On July 9, 2015, the OSC released Staff Notice 81-728 setting out guidance with respect to Index Tracking Funds. The guidance provides, among other things, that:
- the methodology governing the indexes should generally not allow for material discretion by the index provider or any other party involved in the administration of the index, and
- the investment objectives of an Index Tracking Fund should set forth specific detailed disclosure regarding the index methodology or the constituents of the index, to help allow an investor to determine whether the Index Tracking Fund is a suitable investment for the investor.
If these two conditions are not satisfied, it is likely that the OSC would require references to the index in the fund's investment objectives and name be removed.
The guidance provided a reminder that an index that satisfies the above conditions may still not meet the definition of "index mutual fund" or "index participation unit" in National Instrument 81-102 Investment Funds (NI 81-102); therefore, the exemptions provided to index mutual funds or index participation units under NI 81-102 may not be relied upon.