CRM2-like disclosures expected for segregated funds

CRM2-like disclosures expected for segregated funds

CRM2-like disclosures expected for segregated funds The enhanced transparency and disclosure rules that have upended the mutual-fund industry may soon be expanded to include another investment product: segregated funds.

Last week, the Canadian Council of Insurance Regulators (CCIR) released a position paper outlining its expectations on information to be provided to segregated-fund contract holders. In the paper, the regulatory body laid out a new proposal to align regulations governing segregated funds with those for the mutual-fund industry — something that experts have argued for even in the early days of CRM2 disclosure discussions.

Aside from discussing requirements for needs-based sales practices, fund risk ratings, and know-your-product requirements, the paper highlighted recommendations for enhanced disclosure of performance, risks, costs, and insurance features associated with segregated funds.

“This goes even further than CRM2,” said personal finance expert Dale Jackson in an interview with BNN. “CRM2 requires just the advisor fee [in a mutual fund] to be revealed in dollar amounts, whereas in segregated funds, the whole amount, including the MER, will be revealed.”

The CCIR said it will release a prototype for disclosure documents in early 2018; it stressed that the prototype will not be a prescribed form, but just an example to show what compliant disclosure could look like.

According to Jackson, the new seg-fund disclosures should be available to investors by 2019, at which point they will see the total cost they pay in dollars for segregated funds.

“The mutual-fund industry says it’s going in that direction as well,” he said. “But that doesn’t change the fact that we pay among the highest fees in the developed world.”

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