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Proposed Rule: OSC Rule - 41-502 - Prospectus Requirements for Mutual Funds (Repealed by 41-801 on March 17, 2008)
Proposed Rule: OSC Rule - 41-502 - Prospectus Requirements for Mutual Funds (Repealed by 41-801 on March 17, 2008)
ONTARIO SECURITIES COMMISSION RULE 41-502
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS
PART 1 INTERPRETATION AND APPLICATION
1.1 Interpretation
1.2 Application
PART 2 APPLICATION OF RULE 41-501 GENERAL PROSPECTUS REQUIREMENTS
2.1 Application of Rule 41-501 General Prospectus Requirements
PART 3 PERMITTED FORMS OF DISCLOSURE DOCUMENTS
3.1 Prospectus
3.2 Labour Sponsored Investment Fund Corporations
PART 4 FINANCIAL STATEMENTS IN A PROSPECTUS
4.1 Financial Statements in a Prospectus
4.2 Form and Contents of Financial Statements
PART 5 ADDITIONAL REQUIREMENTS
5.1 Non-Canadian Manager
5.2 Submission to Jurisdiction and Appointment of Agent for Service Forms
5.3 Notices/Consent Forms and Security Check Information
PART 6 SIMPLIFIED PROSPECTUS
6.1 Simplified Prospectus
PART 7 EXEMPTION FROM SUBSECTION 81(2) OF THE ACT
7.1 Exemption from Subsection 81(2) of the Act
PART 8 EXEMPTION
8.1 Exemption
8.2 Evidence of Exemption
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS(1)
1.1 Interpretation - Terms defined in National Policy Statement No. 39, contained in the Rule In the Matter of a Simplified Prospectus Qualification Systemfor Mutual Funds [Including National Policy Statement No. 36 and National Policy Statement No. 39](3), or in a successor rule to National Policy StatementNo. 39, and used in this Rule have at any time the respective meanings ascribed to them in that Rule or the successor rule, whichever is in force at that time.
1.2 Application - A pro forma prospectus of a mutual fund shall comply with the requirements of this Rule that relate to a prospectus.(4)
PART 2 APPLICATION OF RULE 41-501 GENERAL PROSPECTUS REQUIREMENTS
2.1 Application of Rule 41-501 General Prospectus Requirements - Section 3.1, section 3.3(5), Part 4(6) and section 7.2(7) of Rule 41-501 General ProspectusRequirements do not apply to a mutual fund and its prospectus.
PART 3 PERMITTED FORMS OF DISCLOSURE DOCUMENTS
3.1 Prospectus - A prospectus of a mutual fund that is not filed under National Policy Statement No. 36, contained in the Rule In the Matter of a SimplifiedProspectus Qualification System for Mutual Funds [Including National Policy Statement No. 36 and National Policy Statement No. 39], ("NP36"), or underany successor rule, shall comply with Form 15(8).
3.2 Labour Sponsored Investment Fund Corporations - Despite section 3.1, a prospectus of a mutual fund that is a labour sponsored investment fundcorporation shall comply with Form 45(9).
PART 4 FINANCIAL STATEMENTS IN A PROSPECTUS
4.1 Financial Statements in a Prospectus(10)
(1) A prospectus of a mutual fund prepared in accordance with either Form 15 or Form 45 shall contain
(a) the financial statements of the mutual fund
(i) for its last completed financial year if those financial statements have been, or were required under the Act to have been, filed; or
(ii) for the preceding financial year if the financial statements for the last completed financial year have not been, and have not yet been required under the Act tohave been, filed; and
(b) the financial statements of the mutual fund for the six month period that began immediately after the financial year to which the annual financial statementsrequired to be included in the prospectus under paragraph (a) relate, if those six month financial statements have been, or have been required under the Act tohave been, filed.
(2) Despite subsection (1), a prospectus of a mutual fund that has not filed and has not been required to file financial statements for a financial year shall contain
(a) the balance sheet of the mutual fund dated the date of inception of the mutual fund; and
(b) financial statements of the mutual fund for the period commencing with the beginning of the first financial year and ending six months before the date onwhich that financial year ends, if those financial statements have been, or have been required to have been, filed.(11)
4.2 Form and Contents of Financial Statements - The financial statements referred to in section 4.1 shall comply with Part IV of the Regulation.(12)
PART 5 ADDITIONAL REQUIREMENTS
5.1 Non-Canadian Manager - The prospectus of a mutual fund, the manager of which is incorporated, continued or otherwise governed under the laws of aforeign jurisdiction(13) or resides outside of Canada, shall include the following on one of the first three pages of the prospectus or under a separate headingelsewhere in the prospectus, with bracketed information completed:
The manager is incorporated, continued or otherwise governed under the laws of a foreign jurisdiction or resides outside of Canada. Although the managerhas appointed [name and address of agent for service] as its agent for service of process in Ontario it may not be possible for investors to collect from themanager judgments obtained in courts in Ontario.
5.2 Submission to Jurisdiction and Appointment of Agent for Service Forms - If the manager of a mutual fund is incorporated, continued or otherwisegoverned under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of processof the manager of a mutual fund in Form 41-501F3, amended as appropriate to substitute references to the "manager" for references to the "issuer", shall be filedat the time the prospectus of the mutual fund is filed if it has not already been filed.(14)
5.3 Notices/Consent Forms and Security Check Information - A mutual fund shall deliver to the Commission, at the time of filing a preliminary prospectus orpro forma prospectus
(a) information describing the full name, birth date, full residential address, and name and address of employer for each director or officer of the manager of themutual fund if that information has not been previously delivered to the Commission in connection with a prospectus filing of the mutual fund or another mutualfund managed by the manager; and
(b) a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred toin paragraph (a).(15)
PART 6 SIMPLIFIED PROSPECTUS
6.1 Simplified Prospectus - A preliminary prospectus, prospectus, or pro forma prospectus, in each case, prepared and filed in accordance with NP36 or inaccordance with any successor instrument, is a short form of preliminary prospectus, short form of prospectus or short form of pro forma prospectus, as the casemay be, in prescribed form for the purposes of section 63 of the Act.(16)
PART 7 EXEMPTION FROM SUBSECTION 81(2) OF THE ACT
7.1 Exemption from Subsection 81(2) of the Act - Subsection 81(2) of the Act does not apply to a mutual fund that has obtained a receipt for a currentprospectus.(17)
PART 8 EXEMPTION
8.1 Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to such conditions or restrictions as may be imposed in theexemption.
8.2 Evidence of Exemption - Without limiting the manner in which an exemption under section 8.1 may be evidenced, the issuance by the Director of a receiptfor a prospectus or an amendment to a prospectus is evidence of the granting of the exemption if
(a) the person or company that sought the exemption delivered to the Director, with the preliminary or pro forma prospectus or at least 10 days before theissuance of a receipt in the case of an amendment, a letter or memorandum describing the matters relating to the exemption and indicating why considerationshould be given to the granting of the exemption; and
(b) the Director has not sent written notice to the contrary to the person or company that sought the exemption before, or concurrent with, the issuance of thereceipt.
Footnotes
1. This Rule provides the prospectus requirements that are specific to mutual funds, and should be read in conjunction with Rule 41-501 General ProspectusRequirements ("Rule 41-501"), which was published for comment on May 2, 1997 in (1997) 20 OSCB (Supp). The Companion Policy to this Rule contains adiscussion of the relationship of this Rule with Rule 41-501.
2. A general definition rule has been adopted as Rule 14-501 Definitions but has not yet come into force. It contains definitions of certain terms used in morethan one rule. That rule also provides, among other things, that terms used in a rule and defined in section 1 of the Securities Act or subsection 1(2) of theRegulation will have the respective meaning given to them in the Securities Act or Regulation, as appropriate. Rule 14-501 also incorporates terms defined inNational Instrument 14-101 Definitions. National Instrument 14-101 contains, among other things, definitions for terms used in more than one nationalinstrument.
3. Notice of this Rule was provided in (1996), 19 OSCB 6955. This Rule came into force on March 1, 1997.
4. This provision ensures that the rules applicable to prospectuses in this Rule apply also to pro forma prospectuses, and eliminates the need to repeat thisinformation at all times. No specific reference to a preliminary prospectus is made as section 54 of the Act requires a preliminary prospectus to substantiallycomply with the form and content requirements of Ontario securities law applicable to a prospectus. Also, no specific reference to a simplified prospectus isnecessary. According to National Policy Statement No. 36 ("NP36") a simplified prospectus is a prospectus, and so references in this Rule to prospectusesinclude simplified prospectuses, unless the context otherwise requires.
5. Part 3 of Rule 41-501 deals with the financial statements to be included in a prospectus, as well as other financial matters. Section 3.1 of Rule 41-501contains the requirements relating to the financial statements to be included in a prospectus. Those provisions have been excluded from this Rule as they havebeen replaced by section 3.1 of this Rule. Section 3.3 of Rule 41-501 contains financial statement prospectus requirements if the proceeds of an offering are to beapplied in connection with an acquisition of a business. This is inapplicable to mutual funds, and that section has been excluded.
6. Part 4 of Rule 41-501 relates to non-fixed price and reduced price offerings and is inapplicable to mutual funds.
7. Part 7 of Rule 41-501 governs procedures and requirements for granting receipts. Section 7.2 of Rule 41-501 contains a prohibition against the filing of aprospectus in connection with a distribution to fund a new business if all material licences, registrations and approvals necessary for the operation of the businesshave not been obtained. This is inapplicable to mutual funds.
8. This section replaces subsection 44(1) of the Regulation, which will be revoked. Section 44 provides for summary statements, which have not been usedsince NP36 was promulgated. Section 33 of the Regulation, which also makes references to summary statements, will also be revoked.
9. This section replaces section 237 of the Regulation, which will be revoked.
10. This section replaces section 54 of the Regulation, which will be revoked.
11. This provision is consistent with section 5.1 of NP36, which requires a simplified prospectus to be accompanied by a copy of the interim financialstatements of the mutual fund if they have been filed after the last completed financial year of the mutual fund.
12. This provision ensures that the financial statements required to be included in a prospectus are no less detailed than those prepared for continuousdisclosure purposes according to Part IV of the Regulation. Part IV of the Regulation will remain in force pending a review of the final report of a CanadianInstitute of Chartered Accountants study group reviewing financial statements and financial disclosure of investment funds. Subsection 94(2) of the Regulation,contained in Part IV, permits a statement of portfolio transactions to be omitted from a prospectus if certain conditions are satisfied. Where subsection 94(2)applies, subsection 94(4) requires specified statements to be included in the published financial statements or prospectus of the mutual fund.
13. The term "foreign jurisdiction" is defined in National Instrument 14-101 Definitions. The definition is "a country, or political subdivision of a country, otherthan Canada".
14. Sections 5.1 and 5.2 are derived from section 25 of Ontario Securities Commission Policy Statement No. 5.1, and they are consistent both with subsection6.8(1) of Rule 41-501 and with section 1.10 of Form 41-501F1.
15. Reference should be made to section 3.3 of the Companion Policy. The source for section 5.3 of the proposed Rule is Ontario Securities CommissionPolicy Statement No. 5.7; however, the provision has been modified to reflect current staff administrative practice.
16. This section performs an analogous function to the Blanket Ruling In the Matter of a Simplified Prospectus Qualification System for Mutual Funds(1984), 7 OSCB 5333. This Blanket Ruling was a deemed rule until its expiration on March 1, 1997, and is now a final Rule, having come into force on March 1,1997. The original Blanket Ruling implemented the simplified prospectus
disclosure system in Ontario. This section provides that simplified prospectuses are prospectuses by virtue of section 63 of the Act, so that the provisions of theAct that apply to prospectuses will also apply to simplified prospectuses.
17. This Part replaces the Commission ruling In the Matter of Certain Mutual Funds - Exemption (Section 79), dated June 5, 1980, (1980) OSC WeeklySummary, No. 21/80, for the week ending June 6, 1980.