Securities regulators are proposing an overhaul of the continuous disclosure that investment funds must provide, aiming to improve reporting to investors while also easing the regulatory burden on the industry.
In a series of proposed rule changes, the Canadian Securities Administrators (CSA) are seeking to modernize certain aspects of fund industry disclosure, primarily by replacing the existing Management Report of Fund Performance (MRFP) with a redesigned report intended to be more useful and investor-friendly.
In an effort to mandate reporting that’s more likely to be read and relied upon by investors, the proposed new annual and interim fund reports were developed with the findings of behavioural research, and they’ve been subjected to investor testing, the CSA said in a notice outlining the proposed reforms.
Among other things, the content of the new reports will be “significantly streamlined,” the CSA said. The information will be “thematically chunked” and will make more use of bullet points and less narrative in an effort to make the reporting easier for investors to use.
As a result, the disclosure is expected to be easier to read and understand, more likely to be read, easier to use in making decisions, more likely to be seen as containing an appropriate amount of information, and easier to navigate, the CSA said. “We are also of the view that the streamlined document will be significantly less burdensome for [fund managers] to prepare.”
Along with the overhauled fund reports, the CSA proposes curbing certain reporting requirements (including certain conflict of interest reports and some class- or series-level disclosures in funds’ financial statements) to eliminate needless duplication in these areas.
It also proposes adopting the fund expense ratio (FER) — the total of the management expense ratio and the trading expense ratio — in the Fund Facts and ETF Facts disclosures.
“By streamlining disclosure requirements, we aim to reduce the regulatory burden on investment fund managers while enhancing the overall quality of information available to investors,” said Stan Magidson, chair of the CSA, and chair and CEO of the Alberta Securities Commission, in a release.
The proposed reforms are out for comment until Jan. 17, 2025.
Once approved, the CSA said it expects that revised requirements would come into effect after three months, except for the switch to FERs in Fund Facts, which would have a nine-month transition period.