Safeguarding Your Investments
Safeguarding Your Investments
Millions of Canadians choose to invest their savings in
mutual and segregated funds because of the many benefits
they provide, including access to professional investment
management, diversification, a wide choice of investment
options, and convenience in investing and administration.
Investment funds also offer a high level of investor protection
and accountability.
By its nature, investing can be unpredictable. The value of
investment funds will fluctuate in line with their underlying
investments, such as stocks. However, in today’s environment,
investors are also concerned about other issues – that their
money is well managed, and that measures are in place
to combat fraud and protect them from the insolvency or
bankruptcy of a firm that handles their money.
With investment funds, you can be assured that there are
several levels of safeguards in place to ensure that your interests
are protected.
This brochure provides a brief overview of these safeguards,
including those provided through laws and regulations, and
those in place at CI Investments. We also discuss how you, as
an investor, can protect your own interests.
How securities regulators protect investors
A detailed framework of laws and regulations governs mutual
funds and investment management companies in Canada.
Among other things, they ensure that:
n
Firms managing or distributing mutual funds are
financially sound and viable.
n
Individuals working in the industry, including portfolio
managers, investment advisors and mutual fund sales
representatives, meet specific education and experience
requirements to become “registered,” or eligible to carry
out their specific industry functions.
n
n
Industry members engage in sound business procedures,
and are subject to independent audits to identify potential
risks or unfair practices.
Mutual fund assets are used only to meet the investment
objectives of the fund. While the fund manager makes
investment decisions for the fund, the securities or assets
of the fund must be held by a separate firm called a
custodian, which is usually a bank or trust company. This
helps to prevent fraud and, in the case of insolvency of
the mutual fund manager, makes sure the funds’ assets are
held for the funds’ investors.
In Canada, securities laws are a provincial responsibility and
each province or territory has a securities commission or
similar agency to administer and enforce these laws. These
regulators work together through the Canadian Securities
Administrators (CSA) to achieve a harmonized system of
securities regulation across the country. The CSA has issued
several sets of rules or “instruments” to govern mutual funds,
with the key ones being:
n
National Instrument 81-101, which sets out the
information that must be included in the mutual fund
Fund Facts given to investors when they purchase a fund,
to assist them in making an informed decision.
n
National Instrument 81-102, which regulates how mutual
funds are bought and sold, how they are advertised and
marketed, and how they are managed, including the kinds
of investments that a fund can make.
n
National Instrument 81-105, which regulates mutual fund
sales practices.
n
National Instrument 81-106, which regulates the financial
and other information that mutual funds have to disclose.
n
National Instrument 81-107, which requires mutual funds
to have independent review committees to help manage
conflicts of interest, among other things.
n
National Instrument 31-103, which regulates advisor
and manager registration, client reporting and conflicts
of interest.
How securities regulators protect investors (cont’d)
Self-regulatory organizations
Self-regulatory organizations (SROs) are associations of
companies that distribute certain investment products.
They monitor and enforce their members’ compliance with
applicable securities laws, as well their own rules. The key
SROs, which are subject to the authority of the securities
commissions, include:
n
The Mutual Fund Dealers Association of Canada
(MFDA), which oversees the operations, standards of
practice and business conduct of mutual fund dealers.
n
The Investment Industry Regulatory Organization of
Canada (IIROC), which provides oversight of the trading
activity on debt and equity marketplaces of all investment
dealers in Canada. IIROC sets and enforces rules regarding
the proficiency, business and financial conduct of dealer
firms and their registered employees. It also sets and
enforces market integrity rules regarding trading activity
on Canadian equity markets.
Both organizations maintain investor protection funds that will
reimburse investors, within predefined limits, if a member firm
becomes insolvent or bankrupt and clients’ assets are missing
as a result.
You should also know that mutual funds, as securities, are
not covered by the Canada Deposit Insurance Corp., which
insures deposits at member financial institutions.
Segregated funds
Segregated fund contracts (which are also known as
individual variable annuity contracts) are issued by insurance
companies and regulated as insurance products. The federal
and provincial governments share jurisdiction over the
insurance industry.
Federal oversight is provided by the Office of the
Superintendent of Financial Institutions (OSFI), which
ensures that insurance companies are in sound financial
condition and in compliance with federal laws. Provincial
regulations also govern the licensing and marketing of
insurance products, the competence and behaviour of
insurance company products, and consumer protection.
Advisors who sell segregated funds – life insurance agents
and brokers – must be sponsored or employed by a general
insurance organization and licensed to transact business in
each province or territory in which they operate.
The Canadian Life and Health Insurance Association
(CLHIA) is a voluntary trade association that represents 99%
of the life and health insurance in force in Canada. Member
companies adhere to industry standards for disclosure
in documents and contracts, advertising, auditing and
accounting, and investments. The life insurance industry also
maintains an investor protection organization, called Assuris,
to assist policyholders (including investors in segregated funds)
in the event their insurance firm becomes insolvent.
How CI Investments protects investors
CI has dedicated specialists and wide-ranging policies and
procedures in place to ensure the good governance of our
investment funds, to provide oversight of the investment
management activities, and to ensure compliance with
the applicable laws and regulations. The key measures are
outlined here.
Board of
Governors
Privacy
Officer
External
Auditors
CI Investment
Consulting
Your
CI Investment
CI Code of Business
Conduct and Ethics
CI Compliance
Department
Board of Governors
The CI Investments Board of Governors acts as an
independent governance body of all CI funds. It recommends
the best course of action to achieve a fair and reasonable result
on any conflict of interest issues, and CI takes into account its
recommendation in accordance with its fiduciary duty to the
CI funds. The Board also discusses other matters related to
the funds, including reviewing the financial statements of the
CI funds with the auditors. All five members of the Board are
independent of CI.
CI was among the first investment management companies
to voluntarily establish an independent Board of Governors in
1998. Canadian securities regulators have required all mutual
funds to have an Independent Review Committee since 2007,
and the Board of Governors meets those requirements for the
CI funds.
Code of Business Conduct and Ethics
CI Investment Consulting
The CI Code of Business Conduct and Ethics requires that
all CI directors, officers and employees adhere to the highest
standards of integrity and ethical business conduct. In addition,
employees are encouraged to report breaches of the code and
other questionable conduct to senior management or the
Board of Directors of CI’s parent company, CI Financial
Corp. These reports can be made anonymously.
CI employs an experienced team of investment experts who
monitor fund managers and their portfolios to ensure they
are adhering to their mandates and performing within
expectations. This group also is responsible for the design and
maintenance of CI’s managed solutions – Portfolio Series and
Portfolio Select Series.
Compliance Department
The Compliance Department monitors adherence to all
rules and regulations governing investment funds as well
as CI’s internal policies and procedures. This includes
monitoring trading activities by the funds’ portfolio managers,
reviewing reports on portfolio composition and valuation
to ensure compliance with securities regulations and the
simplified prospectus, and monitoring employee trading and
compliance with the Code of Business Conduct and Ethics.
The department works closely with the CI Legal Department,
executive team and other staff to review developments and
ensure our policies and procedures are effective and up
to date.
External Auditors
CI ensures that reliable financial information is
available to its funds’ investors. CI funds are audited
by PricewaterhouseCoopers LLP, a member of PwC
International, the world’s largest professional services firm.
CI Financial’s corporate results are audited by a different
firm, avoiding the potential of a conflict of interest. In
addition, the daily pricing of CI’s funds is handled by an
outside firm, RBC Investor Services Trust.
How CI Investments protects investors (cont’d)
Privacy Officer
Financial Strength
CI follows the fundamental principles of privacy protection
contained in the federal Personal Information Protection
and Electronic Documents Act and similar provincial acts.
These standards ensure that you have control over your
personal information by requiring that we obtain your consent
to collect, use or disclose information about you. CI has
appointed a Privacy Officer to address our clients’ concerns
about privacy issues.
CI Investments is a subsidiary of CI Financial Corp., an
independent and Canadian-owned wealth management
company and Canada’s third-largest investment fund
company. CI Financial is listed on the Toronto Stock
Exchange under the symbol “CIX” and is a member of the
S&P/TSX Composite Index.
CI Financial’s status as a publicly traded company provides our
fund investors with additional transparency and accountability
through its quarterly financial reporting and other publications.
The company is financially strong, reporting net income
of $121.7 million for the quarter ending March 31, 2014.
CI Financial had approximately $126 billion in total assets as
of April 30, 2014.
CI Financial
How you can protect yourself
As an investor, there are many ways to reduce risk and ensure that your savings are handled with the utmost care and security.
Deal with a qualified financial advisor
An individual’s registration tells you what products and services they are qualified and licensed to offer and
that they meet industry standards.
Be informed
The goal of both CI and the Canadian investment industry is to be transparent. Investment fund companies are
required by law to publish detailed information about their funds. (See the list of documents on the following
page.) These reports are available directly from CI and on www.sedar.com. Also, examine your account statements
when you receive them, and keep them on file.
Ask questions
Financial advisors welcome clients who want to be knowledgeable about their financial plan and their
investments. Similarly, keep your advisor informed of changes in your circumstances that may affect your
investment objectives.
How you can protect yourself (cont’d)
Important fund documents
Fund Facts – The short-form document that provides key
information about a mutual fund. Investors must be provided
with a fund’s Fund Facts at the time of purchase. You can find
more details in the fund’s simplified prospectus.
Simplified prospectus – Outlines the important facts about
a mutual fund, including its management, investment
objectives, risk profile and fees.
Annual information form – Provides information about a
mutual fund’s management company and portfolio managers,
the history of the funds, the funds’ investment policies, and
other details.
Management report of fund performance – Issued twice a
year for a mutual fund and provides commentary on factors
that affected its performance, financial highlights and a
summary of the fund’s portfolio holdings.
Information folder – Contains important information about a
segregated fund contract, including descriptions of its features
and the investment funds available under that contract. It
must be made available to investors before they invest in the
segregated funds.
Financial statements – Issued twice a year for segregated and
mutual funds and provide financial statements and a complete
list of a fund’s portfolio holdings.
Resources
Extensive information about CI and the CI funds, including
the documents cited on the previous page, can be found on
the CI Investments and CI Financial websites at www.ci.com
and www.ci.com/cix, respectively.
Other Sources:
OSC’s Investor Education Fund: . . . . . . . . . . . . . . . . . . . . . . . . . .www .investorED .ca
Investment Funds Institute of Canada: . . . . . . . . . . . . . . . . . . . . . . . . . . www .ific .ca
Canadian Securities Administrators: . . . . . . . . . .www .securities-administrators .ca
Mutual Fund Dealers Association of Canada: . . . . . . . . . . . . . . . . . . www .mfda .ca
Investment Industry Regulatory Organization of Canada: . . . . . . . . www .iiroc .ca
Canadian Investor Protection Fund: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .www .cipf .ca
Canadian Life and Health Insurance Association: . . . . . . . . . . . . . . .www .clhia .ca
Assuris: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .www .assuris .ca
2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I www.ci.com
Head Office / Toronto
416-364-1145
1-800-268-9374
Calgary
403-205-4396
1-800-776-9027
Montreal
514-875-0090
1-800-268-1602
Vancouver
604-681-3346
1-800-665-6994
Client Services
English: 1-800-563-5181
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1406-0998_E (06/14)