Following a review of fund managers’ compliance, the Ontario Securities Commission says that it does not intend to revise the mutual fund sales practices rule.

The conclusion comes in a report detailing the findings of a review of the marketing and educational practices of fund managers conducted by OSC staff in the fall of 2006. The report summarizes its findings and provides guidance to industry participants on complying with these requirements.

The OSC reviewed a sample of 20 managers with assets under management totalling $306 billion as of July 31, 2006. The managers varied in size from $6 million to $67 billion in assets under management. The review teams consisted of staff from the Compliance team of the Capital Markets Branch and staff from the Investment Funds Branch. They conducted onsite reviews of the managers and reviewed samples of documentation.

Each manager that was reviewed received a report in February, which set out the specific deficiencies staff noted during their reviews. The managers were required to respond in writing to staff within 30 days of receiving the report and explain how they were going to correct the deficiencies. “Overall, the managers we reviewed substantially complied,” the notice says. “While the deficiency reports sent to each manager identified areas for improvement, none of the deficiencies warranted enforcement action.”

Three areas of deficiency were common to the managers in the sample, the OSC said: managers failing to meet the primary purpose test in deciding to accept or reject a cooperative marketing request; policies and procedures for sales practices were inadequate because there was not enough detail to ensure compliance; and, managers did not adequately monitor promotional items and business promotion activities.

“To meet their standard of care under securities legislation, we expect managers to develop policies and procedures specific to their businesses and to apply them consistently to their sales practices. In particular, we expect managers to maintain documentation to support decisions to provide sponsorship,” it said.

The notice also indicated that the spirit and intent of the sales practices rule remains relevant today and strikes “the right balance between protecting investors, and fostering fair and efficient capital markets”. As a result, the OSC is not proposing any amendments to the rule at this time. “We will, however, continue to review co-operative marketing and other sales practices as part of our regular reviews of fund managers,” it said.