On October 8, 2010 the CSA published amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure and its forms and related companion policy. The amendments represent the first step in the implementation of the CSA’s point of sale disclosure framework. That framework resulted from work done by Canadian securities and insurance regulators to provide investors with more meaningful information about mutual funds and segregated funds. The focus of the amendments is the new summary disclosure document called “Fund Facts”. This document is intended to highlight key information that is important to investors, in easy to understand language no more than two-pages (double –sided) in length.
The amendments require that a Fund Facts document be produced by a mutual fund and filed with regulators concurrently with the mutual fund’s simplified prospectus and annual information form. It also requires that a Fund Facts document be made available to investors and be posted on the website of the fund family or fund manager. Although the amendments do not require delivery of the Fund Facts document to investors, the CSA encourages the use and distribution of the document as “a key part of the sales process in helping to inform investors about mutual funds they are considering for investment.” A Fund Facts document is incorporated by reference into its related simplified prospectus so existing statutory rights of investors with respect to misrepresentation also will apply to misrepresentations in the Fund Facts document.
The CSA propose two other stages to the implementation of the point of sale disclosure framework as described in CSA Staff Notice 81-319. Stage 2 will involve publication of a proposal that delivery of the Fund Facts document would satisfy the prospectus delivery requirement. Stage 3 would follow consideration of issues related to Stage 2 and would address proposed requirements to implement point of sale delivery for mutual funds and other types of investment funds as well.
The amendments are expected to come into force on January 1, 2011. However, the requirement to file a Funds Fact document with a prospectus (including preliminary and pro forma) or a prospectus amendment filing takes effect on April 8, 2011. All mutual funds are required to file a Fund Facts document on or before July 8, 2011.