A new point-of-sale disclosure regime for mutual funds is one step closer to reality, as the Canadian Securities Administrators have published their proposed rule for comment.

The proposed rule would require dealers to deliver a basic two-page “fund facts” document at, or before, investors decide to buy a new fund. The new document would set out basic information about a fund’s objectives, holdings, risks, performance and fees, in plain language.

Just as important as the new, simpler disclosure document, is the fact that it would be required to be provided to investors before they buy, whereas current rules just require that investors receive the more complex prospectus within two days of purchase. These proposed delivery requirements have proven most contentious with the industry, which has worried that new regime could disrupt sales.

“Mutual funds are required to disclose a great deal of information, but we know that many investors do not use this information when making purchase decisions,” said Jean St-Gelais, chair of the CSA and president and CEO of the Autorité des marchés financiers.

“The current market conditions highlight the need for investors to fully understand what they are buying. This significant investor protection initiative will provide investors with the opportunity to make more informed investment decisions,” he added.

The new regime has been in the works for some time, originating as an attempt by the Joint Forum of Financial Market Regulators to improve, and harmonize, point-of-sale disclosure for mutual funds and segregated funds. The comment period on the CSA proposal is open until Oct 17.

The Canadian Council of Insurance Regulators indicates that it will be publishing its version of the proposed regime, for seg funds, by the end of June.