The Canadian Securities Administrators (CSA) has published proposed changes
to the regulatory regime governing investment funds pursuant to Phase 2 of its
Modernization of Investment Fund Product Regulation Project (the Modernization
Project). The comment period ended on August 23, 2013.
The proposed changes include prohibiting reporting issuers that are
non-redeemable investment funds from investing in non-guaranteed mortgages (the
Proposed Restriction). If implemented, the proposed changes will directly impact
private mortgage investment entities (MIEs) and mortgage investment corporations
(MICs) that are currently reporting issuers, and private MIEs/MICs looking to go public.
What is the CSA proposing?
The CSA is proposing that non-redeemable investment funds that are reporting
issuers be restricted to investing in guaranteed mortgages only. A guaranteed
mortgage is a mortgage that is fully and unconditionally guaranteed, or insured, by:
• the government of Canada;
• another level of government;
• an agency of any of those governments; or
• a corporation approved by the Office of the Superintendent of Financial Institutions
to offer its services to the public in Canada as an insurer of mortgages.
The CSA states that mortgages not fully and unconditionally guaranteed by a
government or government agency (non-guaranteed mortgages) may not be
appropriate investments for publicly offered investment funds. If implemented, the
CSA is proposing a 24 month transition period on the new restrictions to give these
types of funds time to either:
CSA PROPOSES TO RESTRICT
Public Mortgage Funds from Investing in
By Brian Koscak, Chair, EMDA and Partner, Cassels Brock & Blackwell LLP