NIN 99/38 - Advance Notice of National Instrument 81-101 and Related Documents - Mutual Fund Prospectus Disclosure [NIN - Rescinded]

Implementation of National Instrument

National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101"), Forms 81-101F1 and 81-101F2 (the "Forms") and Companion Policy 81-101CP (the "Companion Policy") are initiatives of the Canadian Securities Administrators ("CSA") and, together with consequential amendments to the Securities Rules, implement a new regulatory regime governing the disclosure provided by mutual funds in satisfaction of the prospectus requirements of securities legislation.

The Commission has not yet made NI 81-101 as a rule nor has it made the consequential amendments to the Securities Rules. This Advance Notice is being published to provide notice that the Commission expects to make NI 81-101 and the related consequential amendments as rules before February 1, 2000, when NI 81-101 is expected to come into force as a rule in British Columbia, Alberta, Manitoba, Ontario and Nova Scotia, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by the CSA. The Companion Policy has been, or is expected to be, implemented as a policy in all of the jurisdictions represented by the CSA. In British Columbia, the Forms are expected to be adopted as rules as part of NI 81-101.

When made as rules, NI 81-101 and the consequential amendments to the Securities Rules, together with related documents, will be published in the Weekly Summary. The Commission anticipates publishing NI 81-101, the consequential amendments and related documents in January 2000, once it has received all necessary approvals. The Ontario Securities Commission ("OSC") has adopted NI 81-101 as a rule and is publishing NI 81-101 and related documents in the November 12, 1999 issue of the OSC Bulletin.

Rescission of National Policy Statement and CSA Notice

Effective the date the NI 81-101 comes into force, National Policy No. 36 Mutual Funds - Simplified Prospectus Qualification System ("NP 36") and CSA Notice 81-301 Mutual Fund Prospectus Disclosure System - Concept Proposal - Request for Comment will be rescinded and replaced by NI 81-101.

Consequential Amendments

In order to avoid inconsistencies between the Securities Rules and NI 81-101, consequential amendments to the Securities Rules will be required. The changes are set out in the proposed consequential amendments of the Securities Rules being published with this Advance Notice. No comments were received about the consequential amendments during either of the public comment periods.

Background

The Commission, together with other members of the CSA, published a request for comment on a concept proposal for a new mutual fund prospectus disclosure system in January 1997. After receiving and considering comments, the CSA first published drafts of NI 81-101, the Forms, the Companion Policy and proposed consequential amendments to the Securities Rules for public comment on July 31, 1998.

The CSA subsequently published amended drafts of NI 81-101, the Forms, the Companion Policy and proposed consequential amendments to the Securities Rules for a second public comment period on April 30, 1999.¹

¹ NIN#99/15

Comments on the second publication drafts were received from 7 commenters. The comments provided in these submissions have been considered by the CSA and the final versions of NI 81-101, the Forms and the Companion Policy being published with this Advance Notice reflect the decisions of the CSA.

A full description of the comments received, and the response of the CSA to the comments, may be found in the OSC Notice relating to NI 81-101 on the OSC website at www.osc.gov.on.ca.

Substance and Purpose of NI 81-101, Forms and Companion Policy

NI 81-101, the Forms and Companion Policy implement a new regulatory regime governing the disclosure provided by mutual funds in satisfaction of the prospectus requirements of securities legislation. NI 81-101 will provide the framework for the system, by requiring the preparation and filing of a simplified prospectus and annual information form by all mutual funds. NI 81-101 will also require that both these disclosure documents be prepared in prescribed formats.

Form 81-101F1 provides detailed disclosure requirements for a simplified prospectus of a mutual fund and Form 81-101F2 provides detailed disclosure requirements for an annual information form of a mutual fund.

The Companion Policy describes the central philosophy of the CSA in implementing the mutual fund prospectus disclosure regime. In particular, the Companion Policy describes the purpose of a simplified prospectus and an annual information form . The Companion Policy also provides further explanation of certain of the rules contained in NI 81-101 and certain disclosure items of the Forms.

The regime created by NI 81-101 is designed for conventional mutual funds. NI 81-101 does not apply to labour-sponsored venture capital corporations, commodity pools or mutual funds listed and posted for trading on an exchange or quoted on an over-the-counter market.

DATED at Vancouver, British Columbia, on November 9, 1999.

Douglas M. Hyndman
Chair

REF: National Policy No. 36
CSA Notice #81-301
NIN#99/15

The Securities Rules, B.C. Reg. 194/97, is amended

(a) by adding the following to section 1 (1):

"NI 81-101" means National Instrument 81-101 entitled "Mutual Fund Prospectus Disclosure";

(b) by adding the following sections:

Alternative Certificate of Mutual Fund

98.1 A mutual fund to which NI 81-101 applies is exempt from section 68 of the Act if the prospectus of the mutual fund contains a certificate of the mutual fund, its manager and each of its promoters, prepared and signed in accordance with Form 81-101F2.

Alternative Certificate of Non-Redeemable Investment Fund or Mutual Fund

98.2 (1) If a non-redeemable investment fund or mutual fund is established as a trust, the certificate required to be signed by the non-redeemable investment fund or mutual fund must be signed by

(a) each individual who is a trustee or by a duly authorized attorney of the individual, or
(b) the duly authorized signing officer or officers of the trustee, if the trustee of the non-redeemable investment fund or mutual fund is a corporation.

(2) Despite subsection (1), a certificate required to be signed by the trustees of a non-redeemable investment fund or mutual fund may be signed by any other person, if that person is duly authorized to sign the certificate by the declaration of trust or trust agreement establishing the non-redeemable investment fund or mutual fund.

(3) Despite subsections (1) and (2), if the trustee of the non-redeemable investment fund or mutual fund is also its manager, the certificate must state that the certificate is being signed by the person both in the capacity of trustee and of manager of the non-redeemable investment fund or mutual fund and must be signed in accordance with section 98.3.

(4) A non-redeemable investment fund, or a mutual fund to which NI 81-101 does not apply, is exempt from paragraphs 68 (2) (a) and (b), and subsection 68 (3) of the Act if the certificate required by subsection 68 (1) of the Act is signed in accordance with this section.

Certificate of Manager

98.3 (1) A non-redeemable investment fund, or a mutual fund to which NI 81-101 does not apply, must contain a certificate from the manager of the non-redeemable investment fund or mutual fund

(2) The certificate required under subsection (1) must be in the same form as the certificate required by section 68 (1) of the Act.

(3) If the manager is a corporation, the certificate required by subsection (1) must be signed by the chief executive officer and the chief financial officer of the manager, and on behalf of the board of directors of the manager by any two directors of the manager other than the chief executive officer or chief financial officer, duly authorized to sign.

(4) Despite subsection (3), if the manager has only three directors, two of whom are the chief executive officer and chief financial officer, the certificate required to be signed by subsection (3) must be signed by the remaining director of the manager.

Certificate of Promoter

98.4 Section 68 (2) does not apply to a promoter of a mutual fund if NI 81-101 applies to the mutual fund and the promoter signs the certificate in accordance with Form 81-101F2.

Certificate of Principal Distributor

98.5 If a prospectus for a mutual fund to which NI 81-101 applies contains the certificate of the principal distributor prepared and signed in accordance with Form 81-101F2, section 69 of the Act does not apply.

(c) by repealing sections 100 to 105;

(d) by adding the words "in the required form, and", before the words " each for," in section 113(1); and

(e) by repealing section 113(2)(b) and substituting the following:

(b) forms part of the prospectus and is sent to a person that requests a copy of the statement of portfolio transactions.