TORONTO, Sept. 18, 2020 /CNW/ – The Canadian Securities Administrators (CSA) today published guidance to help investment fund managers develop and maintain effective liquidity risk management frameworks for investment funds.
For the purposes of this guidance, liquidity risk is the risk that a fund is unable to satisfy redemption requests without having a material impact on the remaining securityholders. A fund must be able to sell the underlying portfolio assets within a reasonable amount of time, in an orderly manner to satisfy redemption requests. Liquidity risk can increase when the liquidity of portfolio assets held by an investment fund does not match the redemption terms and conditions offered to its investors. In recent years, the management of this potential liquidity mismatch has been a key focus for regulators internationally and the asset management sector.
“Taking a preventative and proactive approach to liquidity risk management is critical to ensuring such risks are appropriately managed,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “We are publishing this guidance to support investment fund managers in their ongoing development and maintenance of robust, effective liquidity risk management frameworks.”
The guidance contemplates normal and stressed market conditions, such as the global financial crisis in 2008 or the COVID-19 pandemic, and is based on existing regulatory requirements. It also recognizes that liquidity risk management is not “one-size-fits-all.” Investment funds vary in size, structure, investor base and other fund characteristics, and what may be considered a material risk for one fund may not be material for another.
While the guidance is intended for investment funds that are subject to National Instrument 81-102 Investment Funds, many of the practices and examples outlined may be relevant to other investment funds.
Under securities legislation, investment fund managers must establish and maintain an effective liquidity risk management framework and exercise due care, skill and diligence in managing the liquidity of their funds.
Investment fund managers should contact the securities regulator in their principal jurisdiction to discuss any questions or concerns.
The CSA encourages investment fund managers to consult the global liquidity risk management recommendations developed by the International Organization of Securities Commissions (IOSCO). These recommendations are designed to help fund managers respond to stressed market conditions.
As part of its ongoing continuous disclosure review program, the CSA will continue to monitor the liquidity risk management of funds.
The CSA, the council of the securities regulators of Canada’s provinces and territories, co- ordinates and harmonizes regulation for the Canadian capital markets.
For Investor inquiries, please refer to your respective securities regulator. You can contact them here.
For media inquiries, please refer to the list of provincial and territorial representatives below or contact us at [email protected].
For more information:
Jason (Jay) Booth
Nunavut Securities Office
SOURCE Canadian Securities Administrators
Sydney's Smart Shop to reopen amid surge in downtown investment – CBC.ca
The construction of the new Nova Scotia Community College Marconi campus on the Sydney waterfront is spurring investment in the downtown.
A notable recent development is the purchase of Sydney’s iconic Smart Shop Place on the corner of Charlotte and Prince streets, which has been sitting vacant in recent years.
“We see Sydney as booming nowadays,” said Ajay Balyan, who recently purchased the three-level building along with his brother, Ankit.
It was a different picture when he moved to Cape Breton from India in 2017 to study at Cape Breton University.
A lot has changed since then, with a boom in international enrolment at CBU and unprecedented public infrastructure investment in the area, including the new NSCC campus, health-care redevelopment and a potential new regional library.
“We know after NSCC, the Sydney downtown is going to be the main spot for the students to hang out or to eat,” said Balyan. “And we’re getting good support from the community, as well. So we find it to be a good opportunity for us.”
Smart Shop Place opened in 1904 as a clothing store and long served as a retail anchor in Sydney. The Balyans plan to rename the building Western Overseas, after their family’s business in India.
Construction is underway to convert the main floor into a small food court and the lower level into a fine-dining restaurant. The upper level will become apartments.
The brothers, with family partners in India, have similar plans for the former Cape Breton Post building on Dorchester Street, which they bought last year.
The two also own Swaagat, an Indian restaurant they opened on Prince Street in 2019.
Meanwhile, on Charlotte Street, local entrepreneur Craig Boudreau and a group of partners recently bought four buildings and are negotiating a fifth.
Two years ago, Boudreau purchased the former Jasper’s Restaurant site on George Street. It’s currently being used as a parking lot, but he hopes to start construction next fall on a multi-story commercial and residential development.
NSCC students will need housing and the community could use more dining options, said Boudreau.
“It’s really spinoff,” he said. “It’s kind of the perfect scenario.”
Don't let fear drive you into a fee trap when working with an investment advisor – BNN
Spiking market volatility and a renewed threat of global economic stagnation caused by COVID- 19 has sent stressed-out investors flocking to advisors.
Many advisors have been reporting a rise in new clients since last spring’s lockdown, and a new survey commissioned by Manulife Investment Management backs it up. It shows 63 per cent of respondents plan to seek investment advice in 2020 compared with half in 2019. And more than half of respondents in Canada indicated they were interested in retirement planning and investing advice.
It’s good that more people are looking for long-term retirement plans managed by professionals, but fear can lead investors into fee traps that consume their investment dollars.
The path to those fee traps typically begins with investors looking to coordinate a mishmash of investments in their registered retirement savings plans (RRSP), and tax-free savings accounts (TFSA). For the vast majority of Canadians, the only route to a diversified, professionally-managed portfolio is through mutual funds.
The price investors pay for diversification and professional management in a mutual fund is an annual fee based on a percentage of the money they have invested called the management expense ratio (MER). MERs vary depending on the fund company and asset class, but a typical MER on a Canadian equity fund purchased through an advisor is about 2.5 per cent.
That might not seem like a lot at first glance, but on a $500,000 portfolio of mutual funds, it adds up to $12,500 annually whether the fund makes money or not. That’s $12,500 each year not invested and not compounding, and potentially hundreds of thousands of dollars over a lifetime of investing.
Baked into the MER is a hidden trailing commission, or trailer fee, to compensate the advisor who sold the fund for “ongoing advice.” A typical trailer fee is one per cent annually – or $10,000 on a $500,000 portfolio of mutual funds each year.
Trailer fees are banned in most of the developed world due to the inherent perception of conflict of interest. You have to wonder if an advisor is selling a fund because it is right for the investor or because it provides the best trailer fee from the mutual fund company.
And it get’s worse.
Some advisors will direct investors toward segregated funds, which are essentially mutual funds wrapped in an insurance product. Seg funds have the potential to make money from the investments they hold but are insured, or partially insured, against losses on the principal amount invested over long terms – often 19 years. Investors pay for that extra security through higher MERs. Manulife – the company that commissioned the survey – for example, sells segregated funds with MERs above three per cent.
Segregated funds have certain advantages for small business owners wanting to protect their savings in the event of bankruptcy, but sometimes appear in workplace defined contribution pension plans.
Advisors sometimes push seg funds on unsuspecting clients through a regulatory loophole known as “the-know-your-client rule,” which requires advisors to document a questionnaire relating to return goals and risk tolerance, and only sell investments in line with the client’s answers.
Some clients might not understand that all investments have some degree of risk and say they expect their savings to grow risk-free. Only segregated funds fit that bill.
Payback Time is a weekly column by personal finance columnist Dale Jackson about how to prepare your finances for retirement. Have a question you want answered? Email email@example.com.
TransLink in time crunch to update its 10-year Metro Vancouver transit investment plan – Vancouver Sun
The COVID-19 pandemic and an unexpected provincial election have put TransLink in a time crunch to finish a required update to its 10-year investment plan.
Metro Vancouver’s transit authority is obligated, by provincial legislation, to update the plan at least every three years. The current plan was approved on June 28, 2018, which means the new one is due by June 28, 2021.
“Originally we had had planned for that to happen this year, but because of COVID-19 and dealing with the emergent financial challenges with that, that was not possible,” Mayors’ Council chair Jonathan Coté said following a meeting on Thursday. “But we’ve now reached the point where we need to start to work towards that.”
Priorities for the update include finding revenue to cover long-term COVID-19 losses. Although the federal and provincial governments will provide a combined $644 million to TransLink to cover its pandemic losses for 2020 and 2021, there will likely be shortfalls of $100 million to $300 million each year between 2021 and 2030.
The losses will depend on how long the pandemic lasts, the depth of economic damage and how quickly transit ridership recovers. The plan cannot show a deficit.
“Even with the near-term financial aid, we almost certainly have a fairly significant structural hole in our budget and we’re going to have to work to understand just what that hole is over the months to come,” CEO Kevin Desmond said after the meeting.
“There’s still a lot of uncertainty about the path of the pandemic.”
The investment plan will also deliver elements of the second phase of the 10-year regional transportation vision that are outstanding or were delayed due to the pandemic, plus approving projects that are already funded, such as a SkyTrain extension to Fleetwood and the next stage of the low-carbon fleet strategy.
A lot will have to be done before next June, including confirming federal and provincial contributions, finding new regional funding sources and setting rates, plus consultation with the public and local governments.
“No doubt this is going to be a significant part of our work plan and probably one of the more challenging things the Mayors’ Council is going to have to work on,” Coté said during the council meeting.
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