Securities Amendment Act (Mutual Funds), 2008 Prue, Michael — Bill 140 (39th Parliament, 1st Session)

Bill 140, 39-1

Ontario — Bills

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Bill 140, Securities Amendment Act (Mutual Funds), 2008

Prue, Michael

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[39] Bill 140 Original (PDF)

Bill 140 2008

An Act to amend the Securities Act with respect to mutual

funds

Note:

This Act amends the Securities

Act . For the legislative history of the Act, see the Table of

Consolidated Public Statutes – Detailed Legislative History on www.e-Laws.gov.on.ca.

Her

Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

1. Subsection 1 (1) of the Securities Act is

amended by adding the following definition:

"mutual

fund manager" means a person or company that directs the business, operations

and affairs of a mutual fund; ("gestionnaire de fonds mutuels")

Section 121.1 of the Act is repealed and

the following substituted:

Authorized exceptions to prohibitions

121.1 If

the regulations so provide, a body established under subsection 121.4 (1) by an

investment fund other than a mutual fund in Ontario or under subsection 121.6

(1) by a mutual fund in Ontario may approve a transaction that is prohibited

under this Part and, in that case, the prohibition does not apply to the

transaction.

(1) Subsection 121.4 (1) of the

Act is amended by striking out "If required to do so by the regulations" at the

beginning and substituting "If required to do so by this Act or the

regulations".

(2) Subsection 121.4 (2) of the Act is

repealed and the following substituted:

Same

(2) Unless otherwise provided for in this Act, the body

has such powers and duties as may be prescribed.

4. The Act is amended by adding the following

Parts:

part xxi.2

mutual fund governance

Application

121.5 Despite

Part XXI.1, this

Part applies to every mutual fund in Ontario.

Oversight, etc., of mutual funds

121.6

(1) Every

mutual fund in Ontario shall establish and maintain an independent board of

directors for the purposes of overseeing activities of the mutual fund and the

mutual fund manager, reviewing or approving prescribed matters affecting the

mutual fund, including transactions referred to in

section 121.1, and

disclosing information to security holders of the fund, to the mutual fund

manager and to the Commission.

Duties of board of directors

(2) The board of directors shall act in the best interests

of the mutual fund and its security holders, and its duties shall include,

(

a) overseeing

the establishment and implementation of policies related to conflict of

interest issues;

(

b) monitoring

compliance with the conflict of interest policies;

(

c) monitoring

fees and expenses, and their allocation;

(

d) receiving

and reviewing reports from the mutual fund manager;

(

e) reviewing

the appointment of the fund's auditor;

(

f) meeting

regularly with the fund's auditor; and

(

g) approving

material contracts.

Composition

(3) A majority of the members of the board of directors

must be independent of the mutual fund's management company and may not be

independent members of the management company's board of directors.

Terms of office

(4) The members of the board of directors shall hold

office for three years.

Election of directors

(5) Subject to subsection (6), the members of the board of

directors shall be elected in accordance with the regulations and the rules of

the board.

Nomination of directors

(6) The first board of directors of a mutual fund shall be

nominated by the mutual fund's management company and elected in accordance

with the regulations.

Retaining services

(7) The board of directors may employ or retain

independent legal counsel and other independent advisors for the purpose of

carrying out the functions and powers of the board.

Right to terminate manager

(8) The board of directors may terminate the employment of

the mutual fund manager if the board is of the opinion that the manager is

putting his or her interests ahead of those of the fund's security holders by

way of self-dealing, conflict of interest transactions or any other breach of

his or her duties.

Right to redeem units

(9) If the board of directors is of the opinion that the

mutual fund manager has put his or her interests ahead of those of the fund's

security holders under subsection (8), the board shall give notice to the

fund's security holders and the fund's security holders shall be given the

opportunity to redeem their units of the mutual fund at no cost within 30 days

from delivery of the notice.

Remuneration and expenses

(10) The board of directors shall pay members of the board

the remuneration and reimbursement for expenses that the board sets.

Board may oversee multiple funds

(11) A board of directors may act as the board of

directors for one or more mutual funds.

Names and contact information of board members

(12) The name and contact information for every member of

the board of directors shall be made available to the fund's security holders.

part xxi.3

mutual fund fee disclosure

Definitions

121.7 In

this Part,

"advertisement"

includes television and radio commercials, newspaper and magazine

advertisements and all other sales material generally disseminated through the

communications media; ("annonce publicitaire")

"benchmark" means the prescribed standard against which the performance

of a mutual fund is measured; ("repère")

"management expenses" means the total expenses of a mutual fund, before

income taxes, for the fiscal year or interim period, as shown in the statement

of operations, plus any other fee, charge or expense of the mutual fund that

has the effect of reducing the mutual fund's net asset value; ("frais de

gestion")

"management expense ratio" means the ratio, expressed as a percentage,

of the expenses of a mutual fund to its average net asset value, calculated in

accordance with

Part 15 of National Instrument 81-106 of the Canadian

Securities Administrators; ("ratio des frais de gestion")

"performance data" means a rating, ranking quotation, discussion or

analysis regarding an aspect of the investment performance of a mutual fund;

("information sur le rendement")

"prescribed" means prescribed in the regulations; ("prescrit")

"total return" means the annual compounded rate of return for a mutual

fund for a period that would equate the initial value to the redeemable value

at the end of the period, expressed as a percentage, calculated in accordance

with

Part 15 of National Instrument 81-102 of the Canadian Securities

Administrators. ("rendement total")

Disclosure of management expenses in advertisements

121.8 If

an advertisement for a mutual fund refers to a return on the fund, the return

must be expressed net of management expenses.

Advertisements that refer to historical returns

121.9

(1) If

an advertisement for a mutual fund refers to the performance data of the fund,

the following conditions must be satisfied:

1. The

advertisement must include a statement of the most recent management fees

charged by the mutual fund expressed as a management expense ratio.

2. The

advertisement must include a statement of any fees charged to the fund's

security holders and that are not included in the management expense ratio,

such as purchase fees and redemption fees, and fees charged by financial

intermediaries, such as deferred sales charges.

3. The

advertisement must include a comparison between the mutual fund returns and

benchmark returns.

Same

(2) In addition to the conditions set out in subsection

(1), an advertisement for a mutual fund that refers to performance data must

express the difference between the per cent total return of the fund and of the

benchmark for the period since its inception and over any of the periods of the

last one year, three years, five years, or 10 years during which the fund

existed, as calculated using the formula "A – B" in which,

"A" is the total return of the fund for the period expressed as a

percentage, and

"B" is the benchmark for the period expressed as a percentage.

Commencement

5. This Act comes into force one year after

the day it receives Royal Assent.

Short title

6. The

short title of this Act is the Securities Amendment Act (Mutual

Funds), 2008 .

EXPLANATORY NOTE

The

Bill amends the Securities

Act to require mutual funds to establish and maintain an

independent board of directors to oversee the activities of the mutual fund and

the mutual fund manager and to act in the best interests of the mutual fund and

its security holders.

The

Bill also amends the Act to require certain mutual fund advertisements to

disclose the costs and fees charged by the fund to security holders and to

express the difference between the per cent total return of the fund and of the

benchmark.

Date Bill stage Activity Committee

December 9, 2008

First Reading

Carried

Debates and Progress

First Reading

December 9, 2008

Committee

Second Reading

Committee

Third Reading

Royal Assent :

Coming into force :

Acts affected - Bill 140

Most Ontario public acts are available electronically; to view copies of the Acts to be amended by this bill visit e-laws

Securities Act

Legislative Assembly of Ontario

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Document details

Collection	Ontario — Bills
Citation	Bill 140, 39-1
Type	bill
Volume / chapter	p39 s1 bill 140 html
Language	en
Format	html
Source	PROVINCIAL
Identifier	a44f0214c8a96810e800bfb6b1c657d0efea9327

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