Mutual Fund families that offer fund of funds products in Québec (the “Québec Top Funds”) may now be in a position to choose underlying investments in a broader pool of funds.
Section 2.5(2)(c) of National Instrument 81-102 – Mutual Funds (“NI 81-102”) requires that an underlying fund in a fund of fund structure be a reporting issuer in the same jurisdictions as the top fund. Until recently, the Autorité des marchés financiers (“AMF”) required an underlying fund to file a non-offering prospectus with the AMF in order to obtain reporting issuer status in Québec. Underlying funds had to prepare and file (in both English and French) the non-offering prospectus with the AMF before becoming the bottom fund in a fund of fund structure involving a Québec Top Fund. Many mutual fund families voluntarily chose not to become reporting issuers in Québec to avoid the costs associated with such filing. As a result, many potentially attractive underlying funds were not marketed to Québec Top Funds.
The AMF recently issued a discretionary decision order allowing a number of mutual funds to become reporting issuers in Québec by filing an application to be qualified as reporting issuers without having to prepare and file a non-offering prospectus with the AMF.
As a result, Québec Top Funds can now invest in those underlying funds in compliance with section 2.5 of NI 81-102.