The Ontario Securities Commission (OSC) has issued Staff Notice 11-787 Improving Fee Disclosure Through Behavioural Insights (the Staff Notice), outlining the findings of a research report (the Report) aimed at improving the investor’s experience with correspondingly better market outcomes through behaviorally-informed tactics for designing more effective investment fee disclosures.

The Report, which is appended to the Staff Notice, focuses on the annual fee reports (the annual fee report) on charges and other compensation investors receive from registered dealers or advisers. OSC staff noted that while many investors benefit from the information included in these reports, other investors, even though they have received their reports, may not notice them or even understand how their dealer or adviser is compensated for their services.

The Report identified the three key barriers to investors using the information found in their annual reports as intended:

  • Barriers to engagement: Investors may not notice or recognize the importance of their annual fee report amid the various other disclosures provided to them.
  • Barriers to comprehension: Investors may be confused by the terminology and information included in their annual fee report. They may not understand which fees are included (and which are excluded) from the report, and lack reference points to determine whether their fees are higher or lower than the norm.
  • Barriers to action: Even if investors see and understand their report, they may not know how to act on the information it provides.

The Report also identified twenty-four tactics registrants and other stakeholders can use to help investors to overcome these barriers. Some of these include: using electronic alerts or notifications that attract investors’ attention or, if the annual fee report is being provided by mail, including attention-grabbing language or visuals on the envelope; testing and employing simpler terms to describe key concepts and different types of fees; and, listing actions investors can take to reduce their investment fees or increase the level of service they receive for those fees.

OSC Staff Notice 11-787, Improving Fee Disclosure Through Behavioural Insights is available for download from the website of BCSC.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

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.