On February 12, 2015, the CSA released an update on their planned alternative funds framework for investment funds (the “Alternative Funds Proposal”). The update is part of a broader effort by the CSA to modernize investment fund product regulation.
The Alternative Funds Proposal relates to a class of publicly offered investment funds that wish to invest in assets or use investment strategies that are not permitted under National Instrument 81-102.
The Alternative Funds Proposal was first published for comment in March 2013. According to the CSA, the comment period generated significant discussion from stakeholders, with topics including:
- attributes of an alternative investment fund (in particular, the criteria for differentiating a mutual fund and a non-redeemable investment fund from an alternative investment fund),
- naming conventions,
- whether alternative investment funds should be permitted to borrow cash, and if permitted, limits on borrowing,
- use and measurement of leverage,
- short selling (in particular, concerns about cash cover requirements),
- other investment restrictions, and
- proficiency standards for representatives selling alternative funds.
The CSA plans to continue gathering feedback from stakeholders and aims to complete its consultations by mid-2015, after which proposed rule amendments implementing the Alternative Funds Proposal will be published for comment.