TORONTO, ON — A new disclosure document Canadian financial
regulators require for mutual and segregated funds fails to take advantage of
new technologies such as smartphones and tablets and provide little value to
consumers making financial decisions, concludes a new report released today by
the Fraser Institute, Canada’s leading public policy think-tank.
The report, Financial Regulatory Disclosure: Embracing New Communications Channels,
finds that the Canadian Securities Administrators (CSA) version of the new
disclosure document, Fund Facts, is overly prescriptive and designed to
be viewed as a paper-based document rather than viewed on mobile devices such
as smartphones or tablets. Financial regulators introduced Fund Facts to provide basic
information after they realized Canadians have trouble finding and
understanding the information buried in complex documents like mutual fund
“Securities regulators are talking more
and more about how regulation should be more principles-based but Fund Facts
shows that in practice they are finding it difficult to shake old habits when
it comes to prescriptiveness,” said Neil Mohindra, Fraser Institute director of
financial policy studies and author of Financial Regulatory Disclosure:
Embracing New Communications Channels.
The report notes that Fund Facts is
designed for letter-size paper and the CSA has mandated detailed instructions
for how the document is presented to Canadians purchasing mutual or segregated
funds. Unfortunately, the layout and PDF digital format are not easily viewed
on the smartphones and tablet computers that many Canadians prefer to use.
“The vision behind Fund Facts
originated several years ago but in the meantime, communications technology and
the methods used by Canadians to get information have changed,” Mohindra said.
The CSA is proposing that Fund Facts
documents be delivered to consumers before or when they are being sold an
investment product and that the documents must be in paper format or an
identical digital version that only displays properly on a desktop computer.
This runs the risk of disrupting or delaying a potential transaction that is in
the investor’s interest.
The report concludes that a better
approach would be to give industry more flexibility in the way it presents
mandatory disclosure information to Canadians to create the conditions in which
technology and market forces will move the industry standard towards this
“The idea is to make the information more
accessible so that advisors can better serve their customers. Consumers
appreciate information delivered quickly and in a convenient format. Industry
has incentives to respond to such preferences in a competitive environment,”
“A further advantage to building in more
flexibility is that it would allow for the integration of financial literacy
into mandated disclosure. For example, an individual reading Fund Facts
over a smartphone or tablet could click on words and phrases for clarification,
more information, or to flag questions they might wish to ask their advisors.”