Reforming mutual fund regulation would increase investor protection and bring about significant cost savings and boost efficiencies for industry players, says the B.C. Securities Commission.

“We believe that the mutual fund industry is especially well-suited for principles-based regulation,” said BCSC vice chair Brent Aitken, in a news release. “Today, we are releasing new detailed proposals for changes to how we regulate mutual funds and we urge mutual fund companies, dealers, advisers and our fellow regulators to review them and give us their comments.”

The 81-page report, New Proposals for Mutual Fund Regulation, follows the BCSC’s commitment to a principles-based approach to reforming Canadian securities regulation. The commission is pushing for a code-of-conduct approach to mutual fund regulation. The codes would substitute general principles and guidance for detailed and the often complex and confusing rules on business conduct and product registration.

By advocating separate codes of conduct for mutual fund companies, portfolio managers and dealers, Aitken said that investors would reap better protection and industry would be spared many of the costs of dealing with too many rules.

“We’re not the only ones proposing a principles-based approach,” said Aitken. “Both regulators and industry participants in the U.S. and Britain have spoken out about the strengths of such a system. In Australia, this approach has already been adopted.”

The BCSC proposals detail how the current prospectus-based disclosure system for mutual funds would be replaced by a system based on continuous disclosure. The proposed regime would also allow Canadian investors the freedom to seek out and invest in foreign mutual funds without making those funds comply with Canadian rules.