The previously published amendments (Phase 2 amendments) to NI 81-102 as part of the CSA’s fund modernization project are now in effect.

For mutual funds, the changes include:

  • a new prohibition against investing in closed-end funds (subject to an 18-month transition period for existing mutual funds), and
  • new sales communications requirements for mutual funds following conversion from a closed-end fund structure.

For closed-end funds, the changes include:

  • a prohibition against issuing any warrants (whether as part of an initial public offering, or subsequently to existing unitholders),
  • a requirement to obtain unitholder approval for any type of reorganization (including conversion to a mutual fund structure), including that the fund not incur the costs associated with any such reorganization,
  • new investment restrictions prohibiting:
  • investments in mortgages (other than government-guaranteed mortgages) and certain loans, and
  • investments in underlying funds that are not subject to Canadian securities laws,

subject, in each case, to an 18-month transition period for existing closed-end funds,

  • limits on the circumstances in which redemptions of units can be suspended and requiring that unitholders be reminded annually of their redemption rights,
  • new restrictions on sales communications (advertising), and
  • a variety of conflict of interest rules previously exclusive to mutual funds.