The Government of Canada has improved disclosure regulations for consumers who purchase principal protected notes (PPNs) issued by federally regulated deposit-taking institutions such as banks. The Honourable Jim Flaherty, Minister of Finance, today announced that regulations aimed at improving disclosure have been approved and will come into force July 1, 2008.
“Adequate disclosure is needed to help investors make informed financial decisions,” said Minister Flaherty. “Our Government believes a principles-based approach to regulation is the best way to ensure transparency in today’s rapidly evolving and innovative marketplace.”
The regulations deliver on a commitment made in Creating a Canadian Advantage in Global Capital Markets, released in March 2007, to introduce a new disclosure regime for banks issuing PPNs.
Principal protected notes guarantee the invested principal and offer returns linked to returns on an underlying investment product, which can range from a relatively straightforward basket of equities to more complex investments such as hedge funds.
In recent years, the increased variety and complexity of PPNs has raised concerns about whether previous disclosure regulations provided consumers with enough information to make informed decisions.
The new regulations will help ensure that consumers are informed of the fees, returns, risks and cancellation and redemption rights associated with PPNs. They also require ongoing disclosures after a PPN is sold to aid consumers in monitoring and tracking their investments.
More information on the new regulations is contained in the attached backgrounder.
The regulations will be published in the Canada Gazette on June 11, 2008.
For further information, media may contact:
Chisholm Pothier
Press Secretary
Office of the Minister of Finance
613-996-7861
David Gamble
Media Relations
Department of Finance
613-996-8080
