In the July 2015 issue of Investment Funds Practitioner, the OSC highlights three areas of disclosure that Staff are reviewing during their prospectus reviews, and discusses their expectations with respect to such disclosure:
- Multiple Classes or Series Offered. The disclosure of the different classes or series that are being offered should be sufficiently clear. Staff expect the disclosure to be in plain language and clear for each class or series so that the disclosure assists investors to distinguish the differences between the classes and series and better understand their purpose. The disclosure should include: the intended investor type for each class or series; the fee model with respect to each class or series, if applicable; and the dealer compensation for each class or series. Sufficient disclosure should also be provided regarding switches (automatic and default) between classes or series.
- Fees and Expenses. A summary of all applicable fees and expenses should be set out in plain language and clear so that all investors can understand the purpose of the fee and the services/activities that the fee covers. It appears from Staff's comments that Staff will review the disclosure of the fees and expenses to determine if there is any duplication of fees and expenses and, importantly, whether the overall costs of the fund are comparable to similar investment funds and not contrary to the public interest.
- Investment Objectives and Strategies. The investment objectives and strategies of a fund should provide investors with a clear and accurate picture of the fund and its investments in particular asset classes. The disclosure should allow investors to distinguish between multiples funds that are within the same prospectus or fund family, and understand the differences between funds with similar names and/or investment strategies. All material risks associated with the fund's investment objectives and strategies should also be identified.
The OSC’s current prospectus review priorities are intended to (i) encourage more consistent disclosure by investment funds to enhance the comparability of the above three topics; (ii) promote disclosure of all relevant information to investors in a clear, understandable and accurate manner; and (ii) provide more focused comments to issuers that are of particular importance to investors to assist them in making more informed investment decisions. Issuers should expect Staff to challenge boiler plate disclosure during their prospectus reviews, and to request more detailed disclosure in line with the above expectations.