The Fraser Institute

The Fraser Institute

December 19, 2011 06:32 ET

The Fraser Institute: New Financial Disclosure Document a Technological Bust That Misses the Mark on Educating Canadian Consumers

TORONTO, ONTARIO--(Marketwire - Dec. 19, 2011) - A new disclosure document Canadian financial regulators require for mutual and segregated funds fails to take advantage of new technologies such as smartphones and tablets and provide little value to consumers making financial decisions, concludes a new report released today by the Fraser Institute, Canada's leading public policy think-tank.

The report, Financial Regulatory Disclosure: Embracing New Communications Channels, finds that the Canadian Securities Administrators (CSA) version of the new disclosure document, Fund Facts, is overly prescriptive and designed to be viewed as a paper-based document rather than viewed on mobile devices such as smartphones or tablets. Financial regulators introduced Fund Facts to provide basic information after they realized Canadians have trouble finding and understanding the information buried in complex documents like mutual fund prospectuses.

"Securities regulators are talking more and more about how regulation should be more principles-based but Fund Facts shows that in practice they are finding it difficult to shake old habits when it comes to prescriptiveness," said Neil Mohindra, Fraser Institute director of financial policy studies and author of Financial Regulatory Disclosure: Embracing New Communications Channels.

The report notes that Fund Facts is designed for letter-size paper and the CSA has mandated detailed instructions for how the document is presented to Canadians purchasing mutual or segregated funds. Unfortunately, the layout and PDF digital format are not easily viewed on the smartphones and tablet computers that many Canadians prefer to use.

"The vision behind Fund Facts originated several years ago but in the meantime, communications technology and the methods used by Canadians to get information have changed," Mohindra said.

The CSA is proposing that Fund Facts documents be delivered to consumers before or when they are being sold an investment product and that the documents must be in paper format or an identical digital version that only displays properly on a desktop computer. This runs the risk of disrupting or delaying a potential transaction that is in the investor's interest.

The report concludes that a better approach would be to give industry more flexibility in the way it presents mandatory disclosure information to Canadians to create the conditions in which technology and market forces will move the industry standard towards this objective.

"The idea is to make the information more accessible so that advisors can better serve their customers. Consumers appreciate information delivered quickly and in a convenient format. Industry has incentives to respond to such preferences in a competitive environment," Mohindra said.

"A further advantage to building in more flexibility is that it would allow for the integration of financial literacy into mandated disclosure. For example, an individual reading Fund Facts over a smartphone or tablet could click on words and phrases for clarification, more information, or to flag questions they might wish to ask their advisors."

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 85 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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