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The Ontario Securities Commission's investment management division is responsible for the regulatory framework for investment funds, investment fund managers and portfolio manager services. In OSC Staff Notice 81-739 Investment Management Division Annual Summary Report (the Report), the division describes its key operational and policy initiatives that impacted investment fund issuers and advisers over the last fiscal year, summarizes public fund filings made over the past year, exemptive relief granted to public funds and provides a general description of the division's responsibilities.
There is helpful information in the Report relevant to registrants involved in the management and distribution of investment funds in the exempt market. For example, the Report discusses exemptive relief that is frequently sought for fund of funds from the financial statement filing and delivery deadlines. This relief is sought when a fund invests a significant portion of its assets in foreign funds with different reporting deadlines, to give the auditors of the top fund an opportunity to consider those statements in the top fund audit. It is noted that staff will not likely grant relief on a future oriented basis. The Report reminds filers that the application for relief must include certain information, including:
- A description of the fund's investment objectives and strategies, and how they are met by investing in underlying funds;
- The % of the pooled fund's net assets in the underlying funds;
- The domicile of the underlying funds;
- Why the relief is required (i.e. confirmation from the auditor that the underlying fund information is necessary);
- The specific amount of additional time requested and an explanation for the amount of time;
- The alternatives that were considered (i.e. changing year end) and why the alternatives are not feasible; and
- The method by which the filer will let the security holders of the pooled fund know about the exemptive relief AND give them the opportunity to exit the fund on reasonable terms after being told of the relief.
With respect to registrant regulation, the Report also references bulk transfer applications, where a large number of registered individuals move from one firm to another as the result of a business transaction. In these kinds of applications, the acquiring firm typically files an application for exemptive relief from the individual form filing requirements, so that the transfer of registered or permitted individuals and business locations can be done on a 'bulk transfer' basis. The Report reminds registrants that Appendix D of Companion Policy 33-109CP Registration Information lists the circumstances in which regulators will consider granting this relief and the information that should be included in the application. For staff to consider granting the relief, at least 25 people must be part of the transfer and relief should be sought at least 30 days prior to the effective date of the transfer.
In addition, staff continue to find issues in s. 11.9 and 11.10 notices for the acquisition of a registrant's securities and remind registrants to use the voluntary notice form, provide the notice as soon as the firm knows, or has reason to believe, that 10% or more of its voting securities or securities convertible into voting securities are going to be acquired, and to file the notice a minimum of 30 days before the closing of the proposed transaction.
Finally, the Report recaps information from Staff Notice and Consultation 11-348 Applicability of Canadian Securities Laws and the Use of Artificial Intelligence Systems in Capital Markets and reminds registrants to include their use of AI systems (and related risks) in their policies and procedures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
