Point of Sale Disclosure for Mutual Funds

Outside of the industry you might not have heard of something known as the Point of Sale Disclosure for Mutual Funds. I will refer to it simply as the POS initiative as many others do (no, not for that reason). It is part of a new “disclosure regime” being spear-headed by the CSA (Canadian Securities Administrators). From a recent press release:

“Central to the new disclosure regime is the Fund Facts document. It is in plain language, will be no more than two pages and highlights the potential benefits, risks and the costs of investing in a mutual fund. Under the proposals, investors would generally receive a Fund Facts when they buy a fund for the first time (at or before the “point of sale”).”

Part of the proposal is to replace the short novels we call Simplified Prospectuses with these new Fund Fact sheets with respect to the sales requirement. Simplified prospectuses will always be around, but instead of being required to deliver these large collections of legalese when selling mutual funds, advisors will be able to use the new fund fact sheets instead. If an investor wanted, they can always request the simplified prospectus as well.

So far, there have been very few people who like the proposed fund fact sheets. Over the next while I’ll share some of the frustrations investor advocates have, but for now I’ll link you to a sample fund fact sheet prepared by the CSA – do you think it is adequate? What are your suggestions for improvement? More to come…

NOTE: the sample fund facts are at the end of the document. There is a two-page document for mutual funds and a two-page document for segregated funds. Click here to view the framework.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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