OSC and AMF regulators release review and guidance on investment fund oversight

The targeted review scrutinized the practices of 24 Investment Fund Managers
OSC and AMF regulators release review and guidance on investment fund oversight

The Ontario Securities Commission (OSC) and the Autorité des marchés financiers (AMF) have jointly issued a new multilateral Staff Notice following a comprehensive review focused on the management and regulatory compliance of investment funds.

The targeted review, engaging staff from both commissions, scrutinized the practices of 24 Investment Fund Managers (IFMs) whose regulatory oversight falls under the jurisdictions of either OSC or AMF. This examination spanned a variety of fund types, including conventional mutual funds, exchange-traded funds, scholarship plans, and alternative funds, ensuring a broad analysis across different segments and scales within the investment fund sector.

Central to the review were the prospectuses, annual information forms (AIF), the Independent Review Committee (IRC) Report to Securityholders, and the digital presence of both the IFMs and the managed funds. One of the findings from the review highlighted concerns regarding the tenure of several IRC members, with some exceeding the recommended six-year term. This insight has prompted guidance urging IRCs to foster renewal and diverse perspectives in managing conflicts of interest by adhering to a six-year term limit for IRC members, barring exceptional circumstances.

Moreover, the review encouraged IFMs to adopt a comprehensive approach to identifying “conflict of interest matters,” recommending an erring caution in referring potential or actual conflicts to the IRC. It also suggested that expanding the diversity criteria for IRC membership beyond just skill sets could enhance decision-making processes and governance standards.

The Staff Notice aims to fortify the framework around National Instrument 81-107 Independent Review Committee for Investment Funds, offering IFMs and IRCs detailed guidance to amplify their effectiveness and compliance. The findings and recommendations from this targeted review, detailed in CSA Multilateral Staff Notice 81-337, are now accessible on the OSC and AMF websites.

This initiative is part of the broader efforts by the Canadian Securities Administrators (CSA), a collective of securities regulators from Canada's provinces and territories, to synchronize and refine regulatory practices across the nation’s capital markets.