As Philip explained, the Canadian Securities Administrators have proposed amendments to the National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103 or the Rule) as well as Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations (the Companion Policy).
The introduction to the document states:
"The proposed amendments set out requirements for reporting to clients, relating to investment charges, investment performance and client statements. These requirements are relevant to all categories of registered dealer and registered adviser, with some application to investment fund managers.
"The proposed amendments would apply in all CSA jurisdictions, and we would expect the requirements for members of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) (together referred to as the self-regulatory organizations or SROs) to be materially harmonized."
The document includes the following:
"We are proposing to mandate that registrants use the dollar-weighted method in calculating the percentage return on a client’s account or portfolio, in order to promote consistency and comparability in investor reporting from one registrant to another.
"We had previously considered permitting registrants to choose between a time-weighted and dollar-weighted performance calculation method. We have decided to mandate the dollar-weighted method because it most accurately reflects the actual return of the client’s investments. This is in keeping with one of the main themes of the project – allowing investors to measure how their investments have performed.
"Time-weighted methods are generally used to evaluate the registrant’s performance in managing an account, as the returns are calculated without taking into consideration any external cash flows. These methods isolate the portion of an account’s return that is attributable solely to the registrant’s actions. The philosophy behind time-weighted methods is that a registrant’s performance should be measured."
This is exciting news to those of us who continue to champion the use of money-weighted returns.
I thank Philip for sharing this information; and look forward to reviewing the document in its entirety.