Securities regulators have granted novel exemptions from prospectus requirements to the major manufacturers of exchange-traded funds (ETFs), and the bank-owned dealers and discount brokers, that essentially let ETFs use their own version of Fund Facts documents in place of prospectuses.
In Thursday’s OSC Bulletin, a series of exemption decisions have been published that provides exemptive relief to dealers from the prospectus delivery requirement; and, to ETFs to permit the funds’ prospectus to not contain an underwriter’s certificate and to include a modified statement of investors rights, as long as they file a summary document, similar to the Fund Facts document for mutual funds.
The decisions indicate that the exemptions which will take effect Sept. 1, and expire in two years (Sept. 1, 2015) reflect the Canadian Securities Administrators’ (CSA) plan to expand its point of sale disclosure initiative (substituting Fund Facts disclosure for prospectus disclosure) to other sorts of investment funds, not just mutual funds; and, its plans to codify new alternative prospectus delivery requirements as part of that effort.
Generally, ETFs only have to provide a prospectus for orders filled from a dealer’s inventory of so-called ‘creation units’, which are issued to dealers that are authorized to purchase newly issued securities directly from the fund and then sold on an exchange. They are not required for secondary market trades of previously issued securities.
Now, under this new relief, dealers on the buy side of a trade will have to provide summary disclosure documents within two days of a purchase, whether or not the trade involves “creation units”. Regulators indicate that this will improve the consistency of disclosure to investors, and help create a more consistent treatment of mutual funds and ETFs; while they work to set this approach down in new rules.
Similar decisions were published today for a long list of firms, including: Vanguard Investments Canada Inc., Horizons ETFs Management (Canada) Inc. and AlphaPro Management Inc., BlackRock Asset Management Canada Limited, BMO Asset Management Inc., First Asset Investment Management Inc., RBC Global Asset Management Inc.; along with dealers such as BMO Nesbitt Burns Inc. and BMO Investorline Inc., TD Securities Inc. and TD Waterhouse Canada Inc., RBC Dominion Securities Inc. and RBC Direct Investing Inc., Scotia Capital Inc. and DWM Securities Inc., CIBC World Markets Inc. and CIBC Investor Services Inc., National Bank Financial Ltd. and NBCN Inc., National Bank Financial Inc. and National Bank Direct Brokerage Inc.