30 | LEXPERT • June 2014 | www.lexpert.ca
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FUND REGULATION
CANADA IS HOME TO 19 of the world's 300 largest pension funds, many
home offi ces, high net worth investors and other pools of capital. It ranks third in terms of
pension funds, behind the United States and the United Kingdom, according to the Towers
Watson P&I/TW 300 Analysis, August 2013, www.towerswatson.com. For many years,
the most sophisticated Canadian institutional investors have made signifi cant allocations to
non-traditional alternative investment funds, and increasingly home offi ces and high net worth
investors are recognizing the importance of a diversifi ed portfolio that includes hedge funds.
Unlike the United States and other jurisdictions, where most of the alternative investment
fund market was virtually unregulated prior to the 2007/08 fi nancial crisis, Canada has regu-
lated hedge fund advisors and dealers for more than 25 years. However, as in the rest of the
world, Canadian regulators have not missed the opportunity to beef up regulatory oversight
of the alternatives space in response to international commitments and frenzied media appeals
for greater monitoring of systemic risk and rogue market participants. In addition, legislative
changes have provided regulators with a bigger stick to prosecute white-collar criminals and to
curtail behavior that increases the contagion of systemic risks. With this in mind, we hope to
provide non-resident hedge funds and their managers with some insight into the registration
requirements and exemptions therefrom under Canadian securities laws, and to provide guid-
ance with respect to documentation and disclosure requirements in Canada. We also identify
other compliance requirements, including anti-money laundering and anti-terrorism reporting.
OVERVIEW OF APPLICABLE CANADIAN LAWS
" e marketing, off ering and issuance of investment fund securities in Canada are generally regu-
lated under provincial and territorial (each one is a "jurisdiction") securities regimes established
under the laws of such jurisdictions. Each such regime can generally be described as a "closed
system." Under a closed system, investment funds must off er their securities under a prospectus
RAISING
CAPITAL
IN CANADA:
NON-RESIDENT
HEDGE FUNDS
Canadian regulatory oversight has
increased in the alternative investment
fund market to monitor systemic risk
and rogue market participants
BY TIMOTHY BARON; DAVIES WARD PHILLIPS & VINEBERG LLP
