96 Private Capital Markets | Fall 2014 | www.pcmacanada.com
reporting for issuers. We believe that it is sufficient for regulators
to require investment fund managers to confirm which exemptions
they have relied on in distributing securities to investors.
ii. Duplicating existing information
Many of the sections in the F10, such as Items 2, 7 and 8,
require detailed information about the fund and investment fund
manager that, we believe, is already available to the regulators
because the information is required to be kept current and filed,
and which the CSA already have access to through NRD. Thus, it is
not clear why the investment fund manager should have to provide
this information again on the F10 since it is already accessible.
Similarly, for Item 6 of the F10, the assets under management
(AUM) that would be reported in 3 of the 4 reporting periods is
not an audited value and while it is calculated for management
reporting purposes, it is not verified and if provided in good faith,
may put the issuer offside with the certification required under
Item 18. We believe the OSC is already informed on much of the
required reporting and we do not believe it is necessary to charge
fund managers $500 per quarter to provide information that is
generally already available to the regulators.
We believe a better reporting approach should be developed.
For example, there are two basic types of information: fund
information, principally included in Items 1 through 9 (Fund Data),
and the information about its exempt distributions, principally
included in Items 10 through 19 (Distribution Data). The Fund
Data will typically be unchanged from report to report, whereas
most of the Distribution Data will be different for each report. It
would be much more effective to have these two different types
of data handled separately and differently. First, the system could
be designed so the investment fund manager can “set up” the
fund initially on the web portal with all applicable Fund Data, and
update the Fund Data only when information changes. Then, the
“high frequency” Distribution Data could be uploaded and filed on
a quarterly basis only if there are changes/activity “against” the
previously-established record for the fund and if not, filing should
continue to be required only annually.
We also recommend the regulators consider other ways to
obtain targeted information from investment funds. For example,
if the regulators wish to understand the “unregistered” investment
fund market better, a more effective and efficient means would
be to develop a list of targeted questions and conduct a survey
of a sample of investment fund managers. Select a few of those
investment managers to meet with, and discuss the market and
any issues of regulatory concern.
The Proposed Amendments seek to increase the frequency of
reporting from an annual basis to a quarterly basis, however, it is
not clear in the Proposed Amendments why annual reporting has
not been sufficient. It would be helpful to understand if and how
annual reporting previously failed to capture sufficient information
or alternatively, what was ineffective about annual reporting to
necessitate a shift to more frequent (and costly) reporting.
We are also concerned about how the increased reporting
schedule for exempt distributions will effectively quadruple the
OSC’s fees for those who currently report. Some investment
funds are relatively small in terms of AUM and/or there is not
enough activity in them, from one quarter to another, to justify this
increased reporting schedule and its associated cost. In our view,
investment funds should not be subject to more frequent and
detailed reporting requirements.
We also believe that quarterly reporting should not be
required since general details about an investment fund (i.e.,
service providers, investment objectives, structure) change very
infrequently (generally no more than once or twice in the lifecycle
of a fund, which may be of significant length). Accordingly, we
submit an annual report should be more than sufficient to keep the
iii. Electronic reporting
In Alberta, New Brunswick and Saskatchewan, the F10 will
be a paper form while in Ontario, this form will be an e-form as
stipulated by OSC Rule 11-501 Electronic Delivery of Documents
to the Ontario Securities Commission. First, the obvious concern
with this the inconsistent filing approach required by jurisdiction.
Second, the e-form in Ontario aims to be more “user-friendly” and
easier to complete; however, the process of data submission would
be rendered dramatically easier if it could be accomplished by
uploading to the website one or more “flat” data files in prescribed
format. Such data files could be generated from the investment
fund manager’s existing systems, and uploaded quickly, without
the need for “copy-typing” from one medium to another. Ideally,
this could be provided to all jurisdictions in electronic format.
There is also an issue relating to the choice of acceptable
internet browsers available for submitting an e-form. The
instructions on the web portal say that only Microsoft’s Internet
Explorer (IE) version 8.0 or later, and Mozilla’s Firefox 20 or earlier
are acceptable. In particular the system does not work with (i)
version 11 of IE, (ii) any version of Google’s Chrome browser, or (iii)
any version of Apple’s Safari browser. In addition to representing
a substantial proportion of the overall installed base of web
browsers, these other versions/browsers are more up to date and
better supported. We recommend the OSC and CSA consider the
use of these superior browsers as compatible alternatives to those
currently available on the web portal.
2) Should any of the information requested through the
Proposed Reports not be required to be provided? Is there any
alternative or additional information that should be provided
that is not referred to in the Proposed Reports?
No, the PCMA believes the proposed reporting requirements