POS Disclosure Rules Drive Automation

Terry Flanagan

CSA’s Fund Facts requirement part of broader point-of-sale disclosure project.

Point-of-sale requirements are driving adoption of automated solutions for creation and distribution of mutual fund documents.

The Canadian Securities Administrators now requires “Fund Facts” for each mutual fund class or series.

The CSA’s Fund Facts requirement places new responsibilities on fund administrators at mutual funds and segregated funds to create and deliver more information to investors.

“Due to regulatory Fund Facts needing to be filed at a per class level, the volume of documents is large,” Donna Bristow, vice president of client management and strategic product development, Canada, at Broadridge Financial Solutions, told Markets Media. “Using automated technology allows these documents to be created in a fraction of the time needed using traditional desktop publishing methods.”

Sun Life Global Investments (Canada) has started an initiative to use Broadridge Canada’s Smart Document Creation solution for the automated creation of regulatory point-of-sale (POS) Fund Facts documents, Bristow said.

Smart Document Creation will create Fund Facts documents for mutual funds through an automated document creation process.

In addition to creating the documents, Smart Document Creation will be integrated into Broadridge’s Smart Prospectus service which will then provide an end-to-end fulfillment solution. This same process will also be extended to cover MRFPs (Management Report of Fund Performance), Financial Statements, and other Marketing document requirements.

Integrating with Broadridge’s Smart Prospectus service addresses phase 2 of the POS regulations,” said Bristow. “It will enable regulatory Fund Facts to be sent out post-sale in place of a prospectus document.  By integrating these two service offerings, Broadridge is able to provide an end-to-end solution that encompasses document creation through to document fulfillment.”

The Fund Facts document represents the first stage of the CSA’s  implementation of the point of sale disclosure project for mutual funds. I

In the next stage, the CSA will publish a proposal to allow delivery of the fund facts instead of the simplified prospectus to satisfy existing delivery requirements under securities legislation.

In the final stage, the CSA intends to publish requirements for point of sale delivery of the fund facts for mutual funds; the CSA will also consider point of sale disclosure for other types of publicly-offered investment funds.

For asset management firms, the regulations present formidable data management challenges, including the need to produce many more documents than they do today. Mutual fund companies will be required to produce a fund facts document for each class or series for each of their mutual funds.

As the regulatory landscape continues to change, funds must be prepared to respond to these challenges in order to manage today’s operational risk and tomorrow’s regulatory demands, according to Scott Powell, product manager for Confluence.

Confluence’s core product, Unity, automates the collection, creation, confirmation and delivery of fund data for multiple critical fund administration processes, including performance calculation and reporting, financial and regulatory reporting and expense management.

A special feature of Unity is that it leverages a central repository of fund data, entered only once and available for multiple reporting purposes. This enables fund companies to automate vital regulatory, marketing and reporting functions, with confidence in the integrity of their reports and data, Powell said.

Clients of Confluence include mutual funds, hedge funds and other alternative investments, funds of funds, collective funds, separate accounts, variable products, and fund service providers.

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