In the next few weeks, the Canadian Securities Ad-ministrators are expected to release a draft rule intended to implement various aspects of the registration reform project.

Once implemented, the RRP will have a profound impact on daily operations of the mutual fund industry — for fund managers, fund dealers and advisors.

Basically, this regulatory proposal seeks to streamline and harmonize the registration requirements applied by each of the 13 securities regulators in Canada. Indeed, it will change the very basis of such regulation from the current trade-based trigger to a business-based trigger. This is significant because, although it may permit certain activities that today are considered “trades” to be carried out without registration in the future, it opens the door for numerous other activities to be brought within the scope of securities regulators.

It may pave the way for development of a regulatory regime that effectively focuses on the advice investors receive rather than the activities advisors undertake.

Under the aegis of an ad hoc committee of the board of directors, the Investment Funds Institute of Canada has created three task forces to look at these issues and provide industry comment and input to the regulators: one focuses on investor issues, another on dealer/advisor issues and the third on RRP issues affecting fund managers. These task forces start from the position that new registration requirements should recognize and harmonize with other registration requirements to which an individual firm is subject. Each task force will analyse and comment on major aspects of the RRP.

RRP proposals include a point-of-sale “fund summary,” intended to replace the current simplified prospectus and ensure that mutual fund disclosure conforms with that provided to investors in life insurance segregated funds. Started a number of years ago by the Joint Forum of Financial Market Regulators and recently included in the RRP, this will provide a concise, paper-based summary to be delivered to investors at point of sale. It will give information about a fund’s investment objectives and strategies, risks, MER, fund manager and portfolio advisor disclosure, past performance information and a reference to where investors can find more information — in an easy-to-read format.

IFIC has long supported simpler, more meaningful disclosure to investors. Delivery requirements attached to the proposed fund summary must, however, be flexible enough to accommodate the broad range of channels through which mutual funds are sold and the ways in which investors want to deal with advisors. To increasing numbers, that is electronically.

Also expect to see more clarification of the obligations and expec-tations of dealers and advisors, and the rights and obligations of clients through updated account application forms to be adopted by Mutual Fund Dealers Association of Canada and Investment Dealers Association of Canada members.

Other areas the RRP addresses:

> performance reports. IFIC believes the methodology chosen must permit accurate comparison of different investment products, and the contributions those make to an investor’s portfolio.

> withdrawal rights. IFIC supports the right of withdrawal at then-current NAV for two days following receipt of disclosure documents, and wants to see consistency on this across Canada.

Some changes may be more onerous than others. Some may be a welcome relief. But, overall, the RRP will mark a sea change in how advisors run their businesses and conduct client relationships. IE



Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.