the use of electronic media to provide fund disclosure, but consumer-respondents were strongly opposed to taking what they saw as a negative option approach to disclosure.

Both sides also disagreed over whether the rights of withdrawal and rescission could be eliminated if disclosure were provided prior to the point of sale, rather than afterwards. The industry strenuously agreed with the idea. Consumers didn’t; they would like to see regulators provide a meaningful cooling-off period that would be applicable to all purchases.

Nevertheless, the work to bring in a new regime will be done in two phases. Between now and spring 2005, the CSA plans to:

  • refine the consumers’ guide;
  • develop a new right of withdrawal to replace existing rights of withdrawal and rescission and consider what act amendments and rules may be need to give effect to this new right;
  • develop and test a fund summary document with consumers; and
  • develop new delivery mechanisms to replace existing prospectus delivery requirements.

    These new documents and rules will be published for comment in spring 2005. At the same time next year, the CSA will examine the need to develop a new foundation document that would replace the existing simplified prospectus and annual information form.

    The CSA says that a new rule implementing an enhanced continuous disclosure regime for investment funds means that this project won’t continue to work on that issue. However, it does plan to implement the other changes on seg funds, too, saying that it will work with the Canadian Council of Insurance Regulators to coordinate the development and implementation of the consultation paper.