This comprehensive guide lists and explains the general requirements for mutual funds with respect to filing, documentation, and regulatory adherence in Canada.
Most mutual funds in Canada are qualified for sale in all provinces and are registered in each specific jurisdiction. This section covers the key requirements and documents necessary for the distribution and sale of mutual funds, ensuring compliance with provincial and national regulations.
Mutual funds must be registered for sale in each Canadian jurisdiction where they are offered. For most funds, particularly smaller ones, this registration is only done in provinces where the sales prospects are considered favorable.
Selling a fund’s securities to residents of provinces in which the fund has not been qualified is prohibited. Therefore, mutual fund representatives must strictly adhere to dealing only in funds that are registered in their jurisdiction.
Because mutual funds are continuously distributing their securities, certain key disclosure documents must be provided to investors prior to purchase. These requirements are mandated by the National Instrument (NI) 81-101.
Fund Facts Document: Investors must receive this before making a purchase. It provides essential details on the mutual fund such as investment objectives, performance metrics, and fee structures.
Simplified Prospectus: A condensed version of the full prospectus, providing a summary of the key information about the fund.
Annual Information Form (AIF): Offers extensive details about the fund, including its operations, management and financial health.
Financial Statements: Includes annual audited statements or interim unaudited financial statements detailing the financial performance of the fund.
Other Required Information: This may include material change reports or information circulars, depending on the provincial or territorial regulations where the fund is distributed.
NI 81-101 mandates that the Fund Facts document must be delivered to investors before they purchase a mutual fund. While it is the only document universally required prior to purchase, investors have the right to request additional documentation:
Upon request, the distributor is obligated to provide these documents to the investor.
Registration: Ensure that mutual funds are registered in the specific provinces where they are intended for sale.
Disclosure: Prior to purchase, investors must receive the Fund Facts document. They can also request further documentation.
Compliance: Adherence to NI 81-101 and other relevant provincial guidelines is crucial to lawful mutual fund distribution.
The Fund Facts document, Simplified Prospectus, Annual Information Form (AIF), and financial statements are crucial for mutual fund compliance.
No. Selling a mutual fund in a province where it is not registered is prohibited.
NI 81-101 is a National Instrument that sets forth the requirements for mutual fund distributions in Canada, focusing primarily on disclosure documents that must be provided to investors.
Investors can request additional documents such as the Simplified Prospectus, AIF, or financial statements. The distributor must provide these documents upon request.
Fund Facts Document: A short, easy-to-understand document that provides key information about a mutual fund.
Simplified Prospectus: A condensed version of the full prospectus that summarizes vital details about a fund.
Annual Information Form (AIF): A comprehensive document providing essential details about the operations, management, and financial status of a fund.
NI 81-101: National Instrument 81-101 responsible for setting the standards for mutual fund distribution and disclosure in Canada.
Material Change Reports: Documents filed to inform investors about significant changes in the operations or business of the fund.
flowchart LR
A[Register Mutual Fund] --> B[File Full or Simplified Prospectus]
B --> C{Sales Prospects Favorable?}
C -- Yes --> D[File in Relevant Provinces]
C -- No --> E[Reassess Sales Strategy]
D --> F[Distribute Fund Facts Document to Investors]
F --> G[Provide Additional Documents on Request (Prospectus, AIF, Financial Statements)]