ETF Facts: Filing and Delivery Requirements for a Summary Disclosure Document for Exchange-Traded Mutual Funds

On December 8, 2016, the Canadian Securities Administrators published final amendments that require exchange traded mutual funds (ETFs) to produce and file a summary disclosure document called “ETF Facts” beginning on September 1, 2017.

The amendments also introduce a new disclosure delivery regime for ETFs.  Beginning on December 10, 2018, dealers that receive an order to purchase ETF securities will be required to deliver the ETF Facts, instead of the prospectus, to investors within two days of the purchase.  The prospectus will continue to be made available to investors upon request, at no cost.

The introduction of the ETF Facts will help provide investors with access to key information about an ETF, in language they can easily understand.  It provides information about the potential benefits, risks and costs of investing in an ETF in an accessible format.

Delivery of the ETF Facts to investors will also help improve the consistency with which disclosure is provided to investors of ETFs, and help create a more consistent disclosure framework between conventional mutual funds and ETFs.

The starting point for the development of the ETF Facts was the Fund Facts.  Like the Fund Facts, the ETF Facts is required to be in plain language, no more than two pages double-sided and highlights key information that is important to investors, including risks, past performance, and the costs of investing in an ETF. It also highlights for investors where they can find further information about an ETF. 

The ETF Facts also recognizes a key feature that distinguishes ETFs from mutual funds, which is that ETFs are bought and sold over an exchange like stocks.  Therefore, there is additional content in the ETF Facts that speaks to trading and pricing characteristics of ETFs.

The ETF Facts has been tested with investors and the content of the ETF Facts is informed by the results of the testing.  This testing builds upon the testing conducted in respect of the Fund Facts.  The final report, “CSA Point of Sale Disclosure Project: ETF Facts Document Testing” is available here.

This initiative is responsive to comments received in connection with the CSA’s POS Project, from both industry and investor stakeholders, regarding the need to ensure greater consistency in terms of the disclosure regime for conventional mutual funds and ETFs.