Proposed modernization of certain investment fund prospectus filing rules would extend lapse date to 24 months. CSA also considering introducing base shelf filing for all investment funds.

• On January 27, the Canadian Securities Administrators (CSA) published proposed amendments to modernize existing prospectus filing requirements for investment funds.
• The proposed amendments seek to reduce the regulatory burden on investment funds without affecting investor protections.
• The CSA are accepting feedback on the proposed amendments, as well as a consultation paper regarding potentially introducing a base shelf filing regime for investment funds, until April 27, 2022

Extending the Lapse Date to 24 Months

Currently, under National Instrument 81-101 Mutual Fund Prospectus Disclosure (and in Ontario, section 62 of the Securities Act), investment funds in continuous distribution are required to file a new prospectus every 12 months. This involves, among other things, filing a pro forma prospectus within 30 days prior to the 12-month “lapse date” and filing a new final prospectus within 10 days after the lapse date.

Under the proposed amendments, the lapse date for investment funds in continuous distribution would be extended to 24 months, thus allowing investment funds to file new prospectuses biennially. According to the CSA, stakeholder feedback during the recent burden-reduction consultation process suggested that annual filings are unnecessary in light of the introduction of the Fund Facts and ETF Facts disclosure documents. The current requirements to file Fund Facts and ETF Facts annually would not change.

Repealing the 90-Day Rule for Investment Funds

The proposed amendments would also repeal the requirement that investment fund issuers file a final prospectus within 90 days after the date of the receipt of the preliminary prospectus (the 90-day rule). According to the CSA, the 90-day rule was implemented “to ensure that corporate issuers are not marketing by means of preliminary prospectuses containing outdated information”. The CSA noted that stakeholder feedback suggested that investment funds do not generally market by means of a preliminary prospectus, nor do their prospectuses contain material financial information that would be considered stale after 90 days.

Consultation on Base Shelf Prospectus Filing Model

The CSA also published a consultation paper outlining a conceptual framework for a base shelf prospectus filing regime that could apply to all investment funds. Specifically, the consultation paper cites the base shelf prospectus regime under National Instrument 44-102 Shelf Distributions as a model of how to ensure adequate disclosure, while also stating that an eventual proposal may propose a lapse date greater than 25 months for investment funds in continuous distribution. The CSA suggest that to ensure investors continue to receive adequate disclosure, Fund Facts and ETF Facts would be incorporated by reference into the base shelf prospectus and, thus, misrepresentations would result in primary market liability.

While no specific proposed rules were released as part of the consultation paper, the CSA requested feedback from stakeholders on a number of specific questions in regards to the general conceptual framework. The CSA are accepting stakeholder feedback on the proposed amendments and consultation paper until April 27, 2022.