OSC Notice of Local Amendments to National Instrument 41-101 General Prospectus Requirements, National Instrument 81-106 Investment Fund Continuous Disclosure, National Instrument 81-107 Independent Review Committee for Investment Funds

OSC NOTICE OF LOCAL AMENDMENTS TO NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS, NATIONAL INSTRUMENT 81-106 INVESTMENT FUND CONTINUOUS DISCLOSURE, NATIONAL INSTRUMENT 81-107 INDEPENDENT REVIEW COMMITTEE FOR INVESTMENT FUNDS AND LOCAL CHANGES TO COMPANION POLICY 81-101 MUTUAL FUND PROSPECTUS DISCLOSURE AND COMMENTARY IN NATIONAL INSTRUMENT 81-107 INDEPENDENT REVIEW COMMITTEE FOR INVESTMENT FUNDS

January 13, 2022

Introduction

The Ontario Securities Commission (the OSC) is adopting

• local amendments to National Instrument 41-101 General Prospectus Requirements (NI 41-101),

• local amendments to National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106), and

• local amendments to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107)

in Ontario (collectively, the Local Amendments), and

• local changes to Companion Policy 81-101 Mutual Fund Prospectus Disclosure (81-101CP), and

• local changes to the commentary in NI 81-107

in Ontario (collectively, theLocal Changes).

The text of the Local Amendments is contained in Annexes A, C and D of this Notice. The text of the Local Changes is contained in Annexes B and E of this Notice. The text of the Local Amendments and Local Changes will also be available on website of the OSC at www.osc.ca.

The Local Amendments and Local Changes constitute non-material housekeeping revisions.

Background

Reducing Regulatory Burden for Investment Fund Issuers -- Phase 2, Stage 1

On October 7, 2021, the Canadian Securities Administrators (CSA) published CSA Notice of Amendments Reducing Regulatory Burden for Investment Fund Issuers -- Phase 2, Stage 1 (the Project RID Notice). The final amendments and final changes set out in the Project RID Notice (the Project RID Amendments and Changes) implement the following eight initiatives, or Workstreams, to reduce the regulatory burden on investment fund issuers:

• Workstream One: Consolidate the Simplified Prospectus and the Annual Information Form;

• Workstream Two: Mandate that each Reporting Issuer Investment Fund have a Designated Website;

• Workstream Three: Codify Exemptive Relief Granted in Respect of Notice-and-Access Applications;

• Workstream Four: Minimize Filings of Personal Information Forms;

• Workstream Five: Codify Exemptive Relief Granted in Respect of Conflicts Applications;

• Workstream Six: Broaden Pre-Approval Criteria for Investment Fund Mergers;

• Workstream Seven: Repeal Regulatory Approval Requirements for a Change of Manager, a Change of Control of a Manager, and a Change of Custodian that Occurs in Connection with a Change of Manager;

• Workstream Eight: Codify Exemptive Relief Granted in Respect of the Fund Facts Delivery Requirement and Corresponding Exemptions from the ETF Facts Delivery Requirement.

Workstreams 3-8 have an effective date of January 5, 2022, while Workstreams 1 and 2 have an effective date of January 6, 2022.

Prohibition of Deferred Sales Charges for Mutual Funds

On June 3, 2021, the OSC published OSC Notice of Local Amendments to National Instrument 81-105 Mutual Fund Sales Practices, Local Changes to Companion Policy NI 81-105 Mutual Fund Sales Practices and Related Consequential Local Amendments and Changes, Prohibition of Deferred Sales Charges for Mutual Funds (the OSC DSC Ban Notice). Effective June 1, 2022, the local amendments prohibit the payment by fund organizations of upfront sales commissions to dealers, which will result in the discontinuation of all forms of the deferred sales charge option (collectively, the DSC option).

Summary of the Local Amendments and the Local Changes

Reducing Regulatory Burden for Investment Fund Issuers -- Phase 2, Stage 1

Local Amendments

The Local Amendments make the following non-material amendments to the Project RID Amendments and Changes in order to make minor drafting corrections:

• Workstream Two, NI 41-101: A reference to "available on the [investment fund's/investment fund family's] Internet site at [insert investment fund's Internet site address]" in the existing paragraph 19.4(c) of Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2) was not revised to reflect the designated website requirement. The Local Amendments reflect the designated website requirement in paragraph 19.4(c) of Form 41-101F2.

• Workstream Two, NI 41-101: The amendments to subsection 12(2) of Part A of Form 41-101F3 Information Required in a Scholarship Plan Prospectus did not include "and" between the final two items in a list of means by which an investment fund manager could be contacted. The Local Amendments include the missing "and".

• Workstream Three, NI 81-106: The references to paragraph 12.2.1(1)(g)(ii) in the new subsections 12.2.2(2) and 12.2.3(1)-(2) of NI 81-106 should instead have been to paragraph 12.2.1(g)(ii), since there is no subsection (1) in the new section 12.2.1. The Local Amendments delete the unnecessary "(1)".

• Workstream Four, NI 41-101: An unnecessary "and" was included at the end of the replacement for subparagraph 9.1(1)(b)(ii) of NI 41-101. The Local Amendments remove the unnecessary "and".

• Workstream Five, NI 81-107: When section 6.2 was replaced, the section heading was not carried over. The Local Amendments carry over the heading.

The Local Amendments are set out in Annexes A, C, and D to this Notice.

Local Changes

The Local Changes make the following non-material change to the Project RID Amendments and Changes:

• Workstream Five, Commentary in NI 81-107: The amendments to NI 81-107 codify an exemption from the inter-fund self-dealing investment prohibitions and the self-dealing restrictions set out in section 4.2 of National Instrument 81-102 Investment Funds and paragraph 13.5(2)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, to permit investment funds and managed accounts to trade debt securities with a related dealer. The codified exemption includes a new paragraph 6.5(1)(d), which sets out the following condition: "the bid and ask price of the security transacted is readily available". This condition is intended to mirror the condition in former paragraph 6.1(2)(c), ("the bid and ask price of the security is readily available"), as accompanied by Commentary 7 to section 6.1. The former paragraph 6.1(2)(c) is now paragraph 6.1(2)(d). Equivalent commentary was inadvertently not included as an accompaniment to the new paragraph 6.5(1)(d), and therefore it is being added at this time through a Local Change to the commentary in NI 81-107.

This Local Change is set out in Annex E to this Notice.

Prohibition of Deferred Sales Charges for Mutual Funds

Local Amendments

There are no Local Amendments associated with the OSC DSC Ban Notice.

Local Changes

Amendments in the OSC DSC Ban Notice removed references to the DSC option from Form 81-101F3 Contents of Fund Facts Document and corresponding consequential local changes were made to the sample fund facts document in Appendix A of 81-101CP. However, the sample fund facts document published in the OSC DSC Ban Notice did not remove the DSC reference under the sub-heading "More about trailing commissions".

Annex B to this Notice sets out a non-material consequential local change to the sample fund facts document in Appendix A of 81-101CP to remove the DSC reference under the sub-heading "More about trailing commissions".

Effective Dates

The Local Amendments are exempt from the requirement to publish for comment pursuant to paragraph 143.2(5)(c) of the Securities Act (Ontario) (the Act), and the Local Changes are exempt from the requirement to publish for comment pursuant to subsection 143.8(6) of the Act.

The Local Amendments, as well as other required materials, will be delivered to the Ontario Minister of Finance on or about January 13, 2022. The Minister may approve the Local Amendments, reject them, or return them for further consideration. If the Minister approves the Local Amendments or does not take any further action, the Local Amendments will come into force on April 13, 2022.

The Local Change in Annex B will become effective on June 2, 2022. The Local Change in Annex E will become effective on April 13, 2022.

Contents of Annexes

Annex A: Local Amendments to National Instrument 41-101 General Prospectus Requirements in Ontario

Annex B: Local Change to Companion Policy 81-101 Mutual Fund Prospectus Disclosure in Ontario

Annex C: Local Amendments to National Instrument 81-106 Investment Fund Continuous Disclosure in Ontario

Annex D: Local Amendment to National Instrument 81-107 Independent Review Committee for Investment Funds in Ontario

Annex E: Local Change to the Commentary in National Instrument 81-107 Independent Review Committee for Investment Funds in Ontario

Questions

Please refer your questions to any of the following OSC staff:

Dimitri Bollegala
Legal Counsel
Investment Funds and Structured Products
Ontario Securities Commission
Phone: 416-263-3781
E-mail: [email protected]

Frederick Gerra
Senior Legal Counsel
Investment Funds and Structured Products
Ontario Securities Commission
Phone: 416-204-4956
E-mail: [email protected]

Irene Lee
Senior Legal Counsel
Investment Funds and Structured Products
Ontario Securities Commission
Phone: 416-593-3668
E-mail: [email protected]

Stephen Paglia
Manager
Investment Funds and Structured Products
Ontario Securities Commission
Phone: 416-593-2393
E-mail: [email protected]

Susan Thomas
Senior Legal Counsel
Investment Funds and Structured Products
Ontario Securities Commission
Phone: 416-593-8076
E-mail: [email protected]

 

ANNEX A

LOCAL AMENDMENTS TO NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS IN ONTARIO

1. National Instrument 41-101 General Prospectus Requirements is amended by this Instrument.

2. Form 41-101F2 Information Required in an Investment Fund Prospectus is amended by replacing in Item 19.4(c) "available on the [investment fund's/investment fund family's] Internet site at [insert investment fund's Internet site address]" with "available on the investment fund's website at [insert the investment fund's designated website address]".

3. Form 41-101F3 Information Required in a Scholarship Plan Prospectus is amended by replacing Item 12(2) of Part A with the following:

(2) State the name, address, toll-free telephone number and email address of the investment fund manager of the plan and the scholarship plan's designated website address. If applicable, also state the website address of the investment fund manager of the plan..

4. Subparagraph 9.1(1)(b)(ii) is amended by deleting "and" following subclause 9.1(1)(b)(ii)(C)(II).

Transition

5. Before September 6, 2022, an investment fund is not required to comply with National Instrument 41-101 General Prospectus Requirements, as amended by sections 2 and 3 of this Instrument, if the investment fund complies with National Instrument 41-101 General Prospectus Requirements as it was in force on January 5, 2022.

Effective Date

6. This Instrument comes into force in Ontario on April 13, 2022.

 

ANNEX B

LOCAL CHANGE TO COMPANION POLICY 81-101 MUTUAL FUND PROSPECTUS DISCLOSURE IN ONTARIO

1. Companion Policy 81-101 Mutual Fund Prospectus Disclosure is changed by this document.

2. The Sample Fund Facts Document in Appendix A -- Sample Fund Facts Document is replaced by the following:

 

3. This change becomes effective in Ontario on June 2, 2022.

 

ANNEX C

LOCAL AMENDMENTS TO NATIONAL INSTRUMENT 81-106 INVESTMENT FUND CONTINUOUS DISCLOSURE IN ONTARIO

1. National Instrument 81-106 Investment Fund Continuous Disclosure is amended by this Instrument.

2. Subsections 12.2.2(2), 12.2.3(1) and 12.2.3(2) are amended by replacing "12.2.1(1)(g)(ii)" with "12.2.1(g)(ii)".

Effective Date

3. This Instrument comes into force in Ontario on April 13, 2022.

 

ANNEX D

LOCAL AMENDMENT TO NATIONAL INSTRUMENT 81-107 INDEPENDENT REVIEW COMMITTEE FOR INVESTMENT FUNDS IN ONTARIO

1. National Instrument 81-107 Independent Review Committee for Investment Funds is amended by this Instrument.

2. Section 6.2 is amended by adding the following section heading:

6.2 Transactions in securities of related issuers .

Effective Date

3. This Instrument comes into force in Ontario on April 13, 2022.

 

ANNEX E

LOCAL CHANGE TO COMMENTARY IN NATIONAL INSTRUMENT 81-107 INDEPENDENT REVIEW COMMITTEE FOR INVESTMENT FUNDS IN ONTARIO

1. The Commentary to National Instrument 81-107 Independent Review Committee for Investment Funds is changed by this Document.

2. Commentary 1 to section 6.5 is changed by adding the following at the end of the second paragraph:

Paragraph 1(d) requires that the market quotations for the transactions be transparent. The CSA expect that if the price information is publicly available from a marketplace, newspaper or through a data vendor, for example, this will be the price. If the price is not publicly available, the CSA expect the investment fund to obtain at least one quote from an independent, arm's-length purchaser or seller, immediately before the purchase or sale..

3. This change becomes effective in Ontario on April 13, 2022.