Multilateral CSA Notice: Regulation to amend Regulation 81-105 respecting Mutual Fund Sales Practices and Related Consequential Amendments relating to Prohibition of Deferred Sales Charges for Investment Funds

Multilateral CSA Notice
Regulation to amend Regulation 81-105 respecting Mutual Fund Sales Practices and Related Consequential Amendments relating to Prohibition of Deferred Sales Charges for Investment Funds January 20, 2022 Introduction The Canadian Securities Administrators (CSA), except the Ontario Securities Commission (OSC) (the Participating Jurisdictions or we), are adopting local amendments (collectively, the Local Amendments) to:

• Regulation 81-105 respecting Mutual Fund Sales Practices,
• Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (Regulation 81-101),
• Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing
  Registrant Obligations (Regulation 31-103),
• Companion Policy 81-105: Mutual Fund Sales Practices,
• Policy Statement to Regulation 81-101 respecting Mutual Fund Prospectus Disclosure
  (Policy Statement 81-101), and
• Policy Statement to Regulation 31-103 respecting Registration Requirements,
  Exemptions and Ongoing Registrant Obligations (Policy Statement 31-103).
  Background
  On February 20, 2020, the CSA, with the exception of Ontario, published CSA Multilateral Notice of Publication, Amendments relating to Prohibition of Deferred Sales Charges for Investment Funds, Regulation to amend Regulation 81-105 respecting Mutual Fund Sales Practices, Amendments to Companion Policy 81-105: Mutual Fund Sales Practices, Amendments to Policy Statement to Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (the Multilateral CSA Notice)1 . The amendments published in the Multilateral CSA Notice prohibit the payment by fund organizations of upfront sales commissions to dealers, which 1 https://lautorite.qc.ca/fileadmin/lautorite/reglementation/valeurs-mobilieres/81-105/2020-02-20/2020fev20-81-105- avis-publ-en.pdf

-2- results in the discontinuation of all forms of the deferred sales charge option, including low-load options2 (collectively, the DSC option) (the Multilateral DSC Ban). The Multilateral DSC Ban comes into force on June 1, 2022 (the Effective Date) in all CSA jurisdictions, except in Ontario. On June 3, 2021, the OSC published OSC Notice of Local Amendments to National Instrument 81-105 Mutual Fund Sales Practices, Local Changes to Companion Policy 81-105 Mutual Fund Sales Practices and Related Consequential Local Amendments and Changes3 (the OSC Notice). The amendments published in the OSC Notice also prohibit the payment by fund organizations of upfront sales commissions to dealers, which results in the discontinuation of all forms of the DSC option, including low-load options (the OSC DSC Ban). The OSC DSC Ban comes into force on June 1, 2022, to coincide with the Effective Date of the Multilateral DSC Ban. Local Amendments As the Multilateral DSC Ban did not include Ontario, the amendments published in the Multilateral CSA Notice included certain provisions relating to Ontario (the Ontario references) in Regulation 31-103 and Policy Statement 31-103. Further to amendments published in the OSC Notice, the Ontario References are no longer applicable. Once the Multilateral DSC Ban and the OSC DSC Ban come into effect on the Effective Date, the provisions requiring disclosure of the DSC option in the simplified prospectus, the fund facts document and pre-trade disclosure will no longer be applicable as the DSC option will no longer be offered (the DSC references). The OSC Notice published related consequential local amendments in Ontario to remove DSC References from Regulation 81-101, Policy Statement 81-101, Regulation 31-103 and Policy Statement 31-103 as of the Effective Date. The Participating Jurisdictions are adopting the Local Amendments published with this notice to remove the Ontario references and the DSC references as of the Effective Date. The Local Amendments are considered to be non-material changes. 2 Under the traditional deferred sales charge option, the investor does not pay an initial sales charge for fund securities purchased, but may have to pay a redemption fee to the investment fund manager (i.e. a deferred sales charge) if the securities are sold before a predetermined period of typically 5 to 7 years from the date of purchase. Redemption fees decline according to a redemption fee schedule that is based on the length of time the investor holds the securities. While the investor does not pay a sales charge to the dealer, the investment fund manager pays the dealer an upfront commission (typically equivalent to 5% of the purchase amount). The investment fund manager may finance the payment of the upfront commission and accordingly incur financing costs that are included in the ongoing management fees charged to the fund. The low-load purchase option is a type of deferred sales charge option but has a shorter redemption
fee schedule (usually 2 to 4 years). The upfront commission paid by the investment fund manager and redemption fees paid by investors are correspondingly lower than the traditional deferred sales charge option. 3 https://www.osc.ca/sites/default/files/2021-06/ni_20210603_81-105_mutual-fund-sales-practices.pdf

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The Local Amendments published with this notice differ from jurisdiction to jurisdiction because of differences in the process and timing involved in implementing the Multilateral DSC Ban. Notwithstanding this, and subject to ministerial approval where required, the end result will be that on June 1, 2022, the affected regulations and policy statements will be harmonized with respect to the DSC ban across all CSA jurisdictions. The text of regulation and policy statement consolidations on the websites of CSA members will be updated, as necessary, to reflect these Local Amendments. Questions Please refer your questions to any of the following:
Gabriel Chénard
Senior Policy Analyst
Supervision of Intermediaries
Autorité des marchés financiers
Tel: 514 395-0337, ext. 4482
Toll-free: 1 800 525-0337, ext. 4482 gabriel.chenard@lautorite.qc.ca Louis-Philippe Nadeau Analyst Investment Funds Oversight Autorité des marchés financiers Tel: 514 395-0337, ext. 2479 louis-philippe.nadeau@lautorite.qc.ca Noreen Bent Chief, Corporate Finance Legal Services British Columbia Securities Commission Tel: 604 899-6741 nbent@bcsc.bc.ca Chad Conrad Senior Legal Counsel, Corporate Finance Alberta Securities Commission Tel: 403 297-4295 chad.conrad@asc.ca Wayne Bridgeman Deputy Director, Corporate Finance Manitoba Securities Commission Tel: 204 945-4905 wayne.bridgeman@gov.mb.ca Melody Chen Senior Legal Counsel Legal Services, Corporate Finance British Columbia Securities Commission Tel: 604 899-6530 mchen@bcsc.bc.ca Heather Kuchuran Director, Corporate Finance Securities Division Financial and Consumer Affairs Authority of Saskatchewan Tel: 306 787-1009 heather.kuchuran@gov.sk.ca Ella-Jane Loomis Senior Legal Counsel Financial and Consumer Services Commission of New Brunswick Tel: 506 453-6591 ella-jane.loomis@fcnb.ca

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Junjie (Jack) Jiang
Securities Analyst, Corporate Finance
Nova Scotia Securities Commission
Tel: 902 424-7059 jack.jiang@novascotia.ca