Although the Canadian Securities Administrators (CSA) remains “tight-lipped” about when to expect the rollout of its proposed reform to expand retail investors’ access to so-called alternative investments, the Alternative Investment Management Association Canada (AIMA) anticipates that the rollout could be initiated sometime next spring.
That projection depends on how the CSA decides to move forward once it wraps up its review of letters that investment industry stakeholders submitted through its open callout, says Michael Burns, partner at McMillan LLP and chairman of AIMA Canada, at a media briefing in Toronto on Tuesday.
Still, AIMA and others in the investment industry are, for the most part, in “wait-and-see” mode, Burns says, as the CSA has yet to announce a timeline for its possible implementation, or signal whether its next steps will be to seek further comment or table the proposal.
Under the current regulatory regime, “alternative funds” are limited to accredited or more “sophisticated” investors, such as institutional investors and pension funds.
With the proposed regulations, investment and mutual fund dealers alike would have the ability to pitch these products to the average investor the same way they sell mutual funds. That’s because alternative investments would all be enveloped into the same expanded regulatory framework.
As it stands, Canada’s hedge fund industry is miniscule relative to global players, but once CSA’s proposal comes into effect, Burns says, more players will likely enter the field.
Initially, he adds, mutual fund manufacturers would be poised to capitalize on the changes immediately because they already have the infrastructure in place to reach and educate prospective clients.
Those players have the option of either going it alone — offering standalone products — or partnering with established alternative fund managers to release a “co-branded product,” Burns notes.
At the same time, alternative fund managers would have their own products ready to go for mass consumption.
The CSA has “come a long way” since first introducing its efforts to update the regulatory framework for publicly offered investment funds in 2013, Burns says.
For example, the CSA scrapped a proposed provision that would’ve required alternative funds to publish a long-form prospectus — and instead has opted for a simplified version that mutual funds are also subject to — in response to its consultations with the industry.
How the CSA decides to proceed after it finishes its review of submitted comments, whether it will publish a report on its findings and launch another round of comments or unveil the proposal in its final form, remains up in the air, Burns says.
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