CSA propose Fund Facts pre-sale delivery requirements

The Canadian Securities Administrators today published proposed amendments to mutual fund prospectus disclosure rules that would implement requirements regarding the pre-sale delivery of Fund Facts. The amendments represent the third stage of the CSA's point of sale disclosure project for mutual funds.

Under the proposed amendments, the most recently filed Fund Facts would have to be delivered to a purchaser before a dealer accepts an instruction for purchase. Delivery would not be required, however, if the purchaser had already received the most recently filed Fund Facts. There would also be an exception, subject to certain conditions, where a purchaser indicated a desire to complete the purchase immediately or by a specified time, and it was not practicable for the dealer to complete pre-sale delivery. In such a case, the Fund Facts would have to be delivered within two days of purchase.

Pre-sale delivery requirements would also not apply to subsequent purchases of securities of a mutual fund pursuant to pre-authorized purchase plans so long as the dealer provided initial and subsequent annual notices to the purchaser that included information on how to access and request the Fund Facts and that the purchaser would not have a right for withdrawal of the purchase.

An initial proposal on pre-sale delivery was made in 2009 as part of the CSA's initial proposal of amendments related to point of sale disclosure. The proposal released today addresses comments received from stakeholders and, according to the CSA, simplifies the proposed approach to pre-sale delivery.

According to the notice, the CSA is also currently working on the mutual fund risk classification methodology published in December 2013, as well as the development of a summary disclosure document and delivery requirements for ETFs, which is expected to be published later this Fall.

The CSA is proposing a one-year transition period following the effective date of the amendments. Comments on the proposal are being accepted until May 26, 2014.

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