OSC Staff Provide Views on Closed-End Investment Fund Conversions

Ontario Securities Commission staff today released their views on the regulatory issues surrounding the conversion of closed-end funds into mutual funds. Specifically, OSC staff identified a number of issues.

Conversion process

According to OSC staff, the conversion process must be transparent to investors. Closed-end funds with a built-in conversion feature should make disclosure regarding the conversion prominent in the fund's initial prospectus. Closed-end funds without a built-in conversion feature should include disclosure regarding the possible conversion and the contemplated process in the initial prospectus. If the conversion is not contemplated at the time of the initial prospectus, OSC staff expect that the decision to convert will trigger the material change reporting requirements. Investors should be provided with sufficient written notice (60 days is suggested in instances where securityholder approval is not sought) before the conversion of the fund.