The Canadian Securities Administrators (CSA) announced on April 17, 2020 temporary blanket relief that permits mutual funds to engage in additional short-term borrowing from April 17, 2020 to July 31, 2020. The conditional temporary relief is available to any mutual fund in Canada that invests a portion of its assets in fixed income securities, including equity funds holding a portion of fixed income securities.
Under securities legislation, a mutual fund can engage in temporary borrowing to accommodate redemption requests. However, all borrowings must not exceed five per cent of a fund’s net asset value at the time of borrowing. The CSA is temporarily increasing this limit to 10 per cent to help facilitate a more orderly liquidation of any fixed income securities that might be required to accommodate redemption requests.
Mutual funds that engage in additional short-term borrowing provided by this relief must comply with a number of conditions. These include, but are not limited to, ensuring the additional borrowing is in the best interest of all investors, having strict controls around its use, and disclosing the use of any additional borrowing to investors.
For more details please see: https://www.bcsc.bc.ca/News/News_Releases/2020/36_Canadian_securities_regulators_temporarily_increase_short-term_borrowing_limits_for_mutual_funds_investing_in_fixed_income/
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403 -4606. This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.
