On November 5, the Ontario Securities Commission (OSC) released OSC Staff Notice 81-736 Summary Report for Investment Fund and Structured Product Issuers (the Report) for the OSC Investment Management Division (IM Division) for the fiscal year ended March 31, 2024. The Report dives into several topics of interest to registrants, including the new responsibilities of the IM Division, regulatory policy initiatives, and emerging issues being considered by the division. Below is a summary of the Report, with a focus on issues relating to regulatory compliance.
Responsibilities of the IM Division
In support of the OSC’s mandate, the IM Division is responsible for administering the regulatory framework for investment funds and portfolio management services that are offered to Ontario investors. The IM Division’s key functions include:
- reviewing and assessing disclosure for all types of publicly offered investment funds;
- assessing applications for discretionary relief from securities legislation;
- policy making to adapt to changes in the capital market;
- engagement with stakeholders;
- issuing guidance to stakeholders;
- monitoring and responding to emerging capital market and investor protection risks; and
- monitoring and participating in investment fund regulatory developments globally.
A new Portfolio Advisers team was added to the IM Division, which is responsible for policy matters, including applications for exemptive relief, relating to portfolio management services offered by individuals and firms. The team works with the Registration, Inspection and Examination Division (RIE) of the OSC on novel and complex registration issues related to portfolio management and advice. As needed, the RIE may conduct targeted examinations for certain data requests on behalf of the IM Division.
Exemptive Relief Applications
As noted above, the IM Division reviews applications for exemptive relief. During the last fiscal year, the OSC received a noteworthy exemptive relief application with respect to fund financial statement filings.
A mutual fund that is not a reporting issuer and only distributes its units to accredited investors was granted a 30-day extension of the annual financial statement filing and delivery deadlines and the interim financial statement filing and delivery deadlines under National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106). NI 81-106 requires investment funds to file and deliver annual financial statements within 90 days of its most recently completed financial year end and to file and deliver interim financial statements within 60 days of its most recently completed interim period. The relief was necessary for the fund given its December 31st year-end as it was primarily invested in a diversified portfolio of domestic underlying funds, the majority of which also had December 31st year-ends.
Normally, extensions of the financial statement filing deadlines are only granted to top funds that are not reporting issuers and which invest in underlying funds that are domiciled in foreign jurisdictions that have financial statement delivery deadlines exceeding 90 days. In addition to being notified of this change in financial statement delivery timelines, investors were offered the right, within two business days, to redeem their units of the top fund at the greater of the current net asset value (NAV) or the original purchase price of their units, with the filer to reimburse the fund in any case where an investor redeems their units where the original purchase price exceeds the current NAV.
Staff noted that market issuers who request financial statement filing extensions will be reviewed on a case-by-case basis, and any relief will be granted for existing top funds and not for future oriented funds.
Investment Fund Survey
The Investment Fund Survey (IFS) was initially launched on April 26, 2021, to seek key information about investment funds with at least $10 million in net assets managed by IFMs registered in Ontario. In September 2023, the OSC began sharing the historic survey results of the IFS via a public dashboard which can be found on the OSC Investment Fund Survey data website landing page. January 17, 2024, the OSC launched the 2024 IFS, which like prior years, sought data points including type of holdings (by geography and asset class), leverage, ownership, liquidity profiles and asset class exposure of investment funds. The IFS applies to all IFMs, regardless of fund size. The deadline to submit this information was April 30, 2024, and the OSC received data on approximately 5,700 prospectus-qualified and exempt investment funds managed by more than 400 IFMs as part of this exercise.
Landing Page on OSC Website
The Report highlights that the IM Division landing page of the OSC website contains information relevant for investment fund issuers and their respective IFMs. Information can be found on the following areas: types of investment funds, prospectus offerings for investment funds in Ontario, operating an investment fund in Ontario, ongoing disclosure requirements for investment funds in Ontario, marketing and sales of investment funds, OSC eNews publications, applying for discretionary relief, the investment fund survey, investment fund survey data, refiling and Errors List, latest policy developments affecting investment funds, and the latest orders, rulings and decisions.
If you would like to discuss the Report further, please contact your usual AUM Law lawyer.
November 29, 2024