OSC Reviews Risk Ratings


    The Ontario Securities Commission has begun a targeted continuous disclosure review of risk classification methodologies and risk ratings. Its ‘OSC Bulletin’ says Ontario securities regulators have uncovered several instances of mutual funds that are understating their riskiness in new point-of-sale disclosure documents. In reviewing the initial implementation of the new Fund Facts documents, initially it has focused on mutual funds that have a ‘low to medium’ or ‘medium’ risk level rating when similar funds managed by peers were rated ‘medium to high’ or ‘high.’ As a result of these reviews, it reports, six mutual funds have increased their risk ratings to ‘medium to high.’ In these cases, the fund managers were asked to file amended Fund Facts documents and simplified prospectus, and “to consider how best to publicly notify unitholders of the change in risk rating.”