TORONTO, Oct. 24 /CNW/ - The Joint Forum of Financial Market Regulators
(Joint Forum) unveiled today a proposed new disclosure regime that will ensure
investors have meaningful information about a mutual fund or segregated fund
before they make their decision to invest.
The Joint Forum has released "Framework 81-406: Point of sale disclosure
for mutual funds and segregated funds." A key element of the framework is a
two-page document called "Fund Facts", which highlights critical information,
including performance, risk and cost. Under the existing disclosure regime,
many investors have trouble finding and understanding the information they
need because it is buried in long and complex documents, and information may
not be provided until after investment decisions have been made.
The framework incorporates changes resulting from consultations on the
June 15, 2007 proposed framework, and outlines the next steps for
implementation. All comments were carefully considered and a number of changes
were made to the framework to address issues raised and changes suggested in
the comments by both investors and industry.
The framework reflects the Joint Forum's vision for a more meaningful and
effective disclosure regime. It does not outline specific requirements for the
new regime. Rather it sets out concepts and principles agreed upon by members
of the Canadian Council of Insurance Regulators (CCIR) and the Canadian
Securities Administrators (CSA).
This paper marks the conclusion of the Joint Forum Point of Sale Project.
The Joint Forum has turned the framework over to the CCIR and the CSA to begin
the processes for making the necessary changes to insurance guidelines and
legislation (for segregated funds) and to securities rules and legislation
(for mutual funds). Each organization will follow its usual procedures to seek
public input from, and consult with, all stakeholders to implement the
framework and its principles in a way that balances investor protection and
market efficiency. The Joint Forum will monitor their progress, particularly
to ensure harmonization between the sectors.
Copies of the framework and accompanying backgrounder are available from
the websites of CCIR (www.ccir-ccrra.org), certain members of the CSA (see
www.csa-acvm.ca for a list) or the Joint Forum (www.jointforum.ca).
The Joint Forum consists of representatives from the Canadian Association
of Pension Supervisory Authorities (CAPSA), the CCIR and the CSA. The goal of
the Joint Forum is to continuously improve the financial services regulatory
system through greater harmonization, simplification and co-ordination of
Framework for Point of Sale Disclosure
for Mutual funds and Segregated funds
The current disclosure regime for mutual funds and segregated funds does
not give investors meaningful information when they need it most - before they
make their decision to buy a fund.
The framework describes the elements of the Joint Forum's point of sale
disclosure system, including a new mandatory fund summary document called Fund
Facts, to be delivered to investors before they buy a fund, and a new
simplified "cooling off" right for an investor to cancel a purchase. The
framework has been approved by the regulators that are members of the Joint
Forum and its member associations. It does not necessarily represent the views
of any government.
The Joint Forum developed this plain language document format to give
investors the key information to help them understand the potential benefits,
risks and costs of investing in a fund.
The central document in the disclosure system is the Fund Facts, which
highlights key information that is important to investors. The information in
the Fund Facts fits on both sides of one page and is organized in a way that
makes sense to investors. It uses a question-and-answer format that makes it
easy for investors to find information. It contains statements that help
investors understand the risks of investing in a fund.
To make it as simple, meaningful and accessible as possible, the Fund
Facts was written with the following principles in mind:
- Avoid legal or financial jargon.
- Use simple examples, tables and graphics to illustrate concepts.
- Use bold headings and white space to make the document easier to read
- Write at a grade level of 6.0 or less on the Flesch-Kincaid or
- Recognize the role of the adviser in the sales process.
WHEN FUND FACTS MUST BE DELIVERED
Dealers and insurers will have to deliver the Fund Facts for initial
purchases (first purchase of a fund not currently held in the account or under
the insurance contract).
If the adviser recommends the fund, Fund facts must be delivered before
or at the point of sale for initial purchases (with the exception of money
For investor initiated purchases through an adviser, investors can choose
to receive the Fund Facts before or at the point of sale, or with their trade
confirmation. The adviser will have to bring the Fund Facts to the investor's
attention. Suitability requirements will still apply.
For initial purchases made through order execution-only accounts, Fund
Facts will be required to be delivered with the trade confirmation.
Dealers and insurers will be required to give investors the option to
receive annually the Fund Facts for all of the funds they hold.
HOW FUND FACTS MAY BE DELIVERED
Fund Facts can be directly delivered to each investor by hand, fax, mail,
Electronic delivery could include sending an electronic copy of the
document directly to the investor either as an attachment or link, or
directing the investor to the document on the fund manager's or insurer's
It would not be sufficient to make the information available on the
internet and leave it to investors to find it. Nor would it be sufficient to
describe the document orally without delivering it.
Investors have rights under the framework including a new cooling off
Investors in mutual funds and segregated funds will have a cooling-off
right that allows them to cancel their purchase. They will have two business
days from receipt of trade confirmation to exercise this right.
The investor will get back the lesser of:
- the amount of their original investment and
- the value of the fund on the day they exercise the cooling-off right
The cancellation of a purchase is processed the same way as a redemption.
Preparation and filing of Fund Facts will be subject to the regulatory
requirements relevant to the product. For example, Fund Facts for mutual funds
would fall within the jurisdiction of the securities regulators while
segregated funds would fall within the jurisdiction of the insurance
JOINT FORUM OF FINANCIAL MARKET REGULATORS
The Joint Forum of Financial Market Regulators (Joint Forum) consists of
- Canadian Association of Pension Supervisory Authorities (CAPSA),
- Canadian Council of Insurance Regulators (CCIR) and
- Canadian Securities Administrators (CSA).
The goal of the Joint Forum is to continuously improve the financial
services regulatory system through greater harmonization, simplification and
co-ordination of regulatory activities.
For further information:
For further information: Media inquiries: Rowena McDougall, Financial
Services Commission of Ontario (FSCO), (416) 590-7176,
firstname.lastname@example.org; Sylvain Théberge, Autorité des marchés financiers
(AMF), (514) 940-2176, Sylvain.email@example.com; Laurie Gillett,
Ontario Securities Commission, (416) 595-8913, firstname.lastname@example.org