Changes to be made to alternative funds framework?

The CSA is seeking feedback on proposed amendments for modernized regulation

In a news release, the CSA has published for comment proposed amendments to National Instrument 81-102: Investment Funds (NI 81-102) and National Instrument 81-101: Mutual Fund Prospectus Disclosure. This is part of the CSA’s planned final efforts towards modernized regulation of publicly offered investment funds.

The proposed tweaks aim mainly to develop a more comprehensive framework for publicly offered alternative funds (currently called commodity pools). They would also streamline regulation for non-redeemable investment funds under NI 81-102.

“In the last decade, the range of investment fund products and strategies in the marketplace has expanded significantly, both in Canada and in other jurisdictions. This initiative reflects the CSA's efforts to modernize the existing commodity pools regime by making the regulatory framework in Canada more effective and relevant," said Louis Morisset, CSA chair and president and CEO of the Autorité des marchés financiers. "We expect it will facilitate more alternative and innovative strategies while at the same time maintaining restrictions that we believe to be appropriate for products that can be sold to retail investors."

Investment restrictions that would be introduced or revised by the proposed amendments include concentration limits, limits on illiquid assets and limits on cash-borrowing. Disclosure requirements would also be introduced for alternative funds to emphasize the investment strategies that distinguish these products from ordinary mutual funds.

The CSA published an initial outline for the proposed framework on Mar. 27, 2013. They updated it on Feb. 12, 2015, via CSA Staff Notice 81-326: Update on an Alternative Funds Framework for Investment Funds.

The proposed amendments can be viewed on CSA members’ websites. Comments on the proposals may be submitted until Dec. 21.

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