CSA Notice of Publication: Regulation to Amend Regulation 81-102 Respecting Investment Funds to Accommodate T+1 Settlement Cycles

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CSA NOTICE OF PUBLICATION
REGULATION TO AMEND
REGULATION 81-102 RESPECTING INVESTMENT FUNDS
CHANGES TO POLICY STATEMENT 81-102 TO REGULATION 81-102 RESPECTING INVESTMENT FUNDS AMENDMENTS AND CHANGES TO ACCOMMODATE A RANGE OF SETTLEMENT CYCLES FOR MUTUAL FUNDS May 23, 2024 Introduction The Canadian Securities Administrators (CSA or we) are adopting amendments (the Final Amendments) to Regulation 81-102 respecting Investment Funds (Regulation 81-102) and changes (the Final Changes) to Policy Statement 81-102 to Regulation 81-102 respecting Investment Funds (Policy Statement 81-102). Provided all necessary regulatory and ministerial approvals are obtained, the Final Amendments will come into force on August 31, 2024. The text of the Final Amendments and the Final Changes is published with this Notice and will also be available on the websites of the following CSA jurisdictions:
www.lautorite.qc.ca www.asc.ca www.bcsc.bc.ca nssc.novascotia.ca www.fcnb.ca www.osc.gov.on.ca www.fcaa.gov.sk.ca www.msc.gov.mb.ca

Summary, Substance and Purpose
The purpose of the Final Amendments and the Final Changes is to accommodate a range of settlement cycles and particularly for those mutual funds that voluntarily decide to shorten the settlement cycle for purchases and redemptions of their securities from T+2 to T+1 when the underlying assets held by the fund move to a T+1 settlement cycle. The Final Amendments introduce changes to clarify that payments must be made no later than the reference settlement date of the purchase order. The reference settlement date of the purchase order is the business day determined by the mutual fund and made available in writing to the principal distributor, the participating dealer, or the person providing services to the principal distributor or participating dealer, which must be on or before the second business day after the pricing date. The Final Amendments also introduce a change to paragraph 9.4(4)(a) of Regulation 81-102 to require a mutual fund that voluntarily decides to shorten the settlement cycle for purchase or redemption of its securities from T+2 to T+1 to redeem its securities for non-payment on the next business day after the reference settlement date of the purchase order, which would be on T+2 rather than T+3 as currently required. The Final Changes provide guidance clarifying that examples that could satisfy the requirement for a mutual fund to make available in writing the business day it determines as the reference settlement date under subsection 9.4(0.1)(a) of Regulation 81-102 include (a) providing the mutual fund’s settlement cycle via a clearing agency or a clearing house recognized by a securities regulatory authority in a jurisdiction, which includes Fundserv Inc., or a successor, through an electronic file or otherwise, and (b) posting the mutual fund’s settlement cycle on the mutual fund’s designated website. Background On October 19, 2023, we published for a 90-day comment period draft amendments to Regulation 81-102 to facilitate a voluntary decision by a mutual fund to shorten the settlement cycle for purchases and redemptions of its securities from two days after the date of a trade to one day after the date of a trade in anticipation of the settlement cycle for equity and long-term debt market trades in Canada to T+1. We received two comments. Both comments support the Final Amendments. After considering the comments, we made the Final Changes. We also changed the requirement that the reference settlement date be “disclosed” in the version of paragraph 9.4(0.1)(a) published for comment to a requirement that the reference settlement date be “made available” in the Final Amendments to better align these amendments with the Final Changes. Content of Annexes This Notice contains the following annex:

• Annex A: List of Commenters and Summary of Comments and CSA Responses
  Questions
  Please refer your questions to any of the following:
  Autorité des marchés financiers
  Philippe Lessard
  Investment Funds Analyst, Investment Products Oversight Tel: 514 395-0337 # 4364 Email: Philippe.Lessard@lautorite.qc.ca British Columbia Securities Commission James Leong Senior Legal Counsel, Corporate Finance Tel : 604 899-6681 Email: jleong@bcsc.bc.ca Alberta Securities Commission Chad Conrad Senior Legal Counsel, Investment Funds Tel: 403 297-4295 Email: Chad.Conrad@asc.ca Financial and Consumer Affairs Authority of Saskatchewan Heather Kuchuran Director, Corporate Finance Tel: 306 787-1009 Email: heather.kuchuran@gov.sk.ca Manitoba Securities Commission Patrick Weeks Deputy Director – Corporate Finance Tel: 204 945-3326 Email: Patrick.weeks@gov.mb.ca Ontario Securities Commission Michael Tang Senior Legal Counsel, Investment Management Division Tel: 416 593-2330 Email: mtang@osc.gov.on.ca

Financial and Consumer Services Commission (New Brunswick) Clayton Mitchell, Registration and Compliance Manager Tel: 506 658-5476 Email: clayton.mitchell@fcnb.ca Nova Scotia Securities Commission Abel Lazarus Director, Corporate Finance Branch Tel: 902 424-6859 Email: abel.lazarus@novascotia.ca Peter Lamey Legal Analyst, Corporate Finance Branch Tel: 902 424-7630 Email: peter.lamey@novascotia.ca

ANNEX A
REGULATION TO AMEND REGULATION 81-102 RESPECTING INVESTMENT FUNDS AND CHANGES TO POLICY STATEMENT 81-102 TO REGULATION 81-102 RESPECTING INVESTMENT FUNDS TO ACCOMMODATE A RANGE OF SETTLEMENT CYCLES FOR MUTUAL FUNDS LIST OF COMMENTERS AND SUMMARY OF COMMENTS AND CSA RESPONSES No. Commenter Date

1. Borden Ladner Gervais (Whitney Wakeling, Roma Lotay,
   Donna Spagnolo, Melissa Ghislanzoni)
   January 16, 2024
2. The Investment Funds Institute of Canada (Andy Mitchell,
   President & CEO)
   January 17, 2024
   No. Subject Summarized Comment Response
   GENERAL COMMENTS
   1 General
   Support
   Two commenters are supportive of the
   Final Amendments.
   We thank the commenters for their support.
   SPECIFIC COMMENTS
   2 The Final
   Changes
   Two commenters recommend that guidance be added to Policy Statement 81-102 to provide examples of what constitutes “in writing” to facilitate compliance. Two commenters recommend that the CSA provide examples that would satisfy the requirement under subsection 9.4(0.1) of Regulation 81-102. We are adding subsection 10.2(4) to Policy Statement 81-102 to clarify that examples that could satisfy the requirement for a mutual fund to make available in writing the business day it determines as the reference settlement date under subsection 9.4(0.1) of Regulation 81-102 include (a) providing the mutual fund’s settlement cycle via a clearing agency or clearing house recognized by a securities regulatory authority in a jurisdiction, which includes Fundserv Inc., or a successor, through an electronic file or

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No. Subject Summarized Comment Response otherwise, and (b) posting the mutual fund’s settlement cycle on the mutual fund’s designated website. To better align the Final Amendments with the addition of subsection 10.2(4) to Policy Statement 81-102, the requirement to “disclose” the reference settlement date in the version of paragraph 9.4(0.1)(a) published for comment has been changed to “made available” in the Final Amendments. 3 Other Comments One commenter asked the CSA to affirm the continued applicability of certain exemptive relief decisions, which permit certain exchange-traded funds (ETFs) that invest in securities that settle three days after the trade date to continue to settle primary trades of ETF securities three days after the trade date. The commenter notes that these ETFs will technically be unable to satisfy a condition of the decisions, which require these ETFs to disclose that primary market trades of their securities settle two days after the trade date because primary market trades of their securities will settle one day after the trade date following the transition to a T+1 settlement cycle. The rulemaking process is not an appropriate forum to provide the affirmation requested by the commenter.