The Ontario Securities Commission has issued a staff notice announcing the implementation of a Continuous Disclosure Review Program for Investment Funds, which the Investment Funds Branch is launching this month. The program was initially proposed in September 2002.

The notice outlines the general features of the CD Review Program. In addition to monitoring investment funds for timely and complete disclosure of information, the program will be used to monitor how investment funds are being managed. This will include checking for compliance with Ontario securities law, and how fund is being managed compared to the investment objective and strategies disclosed in the fund’s prospectus.

Funds will be subject to either a full, issue-oriented or basic review based on selective review criteria. Like the selective review approach to prospectus review, the responsibility for full compliance with applicable securities legislation, policies and practices remains with the funds and their managers.

A full review would typically include a comprehensive examination of the investment fund’s entire disclosure record including financial statements for a minimum of the past two years.

The OSC says funds will be selected for review primarily through a risk-based approach. A random selection basis will also be used from time to time to supplement the risk-based selection. Since the selection process is primarily risk-based, some funds may be reviewed more frequently than others.

The OSC says that its staff will work with the fund to resolve issues in a timely manner. “Staff will be aggressive in pursuing matters arising from continuous disclosure reviews and in enforcing the requirements of Ontario securities law through all available means.”

The branch plans to publish the findings of the review program on an annual basis.