The Ontario Securities Commission (OSC) reports that staff of its Investment Funds Branch found a variety of problems with the advertising and marketing materials of publicly offered funds.
The commission Thursday issued OSC Staff Notice: 81-720 – Report on Staff’s Continuous Disclosure Review of Sales Communications by Investment Funds, which spells out the results of a targeted review of sales communications from investment funds that was carried out in May 2012, along with its regular spot reviews of these materials.
The OSC notes that while it found the funds were generally in compliance with disclosure requirements related to sales communications, it also found that some basic requirements were frequently not met. And, some sales communications did not contain all the information required, referring instead to another source, such as the fund’s website or prospectus, for more information.
The commission says that, as a result of its targeted reviews, potentially misleading performance charts were removed or replaced with more balanced charts, potentially misleading headlines or slogans were removed from advertisements, firms reviewed their policies and procedures relating to marketing, and conducted training sessions with their staff on sales communications, and, fund managers committed to more frequent reviews of older marketing materials, among other things.
The notice also sets out guidance for firms to ensure they are complying with their regulatory obligations where sales communications are concerned. “We recognize the importance of sales communications to a fund manager’s business,” it says. “While a certain degree of creativity is to be expected, staff remind fund managers to be mindful of the target audience for marketing and advertisements, particularly when it’s the retail investor.”
It stresses that sales communications should conform with the spirit and intent of the rules, not just the technical requirements. And, the OSC pledges to continue these sorts of reviews.