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:

  1. 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),
  2. naming conventions,
  3. whether alternative investment funds should be permitted to borrow cash, and if permitted, limits on borrowing,
  4. use and measurement of leverage,
  5. short selling (in particular, concerns about cash cover requirements),
  6. other investment restrictions, and
  7. 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.