Canadian securities regulators are moving ahead with their plan to phase in a new point-of-sale disclosure regime for mutual funds.

The first phase doesn’t actually require delivery of point-of-sale disclosure. Instead, under rule amendments released Wednesday, fund companies will be required to start producing a new (up to) four-page disclosure document for each class or series of funds as of Jan. 1, 2011. The companies must make the new document available on their websites, or by request, as of July 8, 2011.

The new document, known as the “Fund Facts” document, highlights key information for investors, including a description of the fund, and the performance, risks and costs of buying and owning the fund.

Changes to the document include:
> adding a requirement to disclose the trading expense ratio, and removing the requirement to show the components of the management expense ratio;
> adding the requirement to disclose the combined total of MER and TER costs as a percentage of the mutual fund’s value; and,
> adding dollars and cents illustrations of the sales charges, fund expenses and trailing commissions.

Also, the regulators are not proceeding with replacing the current withdrawal and rescission rights with a single, harmonized two-day cooling-off right for investors.

The second phase of the new regime will involve the regulators making proposals that would allow firms to deliver the new document instead of the simplified prospectus to satisfy disclosure obligations to investors. Those proposals are expected next year.

The CSA has yet to say when it will actually require delivery of the new document at the point-of-sale, although it maintains that it still intends to do this; along with considering similar disclosure requirements for other types of investment funds.

“The CSA remains committed to implementing point of sale disclosure for mutual funds. A staged implementation allows us to make the Fund Facts document available to investors and market participants sooner, while we continue to consult with stakeholders and consider the issues a large number of commenters have raised related to point of sale delivery for mutual funds and the applicability of the point of sale regime to other types of publicly offered investment funds,” it says.

Additionally, once this implementation is complete, the CSA also intends to review the overall disclosure regime for mutual funds to reduce any unnecessary duplication.

IE