Canadian Securities Administrators (CSA) A Multilateral Staff Notice 81-337 Targeted Continuous Disclosure Review and Guidance for Independent Review Committees for Investment Funds (the Staff Notice) has been published jointly by the Ontario Securities Commission (OSC) and the Autorité des marchés financiers (AMF).
Publication of the Staff Notice follows a continuous disclosure review (the CD Review) related to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107 or the Rule) carried out jointly by both regulators.
The CD Review included investment funds managed by 24 Investment Fund Managers (IFMs) who are principally under the regulatory auspices of the OSC or the AMF. Investment funds managed by the IFMs included conventional mutual funds, exchange-traded funds, scholarship plans and alternative funds to reflect a fair representation of fund types and sizes.
The Staff Notice includes regulatory views on Independent Review Committee (IRC) Authority. It summarizes the findings and general observations in specific areas of inquiry and provides regulatory views and guidance on each area of inquiry.
Staff reviewed prospectuses (long form or simplified prospectus as applicable to the fund), annual information forms (AIF), the Independent Review Committee (IRC) Report to Securityholders, and the websites of the IFM or funds as applicable.
The Review found concerns with IRC term lengths, noting that several with members of terms longer than six years, which is considered the maximum. A shorter IRC term, except in limited circumstances, will help maintain fresh perspectives among the members, especially on conflicts of interest. The Review encourages IFMs to take a broad view of what constitutes a ‘conflict of interest matter’ and to err on the side of caution to refer an actual or perceived conflict of interest to the IRC. The Review also notes that diversity in IRC membership beyond a defined ‘skill set’ may lead to better decision-making and good governance.
IFMs and IRCs are encouraged to use the guidance provided in this Notice to further enhance and support their roles under National Instrument 81-107 Independent Review Committee for Investment Fund.
CSA Multilateral Staff Notice 81-337 Targeted Continuous Disclosure Review and Guidance for Independent Review Committees for Investment Funds is available for download from the website of the Ontario Securities Commission.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
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