FAIR Canada
FAIR Canada Newsletter

July 2011

Fund Facts Misleading Investors About Risks?

Mutual Fund Companies Withholding Investment Risk Classification Methodology

FAIR Canada recently drew the Ontario Securities Commission's (OSC) and the Canadian Securities Administrators' (CSA) attention to the fact that in preparing simplified prospectus documents some mutual fund companies are not complying with their disclosure obligations when it comes to investment risk classification methodology. We are concerned that this non-compliance withholds essential information from investors, preventing them from understanding the level of risk provided in a mutual fund's simplified prospectus or set out in Fund Facts. 

 

FAIR Canada and other investor advocates, including Ken Kivenko, have found that several mutual fund companies are not providing adequate risk disclosure.  Instead, they are stating that the methodology used in their simplified prospectus (and reflected in Fund Facts) is the methodology recommended by the Fund Risk Classification Task Force of the Investment Funds Institute of Canada (IFIC) or is based on IFIC's methodology. IFIC is the lobby group for Canada's investment funds industry. The statements in question do not provide the necessary description of the methodology used, nor has it been available upon request, as is required by National Instrument 81-101.  When FAIR Canada and other advocates contacted the fund companies, we were not provided with the methodology but were instead referred to IFIC.  IFIC, in turn, refused to disclose its recommended methodology.  

 

FAIR Canada believes that how a manager determines the level of risk of a mutual fund is a key piece of information that investors need and should have access to. 

 

The OSC responded to FAIR Canada's letter on July 13, 2011, agreeing that more is required than simply identifying that a particular methodology is used and indicating that they will be reviewing the issues raised. 

 

Read FAIR Canada's letter  to OSC/CSA and the OSC's response .  

   

Read more  about how Fund Facts disclosure is inadequate... 

  

 

FAIR Canada Supports OBSI's Methodology for Calculating Losses for Unsuitable Investments

FAIR Canada believes that a single, national ombudservice for investment complaints is vital to the integrity of the Canadian financial services marketplace and investor protection.  FAIR Canada supports continued mandatory OBSI participation for IIROC and MFDA member firms.  FAIR Canada supports the loss methodology used by OBSI, which is described in its Consultation Paper  dated May 26, 2011. OBSI's guiding principle is to determine a reasonable estimate of the financial position the investor would be in had the unsuitable investment advice not been given and acted upon. OBSI's approach to determining suitability and calculating investor losses is entirely appropriate and comparable to other jurisdictions.
To read FAIR Canada's submission , please click here.

FAIR Canada is disappointed with the industry's response to OBSI's request for comments on its Consultation Paper. Submissions by members of the financial industry and industry organizations demonstrate that the industry continues to oppose the idea of any ombudservice for financial consumers. Alternatively, the financial industry spokepersons do not understand or accept the principles upon which an ombudsman is guided. FAIR Canada believes that if the industry persists in its lobby to effectively "kill" OBSI, the only alternative is a statutory ombudservice, which would have the ability to impose its decisions on firms and enforce them, if necessary.

Visit OBSI's website  linking to all the submissions received by OBSI.  

Read more  about OBSI and how the financial industry's attacks on OBSI have resulted in a crisis...

 

 

FAIR Canada Job Opportunity

FAIR Canada is recruiting for a Deputy Director. You are a lawyer, accountant or other investment/financial professional and have a minimum of 10 years experience in financial markets regulation and related experience. You have a strong understanding of securities and financial services legislation. Your keen interest in securities regulation, investor rights and your analytical skills are complemented by your strong communication (written and verbal) and presentation skills. 

 

Experience in the political and regulatory process by which securities law is developed is highly desirable as is work experience and knowledge of different regions of the country.  French is a desirable asset but not a requirement. The Deputy Director should be experienced and capable enough to be a candidate for Executive Director of FAIR Canada within 6 months of joining the organization.


To apply for the above position, email resume with cover letter to [email protected] or fax to 416-572-4109 by September 2, 2011.
 

FAIR Canada Recent Submissions

Phase 2 Investment Fund Proposals

FAIR Canada urges further and more fundamental changes in investment funds regulation.

OBSI Consultation Loss Compensation

FAIR Canada supports OBSI's approach to determining suitability and assessing investor issues.

IIROC Guidance Note - Outside Business Activities

FAIR Canada recommends that all securities related activity be required to be conducted through a Dealer Member in order to protect investors.

TMX/LSE Proposed Transaction

FAIR Canada stresses the importance of addressing existing conflicts of interest concerns arising out of the TSX's competing listings regulation responsibilities and its listings business operations.

 

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