PMAC has submitted our response to the Canadian Securities Administrators’ (CSA) proposed amendments to National Instrument 81-102 Investment Funds (the Proposed Amendments) and the accompanying consultation paper on liquidity risk management tools, liquidity classification, regulatory reporting, and investor disclosure (the Consultation Paper).
In our submissions, we express support for the CSA’s objectives of enhancing investor protection, promoting market integrity, and aligning with international developments. However, we emphasize that Canada’s existing framework has functioned effectively through periods of market stress and that any reforms should be proportionate, principles-based, and tailored to the Canadian market context.
PMAC cautions against introducing overly prescriptive operational and governance requirements that could impose unnecessary regulatory burden, constrain professional judgment, and place Canadian investment funds at a competitive disadvantage globally. Instead, we recommend a flexible framework that preserves the ability of investment fund managers to manage liquidity risk based on the specific characteristics of each fund.
Key recommendations include:
- Scope and proportionality: Exclude exempt pooled funds, money market funds, and in-kind ETFs from prescriptive liquidity risk management requirements, recognizing their distinct structures and investor bases.
- Principles-based approach: Maintain a flexible, outcomes-focused framework that allows for differences across fund types and avoids “one-size-fits-all” requirements.
- Operational flexibility: Avoid mandating specific liquidity management tools, liquidity classifications, or fixed-frequency stress testing, and instead allow managers to apply judgment based on risk.
- Avoid unnecessary burden: Refrain from introducing additional reporting or disclosure requirements unless clearly justified by regulatory need and demonstrable benefit.
Due to the length of the consultation and the breadth of issues covered, we have organized our response into two separate documents:
Overall, PMAC encourages the CSA to adopt a measured approach that builds on Canada’s strong existing framework, supports effective liquidity risk management, and maintains the competitiveness of Canadian investment funds.