Staff of the Ontario Securities Commission today released a notice setting out their views on the application of prospectus requirements and product regulation in connection with cross-listings by foreign exchange-traded mutual funds.
According to OSC Staff, an ETF's exchange listing functions are "the primary distribution channel through which an ETF issues its securities to investors and increases its net assets". As such, OSC Staff do not consider a listing to merely provide a source of secondary market liquidity and a cross-listing would, thus, generally be considered a distribution in Ontario.
Foreign ETF providers must, therefore, file a prospectus and comply with investment fund product regulation before applying to cross-list on an exchange in Ontario. Foreign providers of comparable products that use a similar distribution structure would also fall under the same requirements.
OSC Staff indicated that they intend to monitor the issue and potentially consider whether a modified approach to cross-listing of foreign investment products is warranted. Staff also stated that they are open to considering exceptions to their approach. For more information, see OSC Staff Notice 81-715.