Securities Law

BCN 2004/26 - Request for Comment - Changes to Proposed National Instrument 81-106 Investment Fund Continuous Disclosure, Form 81-106F1 and Companion Policy 81-106CP Investment Fund Continuous Disclosure (Second Publication) and Related Amendments [BCN - Lapsed]

Published Date: 2004-05-28
Rescinded Date: 2012-07-03
Related Document(s):

In the attached notice, the Canadian Securities Administrators (CSA) are publishing for comment proposed National Instrument 81-106 Investment Fund Continuous Disclosure, Form 81-106F1 (together the proposed instrument) and Companion Policy 81-106CP and related materials.

The CSA notice describes where you can direct your comments and questions relating to the proposed instrument. We will consider all comments received by July 27, 2004.

Appendix I to the CSA notice describes how the Commission intends to harmonize the financial reporting regime in the proposed instrument with other proposals and the existing regime.

May 28, 2004

Brent W. Aitken
Vice Chair


Ref: NI 81-106
Form 81-106F1
Companion Policy 81-106CP
NI 81-101
Form 81-101F1
Form 81-101F2
Companion Policy 81-101CP
NI 13-101
NI 51-102
NI 52-107
NI 81-104
NI 54-102
NP 27
NP 31
NP 50
NP 51
Securities Rules BC Reg. 194/97


This Notice may refer to other documents. These documents can be found at the B.C. Securities Commission public website at www.bcsc.bc.ca in the Commission Documents database or the Historical Documents database.

Notice and Request for Comment

Changes to Proposed National Instrument 81-106Investment Fund Continuous Disclosure, Form 81-106F1 and Companion Policy 81-106CPInvestment Fund Continuous Disclosure(Second Publication) and Related Amendments

Introduction

We, the Canadian Securities Administrators (CSA), are publishing for comment revised versions of proposed National Instrument 81-106 Investment Fund Continuous Disclosure (the Rule), Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (the Form) and the Companion Policy 81-106CP Investment Fund Continuous Disclosure (the Policy). The Rule and the Form are together referred to as the Instrument.

We are also publishing for comment:

  • changes to proposed amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure,Form 81-101F1 Contents of Simplified Prospectus, Form 81-101F2 Contents of Annual Information Form, and Companion Policy 81-101CP Mutual Fund Prospectus Disclosure (second publication);
  • changes to Proposed Amendments to National Instrument 81-102 Mutual Funds and Companion Policy 81-102CP Mutual Funds (second publication);
  • changes to proposed amendments to National Instrument 13-101 System For Electronic Document Analysis and Retrieval (SEDAR) (second publication);
  • proposed amendments to National Instrument 51-102 Continuous Disclosure Obligations;
  • proposed amendments to National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency;
  • proposed amendments to Multilateral Instrument 81-104 Commodity Pools;
  • proposed revocation of National Instrument 54-102 Interim Financial Statement & Report Exemption;
  • proposed rescission of National Policy 27 Canadian Generally Accepted Accounting Principles, National Policy 31 Change of Auditor of a Reporting Issuer, National Policy 50 Reservations in an Auditor’s Report, and National Policy 51 Changes in the Ending Date of a Financial Year and in Reporting Status; and
  • in some jurisdictions, certain local amendments.

The Instrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario and Nova Scotia, as a commission regulation in Saskatchewan and Quebec, and as a policy in all other jurisdictions represented by the CSA.

Background

On September 20, 2002, we published for comment the first version of the Instrument and Policy (the 2002 Proposal). For additional background information on the 2002 Proposal, as well as a detailed summary of its contents, please refer to the notice that was published with those versions.

Substance and Purpose

The Rule will:

  • harmonize continuous disclosure (CD) requirements among Canadian jurisdictions;
  • replace most existing local CD requirements;

The Instrument sets out the obligations of investment funds with respect to financial statements, annual information forms (AIFs) for investment funds that do not have a current prospectus, management reports of fund performance, material change reporting, information circulars, proxies and proxy solicitation, delivery obligations, proxy voting disclosure and certain other CD-related matters. The Instrument prescribes the form of the management reports.

If all necessary government approvals are obtained, we expect the Instrument to be effective on December 31, 2004. As such, the filing deadlines for financial statements, management reports of fund performance and AIFs in the Instrument will be mandatory for financial years ending on or after December 31, 2004.

In some jurisdictions, including Ontario and Quebec, the Instrument addresses certain non-reporting investment fund obligations such as financial statement requirements. Non-reporting investment funds will not have these requirements in other jurisdictions such as British Columbia, Alberta and Manitoba. The Instrument also does not address CD obligations for reporting issuers that are not investment funds. These reporting issuers are regulated by National Instrument 51-102 Continuous Disclosure Obligations which came into force on March 30, 2004.

Purpose and Summary of the Companion Policy

The purpose of the Policy is to assist users in understanding and applying the Instrument and to explain how we will interpret or apply certain provisions of the Instrument. It contains discussion and explanations primarily relating to:

  • filing and delivery obligations under the Instrument
  • the requirements for financial statements under the Instrument
  • presentation of financial information
  • application of Canadian GAAP
  • auditors and the auditor’s reports
  • independent valuations
  • proxy voting disclosure
  • the use of plain language in documents filed under the Instrument.

Summary of Written Comments Received by the CSA

During the comment period, we received 56 submissions on the 2002 Proposal. A summary of the comments received, together with our responses, is contained in Appendix B to this notice. We also conducted a survey of investors about what kind of information they would find useful in investment fund reports. The survey results are also in Appendix B.

After reviewing the comments received and further considering the Instrument and Policy, we are proposing a number of amendments to the 2002 Proposal.

Summary of Changes to the Proposed Instrument and Policy

See Appendix A for a description of the material changes made to the 2002 Proposal.

Anticipated Costs and Benefits

We believe that the considerations set out in the notice accompanying the 2002 Proposal that justify any incremental costs of complying with the Instrument are still valid. We also believe that the revisions to the Instrument should reduce its potential incremental cost, given the decreased reporting and delivery requirements.

Related Amendments

National Amendments

Changes to the proposed amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) are set out in Appendix C to this Notice.

Changes to the proposed amendments to National Instrument 81-102 Mutual Funds (NI 81-102) are set out in Appendix D to this Notice.

Changes to the proposed amendments to National Instrument 13-101 System For Electronic Document Analysis and Retrieval (SEDAR) (NI 13-101) are set out in Appendix E to this Notice.

The CSA is separately publishing for comment proposed amendments to Multilateral Instrument 81-104 Commodity Pools (MI 81-104) which are set out in Appendix F to this Notice; National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) which are set out in Appendix G to this Notice; and National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) which are set out in Appendix H to this Notice.

The CSA is proposing to revoke National Instrument 54-102 Interim Financial Statement & Report Exemption (NI 54-102) when the Instrument comes into force.

The CSA is proposing to rescind National Policy 27 Canadian Generally Accepted Accounting Principles (NP 27), National Policy 31 Change of Auditor of a Reporting Issuer (NP 31), National Policy 50 Reservations in an Auditor’s Report (NP 50), and National Policy 51 Changes in the Ending Date of a Financial Year and in Reporting Status (NP 51) when the Instrument comes into force.

Local Amendments

We propose to amend or repeal elements of local securities legislation and securities directions, in conjunction with the implementation of the Instrument. The provincial and territorial securities regulatory authorities may publish, or may have published, these local changes or proposed changes separately in their local jurisdictions. Any proposed consequential amendments to rules or regulations in a particular jurisdiction can be found in the version of Appendix I to this Notice published in that particular jurisdiction.

Some jurisdictions will need to implement the Instrument using a local implementing rule. Jurisdictions that must do so will separately publish the implementing rule.

Unpublished Materials

In proposing the Instrument, we have not relied on any significant unpublished study, report or other written materials.

Request for Comments

We welcome your comments on the changes to, or this version of the Instrument, the Policy and related amendments.

Please submit your comments on the Instrument, the Policy and the related amendments to NI 81-101, NI 81-102 and NI 13-101 in writing on or before July 27, 2004. Comments on the proposed amendments to MI 81-104, NI 51-102 and NI 52-107, the proposed revocation of NI 54-102, and the proposed rescission of NP 27, NP 31, NP 50 and NP 51 must be submitted in writing on or before August 26, 2004. (The comment period for local amendments or rules varies. See Appendix I as applicable.) If you are not sending your comments by email, a diskette containing the submissions (in Windows format, Word) should also be sent.

Address your submission to all of the CSA member commissions, as follows:

British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Financial Services Commission
Manitoba Securities Commission
Ontario Securities Commission
Autorité des marchés financiers
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Securities Commission of Newfoundland and Labrador
Registrar of Securities, Northwest Territories
Registrar of Securities, Yukon Territory
Registrar of Securities, Nunavut

Deliver your comments only to the addresses that follow. Your comments will be forwarded to the remaining CSA member jurisdictions.

John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West
19th Floor, Box 55
Toronto, Ontario M5H 3S8
E-mail: jstevenson@osc.gov.on.ca

Anne-Marie Beaudoin
Directrice du secrétariat
Autorité des marchés financiers
Tour de la Bourse
800, square Victoria
C.P. 246, 22e étage
Montréal, Québec
H4Z 1G3
Fax: (514) 864-6381
E-mail: consultation-en-cours@lautorite.qc.ca

We cannot keep submissions confidential because securities legislation in certain provinces requires publication of a summary of the written comments received during the comment period.

Questions

Please refer your questions to any of:

Raymond Chan
Accountant, Investment Funds
Ontario Securities Commission
Tel: (416) 593-8128
rchan@osc.gov.on.ca

Vera Nunes
Legal Counsel, Investment Funds
Ontario Securities Commission
Tel: (416) 593-2311
vnunes@osc.gov.on.ca

Irene Tsatsos
Senior Accountant, Investment Funds
Ontario Securities Commission
Tel: (416) 593-8223
itsatsos@osc.gov.on.ca

Noreen Bent
Manager and Senior Legal Counsel
British Columbia Securities Commission
Tel: (604) 899-6741
or 1-800-373-6393 (in B.C. and Alberta)
nbent@bcsc.bc.ca

Christopher Birchall
Senior Securities Analyst
British Columbia Securities Commission
Tel: (604) 899-6722
or 1-800-373-6393 (in B.C. and Alberta)
cbirchall@bcsc.bc.ca

Melinda Ando
Legal Counsel
Alberta Securities Commission
Tel: (403) 297-2079
melinda.ando@seccom.ab.ca

Bob Bouchard
Director, Corporate Finance and Chief Administrative Officer
Manitoba Securities Commission
Tel: (204) 945-2555
bbouchard@gov.mb.ca

Wayne Bridgeman
Senior Analyst, Corporate Finance
Manitoba Securities Commission
Tel: (204) 945-4905
wbridgeman@gov.mb.ca

Sylvie Anctil-Bavas
Spécialiste - expertise comptable
Service de la réglementation
Autorité des marchés financiers
Tel: (514) 395-0558, poste 2402
sylvie.anctil-bavas@lautorite.qc.ca

Jean Hébert
Analyste - Produits gérés et alternatifs
Direction du marché des capitaux
Autorité des marchés financiers
Tel: (514) 395-0558, poste 4477
jean.hebert@lautorite.qc.ca

The text of the proposed Rule, Form and Policy follows or can be found elsewhere on a CSA member website.


May 28, 2004