Canadian regulator expresses concern over PPN marketing
The Canadian Securities Administrators (CSA) – an umbrella organisation for Canada's provincial securities regulators – officially views principal protected notes (PPNs) linked to hedge funds as an “area of concern.” In fact “registrants selling PPNs may not be meeting their know your client and suitability obligations” according to CSA Staff Notice 81-316 Hedge Funds, a sample-based review of hedge funds in Canada.
The CSA conducted the review in response to increased retail interest in hedge funds . The review was done through a combination of compliance reviews of fund managers and advisers, disclosure reviews and industry consultations. Although the CSA determined that “an appropriate securities regulatory framework exists for hedge funds in Canada”, it also found that certain areas can be improved – particularly the marketing of PPNs.
Accordingly, the CSA plans to further investigate the marketing of
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