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The CSA has issued a Memorandum of Understanding (the "MOU") relating to the Mutual Reliance Review System (the "MRRS"). The MRRS is an understanding between the Canadian securities regulatory authorities on the principles of mutual reliance and is being implemented by way of the MOU. The general principles of the MRRS are described in the MOU and the different policies and rules that are or will be referred to in Appendix A to the MOU describe the detailed procedures for each of the different categories of filings.
The National Instrument is designed to replace NPS 39 and will regulate all publicly offered investment funds that fall within the definition of "mutual fund" contained in Canadian securities legislation. Accordingly, all publicly offered investment funds that give investors the right to redeem securities on demand at a price based on the net asset value of those securities will be required to comply with the National Instrument. Specialized mutual funds such as labour-sponsored investment funds, mortgage funds and commodity pools will generally be required to comply with the National Instrument and also the applicable securities regulation that is in addition to, or in partial substitution for, the provisions of the National Instrument. The purpose of the Companion Policy is to state the views of the CSA on various matters relating to the National Instrument.
Currently, applications for approvals and exemptions under NPS 39 follow the processes set out in it. These applications have not been accepted under ERA because National Instrument 13-101, "System for Electronic Document Analysis and Retrieval" ("SEDAR"), mandates the filing of applications under NPS 39 on SEDAR and applications under ERA are not filed on SEDAR. However, staff note that in practice the application review process under NPS 39 is quite similar to the application review process under ERA.
Mutual Reliance Review System
The CSA has issued a Memorandum of Understanding (the "MOU") relating to the Mutual Reliance Review System (the "MRRS"). The MRRS is an understanding between the Canadian securities regulatory authorities on the principles of mutual reliance and is being implemented by way of the MOU. The general principles of the MRRS are described in the MOU and the different policies and rules that are or will be referred to in Appendix A to the MOU describe the detailed procedures for each of the different categories of filings.
The MRRS applies to filings submitted in more than one jurisdiction. The MRRS is not a mandatory system; if a filer does not wish to use the system, it can file its materials in each relevant jurisdiction and deal separately with such jurisdictions.
The MOU supersedes the Memorandum of Understanding for the Expedited Review of Short Form Prospectuses and Renewal AIFs dated December 18, 1996. The MOU was delivered to the Minister of Finance on October 28, 1999. If the Minister does not approve or reject the MOU by December 28, 1999, or if the Minister approves the MOU, the MOU will come into effect, pursuant to section 14 of the MOU, on January 1, 2000.
The MRRS has been reproduced in Volume 1 of the Canadian Securities Law Reporter at [Symbol Not Transcribed]80-451. A related notice appears in Volume 2 at [Symbol Not Transcribed]222-362.
Policy Re Mutual Reliance Review System Adopted
National Policy 12-201, "Mutual Reliance Review System for Exemptive Relief Applications", has been adopted by the CSA, effective January 1, 2000. The policy, which will establish the mutual reliance review system ("MRRS") for exemptive relief applications ("ERA"), embodies the principles of mutual reliance set out in the memorandum of understanding dated October 14, 1999. Some highlights of the policy are as follows:
- A filer is eligible to elect to use ERA for any application made to more than one securities regulatory authority, except for those applications for which the granting of exemptive relief can be evidenced by a MRRS decision document issued under National Policy 43-201 or by a certificate of registration.
- The policy provides that a filer electing to use ERA for an application is responsible for selecting a principal regulator for the application in accordance with guidelines set out in the policy. These guidelines mirror similar provisions in the prospectus policy and are generally based on the location of the head office of the filer or the connection of the filer to a jurisdiction. The policy clarifies the procedure for changing the principal regulator for an application.
- The policy provides a process for pre-filing discussions on applications. If the principal regulator determines that the pre-filing discussion is of a routine nature, the pre-filing will be dealt with by the principal regulator. If the principal regulator determines that the pre-filing discussion involves a novel and substantive issue or a novel public policy issue, the policy provides for a consultative process between securities regulatory authorities. The process is similar to that provided for in the prospectus policy.
National Policy 12-201 will be reproduced in Volume 1 of the Canadian Securities Law Reporter at [Symbol Not Transcribed]81-201 in a future report.
Policy Reduces Unnecessary Duplication in Reviews of Filed Documents
The CSA has adopted National Policy 43-201, "Mutual Reliance Review System for Prospectuses and Annual Information Forms", and has rescinded National Policy Statement No. 1 (NPS 1), "Clearance of National Issues". The policy will come into force and NPS 1 will be rescinded effective January 1, 2000.
The National Policy applies the principles of the MRRS to the review of prospectuses, AIFs and related filings in order to reduce unnecessary duplication in the review of materials filed in multiple jurisdictions. The MRRS is an important step towards increasing harmonization. Under the MRRS, each non-principal regulator relies primarily on the review and analysis of the principal regulator in reaching its own decision.
National Policy 43-201 will be reproduced in Volume 1 of the Canadian Securities Law Reporter at [Symbol Not Transcribed]81-431 in a future report.
National Instrument Re Mutual Fund Prospectus Disclosure Issued
The Ontario, Manitoba, and Alberta Securities Commissions have adopted National Instrument 81-101, "Mutual Fund Prospectus Disclosure", Form 81-101F1, Form 81-101F2 and Companion Policy 81-101CP. These documents will come into force on February 1, 2000. The other members of the CSA are expected to adopt these documents in the near future.
Effective the date that the National Instrument comes into force, National Policy Statement No. 36 and CSA Notice 81-301, "Mutual Fund Prospectus Disclosure System -- Concept Proposal -- Request for Comments", will be revoked. These materials are replaced or superseded by the matters contained in the National Instrument.
The National Instrument and Forms implement a new regulatory regime governing the disclosure provided by mutual funds in satisfaction of the prospectus requirements of securities legislation. The National Instrument will provide the framework for the system, by requiring the preparation and filing of a simplified prospectus and annual information form by all mutual funds. It will also require that both these disclosure documents be prepared in certain formats.
The Companion Policy describes the central philosophy of the CSA in implementing the mutual fund prospectus disclosure regime; in particular, it describes the purpose of a simplified prospectus and an annual information form. The Policy also provides further explanation of certain of the rules contained in the National Instrument and certain disclosure items of the Forms.
The National Instrument, Companion Policy and Forms will be reproduced in Volume 1 of the Canadian Securities Law Reporter in a future report.
National Instrument Governing Mutual Funds Adopted
The Ontario, Manitoba and Alberta Securities Commissions have adopted National Instrument 81-102, "Mutual Funds", and Companion Policy 81-102CP. These documents will come into force on February 1, 2000. The other members of the CSA are expected to adopt these documents in the near future.
Effective the date that the National Instrument comes into force, National Policy Statement No. 34, "Unincorporated Issuers: Requirements to Maintain a Register of Securityholders", National Policy Statement No. 39, "Mutual Funds", and CSA Notice, "Mutual Funds: Section 16 Sales Communications" will be rescinded. These documents are replaced or superseded by the matters contained in the National Instrument and Companion Policy.
The National Instrument is designed to replace NPS 39 and will regulate all publicly offered investment funds that fall within the definition of "mutual fund" contained in Canadian securities legislation. Accordingly, all publicly offered investment funds that give investors the right to redeem securities on demand at a price based on the net asset value of those securities will be required to comply with the National Instrument. Specialized mutual funds such as labour-sponsored investment funds, mortgage funds and commodity pools will generally be required to comply with the National Instrument and also the applicable securities regulation that is in addition to, or in partial substitution for, the provisions of the National Instrument. The purpose of the Companion Policy is to state the views of the CSA on various matters relating to the National Instrument.
The National Instrument and Companion Policy will be reproduced in Volume 1 of the Canadian Securities Law Reporter at [Symbol Not Transcribed]1702 in a future report; the Companion Policy will be reproduced at [Symbol Not Transcribed]81-802
How Does ERA Relate to Applications for Approvals Made Under NPS 39?
The CSA has issued Staff Notice 12-302/81-305 to communicate its view on how ERA relates to applications for approvals and exemptions made under National Policy Statement No. 39 (NPS 39).
Currently, applications for approvals and exemptions under NPS 39 follow the processes set out in it. These applications have not been accepted under ERA because National Instrument 13-101, "System for Electronic Document Analysis and Retrieval" ("SEDAR"), mandates the filing of applications under NPS 39 on SEDAR and applications under ERA are not filed on SEDAR. However, staff note that in practice the application review process under NPS 39 is quite similar to the application review process under ERA.
Staff now prefers that all applications for approvals or exemptions under NPS 39 be filed under ERA even though these applications must still be filed on SEDAR as required by National Instrument 13-101. Under ERA, the principal regulator will acknowledge receipt of the application as required by ERA by placing correspondence on SEDAR. Non-principal regulators will acknowledge receipt of this document by updating the status of the application on SEDAR to "Under Review", ensuring that the appropriate "Agency Contact" information is filled in.
The notice has been reproduced in Volume 1 of the Canadian Securities Law Reporter at [Symbol Not Transcribed]82-072.
Should National Policy Statement 30 Be Rescinded?
The CSA is proposing to rescind National Policy Statement No. 30, "Processing of Seasoned Prospectuses" ("NPS 30"). NPS 30, which became effective on December 5, 1978, provides for a procedure which is intended to shorten the review period for prospectuses of issuers who file prospectuses on a repetitive basis or continuously have a valid prospectus outstanding. In particular, NPS 30 provides that when a preliminary prospectus that is a seasoned prospectus is filed, it should be accompanied by a copy indicating the changes that have been made to the proceeding prospectus of the issuer. NPS 30 also provides that the prospectus should be accompanied by a certificate or certificates of lawyers, accountants or other responsible persons certifying that the blackline copy accurately reflects the changes.
Comments on the proposed rescission are welcomed by January 18, 1999. For further information, please refer to the November 19, 1999 OSC Bulletin.
Copyright CCH Canadian Limited Dec 1999