81-509 - Mutual Fund Requirements [Advanced Notice - Lapsed]

Concurrently Published:

• 81-509F - Report of Exempt Offering of Pooled Fund(s) [Proposed F - Lapsed]
• BCN 2004/37 - Advance Notice Rules to Implement the New Securities Act and related Guides [BCN - Lapsed]

Division A - Definitions and interpretation

1 In this instrument:

2 A fund manager must

(a) exercise the powers and discharge the duties related to management of a mutual fund honestly, in good faith and in the best interests of the fund, and

(b) exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.

Plain language

3 (1) If a mutual fund is required under this instrument or an exemption from this instrument to file a record or send a record to an investor, the mutual fund must prepare the record in plain language.

4 (1) Section 18 (1) of the Act does not apply to a person making an offering of a security of a mutual fund if

(a) the mutual fund is not a public mutual fund,

(b) the offering is made to a client of a registered adviser, or an adviser in another province or foreign jurisdiction that is registered under the securities laws of the other province or foreign jurisdiction for the purpose of acting as an adviser, and

(c) the adviser referred to in paragraph (b)

(i) manages the investment portfolio of the fund, and

(ii) has full discretion to trade without requiring the client’s consent to a transaction.

(2) A mutual fund that makes an offering of securities under subsection (1) must file a report in the required form no later than 30 days after the end of the calendar year in which the offering occurs.

5 If a significant change occurs in the affairs of a public mutual fund, the public mutual fund must file an amendment to its prospectus that discloses the significant change as soon as practicable.

Delivery of prospectus on request

6 A mutual fund must send a copy of a prospectus filed under the Act as soon as practicable and without charge to a prospective purchaser, or purchaser, who requests it.

Lapse of prospectus

7 If a mutual fund makes an offering under a prospectus, the mutual fund must not trade a security under the offering more than one year and 20 days after the date of the prospectus.

8 (1) Subject to subsections (2) and (3), a mutual fund that files a prospectus under the Act must include in the prospectus annual financial statements in the required form for the fund’s 2 most recently completed financial years, or if the mutual fund has not completed 2 financial years, for all of its financial years.

Audit requirement

9 (1) For the purpose of section 8,

(a) the financial statements for the mutual fund’s most recently completed financial year must be audited financial statements, and

(b) the financial statements for a financial year other than the mutual fund’s most recently completed financial year may be unaudited financial statements unless

(i) the financial statements for the financial year have been audited, and

(ii) the auditor of those statements issued a report with respect to the audit.

10 (1) Subject to subsections (2) and (3), a mutual fund that files a prospectus must include in the prospectus comparative financial statements in the required form for the most recent six months.

11 Sections 8 and 10 do not apply to a mutual fund that is subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure if it incorporates by reference in the prospectus the financial statements required to be incorporated in a prospectus under that Instrument and the financial statements are in the required form.

12 In this Division,“form of proxy” means a record containing the information required under section 25 that becomes a proxy when it is completed and signed by or on behalf of a securityholder.

Approval of financial statements

13 Financial statements required under this Division must be approved in accordance with NI 81-102.

Annual audited financial statements

14 (1) A public mutual fund must file comparative annual audited financial statements in the required form.

(b) it contains an auditor’s report on the statement or states that the statement presents fairly the required information.

Filing deadline for annual audited financial statements

15 The annual financial statements under section 14 must be filed within 140 days after the end of the financial year.

Interim financial statements

16 (1) Except as provided in subsection (2), a public mutual fund must file comparative financial statements for the first six months of its financial year in the required form.

17 The financial statements under section 16 must be filed within 60 days after the end of the interim period.

Delivery of financial statements to securityholders

18 (1) A public mutual fund must send a copy of its annual financial statements and interim financial statements to all of its securityholders unless the mutual fund annually sends to all of its securityholders

(a) a notice stating that securityholders will not receive annual or interim financial statements of the mutual fund after the date of the notice unless the securityholder requests the statements,

(b) a form that the securityholders can use to request the statements, and

(c) information about where the securityholders are to send the request form.

(b) receiving a request under subsection (1) from a securityholder,

19 (1) If a public mutual fund terminates an auditor’s appointment or the auditor resigns or declines to stand for re-appointment, the mutual fund must, as soon as practicable,

(a) file and deliver to its former auditor a report describing any reasons for the event known to the fund, including any reason related to the content, presentation, audit or review of the mutual fund’s financial statements,

(b) deliver the report in paragraph (a) to the successor auditor as soon as one is appointed, and

(c) issue and file a news release as soon as practicable disclosing that the auditor’s appointment was terminated or the auditor has resigned or declined to stand for re-appointment.

(b) resulting solely from a takeover bid, business combination or similar reorganization affecting the mutual fund or the auditor.

Change in year end - notice requirement

20 (1) If a public mutual fund proposes to changes its financial year end, it must file a notice of the proposed change.

(b) the 360th day after the end of the most recent financial year for which financial statements were required to be filed under section 14.

Change in year end - transition year

21 (1) A transition year must not exceed 15 months and the period under section 16 (1) in a transition financial year must not exceed seven months.

(b) before the first day of its new financial year.

22 (1) A public mutual fund must, when giving notice of a meeting to its securityholders, send to each registered securityholder who is entitled to vote at the meeting a form of proxy with respect to the meeting.

(b) if the proxy is solicited by or on behalf of a person other than the mutual fund, at the same time as or before the solicitation, send an information circular in the required form to the securityholder.

(b) acts as an intermediary,

(c) is a securityholder and makes a public announcement of how it intends to vote and the reasons why it will vote that way, or

(d) communicates with a securityholder for the purpose of obtaining the number of securities required for a shareholder proposal.

Exemptions from sending information circulars

23 (1) Section 22 (2) (b) does not apply to a solicitation if proxies are solicited from no more than 15 securityholders with respect to the meeting.

24 A person that is required to send an information circular or form of proxy under section 22 must, as soon as practicable after sending the circular or form, file a copy of the circular or form and all other material required to be sent by the person in connection with the meeting.

Content of form of proxy

25 (1) A form of proxy under section 22 must permit the securityholder

(a) to specify that the securities registered in its name will be voted for or against, or voted for or withheld from voting on, each matter identified in the form of proxy, the notice of meeting or the information circular, and

(b) if the form of proxy names a person to act as nominee, to name another person as the securityholder’s nominee.

(b) explain how the securityholder may exercise the right in paragraph (a), and

(c) state that the proxy will vote in accordance with the securityholder’s instructions.

(b) the securityholder has not specified how the securities are to be voted and the form of proxy or the information circular discloses how the securities proxy will be voted if the securityholder fails to specify how the securities are to be voted.

(b) the matter was not described in the form of proxy or the information circular, and

(c) the nominee or the person that solicited the proxy knew or reasonably should have known that the matter would come before the meeting.

(b) at any meeting other than the meeting specified in the notice of meeting or any adjournment of that meeting.

Exemption based on periodic disclosure requirements in other province

26 Sections 14 to 22, 24 and 25 do not apply to a public mutual fund that is a reporting issuer under the securities laws of another province if it

(a) complies with the requirements in the other province designated for the purpose of this section,

(b) files with the commission the records it is required to file under the designated requirements when it files them in the other province, and

(c) sends a record to a securityholder in British Columbia at the same time and in the same manner as it is required to send that record to a securityholder in the other province.

27 A public mutual fund must issue and file a new release disclosing a significant change under section 24 of the Act as soon as practicable.

Confidential significant change report

28 A public mutual fund is exempt from section 24 of the Act [disclosure of significant change by public mutual fund] if

(a) the mutual fund files, as soon as practicable, a confidential significant change report describing

(i) the significant change the mutual fund would have disclosed in its news release had it made disclosure under section 24 of the Act, and

(ii) the reasons why there should not be a press release, and

(b) in the fund manager’s opinion

(i) the disclosure required by section 24 of the Act would be unduly detrimental to its interests, or

(ii) the significant change consists of a decision to implement a change made by senior management of the mutual fund who believe that confirmation of the decision by the directors is probable, and senior management has no reason to believe that persons with knowledge of the significant change have made use of that knowledge in trading securities of the mutual fund.

Filing records sent to securityholders or other agencies

29 (1) If a public mutual fund

(a) sends a record to a securityholder, or

(b) provides a record to a marketplace, a regulatory organization or another regulator,

(b) the mutual fund provides the record to the marketplace, regulatory organization or other regulator.

30 (1) In this section:

(b) is merely ancillary to the main business of the mutual fund, its fund manager or its distributor;

(b) an individual who is a partner, director or officer of the fund manager, or

(c) an associate or affiliate of the fund manager.

(b) trade a security of an issuer from or to the account of a responsible person, or

(c) make a loan to a responsible person or to an officer or director of the mutual fund, its distributor or an associate of any of them.

31 Section 30 (2) (b) does not apply to a trade of a security of an issuer from or to the account of a responsible person who

(a) does not participate in the making of investment decisions on behalf of the mutual fund, or

(b) does not have knowledge of investment decisions made on behalf of the mutual fund or of advice given to the mutual fund about those decisions before implementation of the investment decisions.

Exemption for mortgages and debt securities

32 (1) Section 30 (2) (b) does not apply to a trade of a mortgage if the terms of the purchase or sale are reasonable and in the best interests of the mutual fund.

33 (1) In this section, “agent” means a partner, director, officer, representative, or employee of the dealer.

34 Section 33 does not apply to a fund manager for a public mutual fund that is a reporting issuer under the securities laws of another province if the fund manager complies with the requirements designated for the purpose of this section.

Tied selling

35 A fund manager for a public mutual fund must not require a person to purchase

(a) a security of the mutual fund as a condition to providing a product or service to the person, or

(b) a product or service as a condition to selling the person a security of the mutual fund.

36 (1) In this section, “custodian” means a custodian of securities issued by a mutual fund and held for the benefit of plan holders under a custodial agreement or other arrangement.

(b) knows the name and address of the beneficial securityholder, and

(c) receives one of the following documents:

(i) a notice of a meeting of an issuer’s securityholders;

(ii) an information circular;

(iii) a bid circular, a directors circular or a director’s or officer’s circular under British Columbia Instrument 62-502 Takeover Bids and Issuer Bids,

(b) give the securityholder, or its nominee, a proxy enabling one of them to vote the security.

Exemption

37 Section 36 (2) does not apply if the securityholder has not agreed to pay the reasonable costs of sending the material.