Last week, OSC staff concluded a review focusing on mutual fund practices related to liquidity assessments of fund holdings, liquidity stress testing and liquidity valuation considerations. OSC staff’s review disclosed its observations and recommendations for mutual funds as a result of the review.
For example, OSC staff found that some investment fund managers have the view that equity investments are liquid so long as they are listed on an exchange without considering other factors such as market activity and conditions. OSC staff recommend that the requirements of National Instrument 81-102 – Investment Funds should be considered – namely, the requirements that redemption requests be settled in 3 business days without a significant adverse impact to the portfolio. In OSC staff’s view, a stock listing is not necessarily indicative that an equity investment can be readily disposed at a price that approximates the amount at which the portfolio asset is valued.
For further information, please consult OSC Staff Notice 81-727.