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Find Lawyers in Canada for Mutual Funds Law

Practice Area Overview

A mutual fund is a vehicle that pools or collects funds from multiple investors and then invests the subscription proceeds from the investors in certain types of investments (e.g., stocks and bonds) depending on what the investment objective of the mutual fund is (e.g., investing in, or tracking an index that is based on, one or more types of securities or sectors of the marketplace). To be a mutual fund in Canada, investors must be able to ask for their money back based on the value of the mutual fund within a reasonable period of time (e.g., daily or quarterly). Mutual funds may be offered by prospectus to retail investors or an exempt basis to qualified investors (e.g., accredited investors). Investors in a mutual fund share in the gains or losses of the mutual fund based on their pro rata investment in the mutual fund. Retail mutual funds are subject to a number of securities law requirements and are typically more conservative. In contrast, exempt funds have more latitude in terms of what they can do as they can only be sold to a more sophisticated investor.

A mutual fund may be structured as a trust, a limited partnership or a corporation depending on the tax advantages and switchability features that may be desired. A mutual fund may also be listed on an exchange which offers its securities to investors on a continuous basis through qualified dealers (e.g., an exchange traded fund). Other types of funds also may be offered to investors (e.g., segregated funds), including over an exchange (e.g., closed end funds), but based on their features are not a mutual fund.

Mutual funds typically have a manager who administers the mutual fund, a portfolio manager who makes the investment decisions on behalf of the mutual fund, a custodian who holds the assets of the mutual fund, and a dealer who sells the securities of the mutual fund to investors. The securities administrators in each province and territory of Canada regulate mutual funds in terms of what a mutual fund can do, who can be a manager, portfolio manager, and/or dealer that acts for the mutual fund, and what type of offering documents the mutual fund must give investors. Although these requirements have generally been harmonized across Canada, there are regional differences that may impact how a mutual fund is offered in a particular province or territory.

Lawyers involved with mutual funds must have a thorough understanding of the applicable securities laws, including both national and local instruments, and understanding which laws apply to which type of mutual fund and what requirements apply to each person who is involved in running a mutual fund. Mutual fund lawyers are often involved in advising clients about how a mutual fund should be structured, what requirements will apply initially and on an ongoing basis, including all relevant compliance issues, and who the mutual fund can be offered to.

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