The mutual fund industry has passed the first big hurdle in the disclosure-reform process, but it’s becoming clear that mutual fund firms and financial advisors will face ongoing challenges as they learn to manage the plethora of new disclosure documents. Some third parties are offering services to make their jobs a little easier.
As of July, mutual fund companies in Canada have been required to have new plain-language disclosure forms, known as Fund Facts, filed with regulators and available on their websites. A separate document must be filed for every class and series of fund, so there are more than 25,000 Fund Facts in existence.
The huge volume of forms presents a challenge for advisors who potentially need to visit multiple websites in order to track down the documents pertaining to the specific classes of funds that they’re interested in selling. The new disclosure regime also creates a hefty new workload for mutual fund companies, which must file updated versions of their Fund Facts at least once a year, along with their simplified prospectuses and annual information forms.
“With the sheer volume of these documents, it’s a real logistical exercise to make sure you have the right information in every document,” says Brad Beuttenmiller, senior vice president and chief counsel with Toronto-based Franklin Templeton Investments Corp., whose firm has had to file approximately 800 Fund Facts.
In response, a variety of services have emerged to help the mutual fund industry keep disclosure documents current, accurate and as accessible as possible to advi-sors and their clients.
Two online repositories have been launched through which advisors can locate multiple companies’ Fund Facts. In June, Toronto-based FundSERV Inc. launched www.FundFacts.com, a website through which mutual fund firms can voluntarily upload the Fund Facts pertaining to their products for advisors to access. To date, 22 companies have posted their forms on this website.
More recently, Toronto-based technology firm Vault Solutions Inc. has teamed up with Brant-ford, Ont.-based document-management firm Distributech Inc. to launch www.InvestorPOS.com. This new website, featuring the entire universe of Fund Facts, is integrated with the System for Electronic Document Analysis and Retrieval so that the latest version of each Fund Facts is automatically uploaded to InvestorPOS in real time.
“For the advisor, the benefit is that it’s one-stop shopping or, at least, one-stop sourcing of these Fund Facts documents,” says Anthony Boright, president of Vault Solutions. “It’s peace of mind [for] the advisors that they’re getting the latest [version] off the top of the pile.”
Through these repositories, advisors can both search for specific funds and electronically deliver the relevant forms directly to clients. InvestorPOS also lets advisors and firms keep records of Fund Facts delivery for compliance purposes.
It’s important for Fund Facts to be easily accessible to advisors, especially once regulators implement the third stage of the disclosure-reform regime, which will require advisors to deliver Fund Facts prior to the sale of a fund to a client. If an advisor can’t easily find the relevant form, they may be less likely to promote a fund.
“There was a lot of concern about shelf space and funds getting knocked out of the picture,” says Boright. “It’s an extension of the fund company’s shelf, making their funds’ [documents] available through this repository.”
In the meantime, advisors will have to deliver Fund Facts to clients only when requested. But even though point-of-sale delivery is not yet mandatory, some advisors may begin using these forms as a sales tool — the concise, easy-to-read forms are likely to resonate with clients to a much greater extent than legalese-heavy prospectus documents.
“[Fund Facts is] probably an easier document to put in front of a client and go through,” says Dan Hallett, vice president and director of asset management with Oakville, Ont.-based HighView Financial Group. “Making it easy to find the documents is important, however that happens.”
The new online repositories also offer services to help fund companies manage their responsibilities related to the different phases of the new disclosure regime. For example, InvestorPOS offers a publishing service through which companies can produce, edit and file their documents through SEDAR in an automated manner. Firms also can subscribe to a business-intelligence service that provides them with data on the frequency with which Fund Facts are being accessed and delivered by dealers and advisors, broken down by geography, fund, sector, class and time.
Other companies offer similar services. Mississauga, Ont.-based Broadridge Investor Com-munications Solutions Canada offers an automated Fund Facts creation service for fund companies that lets these firms produce, update and deliver the documents to clients — with an audit trail for compliance purposes. IE