New requirements hit all funds, even non-reporting issuers
CSA proposes mandatory liquidity risk management framework for all investment funds, eyeing $5.5 million industry compliance cost
The Canadian Securities Administrators has published proposed amendments to National Instrument 81-102 Investment Funds that would establish mandatory liquidity risk management requirements for all investment funds in Canada, including those that are not reporting issuers.
The proposals, published November 27, 2025, introduce a new Part 6.1 to NI 81-102 requiring investment funds to establish and maintain liquidity risk management frameworks, with a 120-day comment period ending March 27, 2026.
The amendments would impose requirements across three key areas: liquidity risk management frameworks, operational requirements, and oversight. Investment funds would be required to establish, maintain and apply policies and procedures addressing all matters relating to liquidity risk management, including compliance with the new requirements.
Under the operational requirements, investment fund managers would need to ensure that a newly established fund's investment objectives, investment strategies and permitted redemption frequency align with the nature of expected portfolio assets and expected redemption activity before filing an initial prospectus. Investment funds would also be required to monitor, review and assess their liquidity profile and relevant market conditions on an ongoing basis using qualitative and quantitative metrics, and adjust portfolio composition if necessary.
The proposals mandate that investment funds establish and maintain liquidity thresholds and targets, and conduct stress tests of portfolio asset liquidity at least quarterly during normal market conditions. The stress tests must include historical and hypothetical scenarios relevant to the fund's liquidity profile. If market conditions become stressed, funds must increase stress testing frequency until conditions normalize.
Investment funds would be required to assess the impact of portfolio transactions on liquidity profiles before making investment decisions, and establish and maintain contingency plans addressing liquidity risk, including plans for using liquidity risk management tools. These contingency plans must be periodically tested to ensure suitability for adequate liquidity risk management.
The oversight requirements would mandate that investment funds either appoint a liquidity risk management supervisor or establish a liquidity risk management committee. If appointing a supervisor, the fund must designate either the chief compliance officer of the investment fund manager, an individual reporting directly to the CCO, or an individual reporting directly to the CCO on liquidity risk management matters. For funds establishing committees, membership must include either the CCO or an individual reporting directly to the CCO.
The CSA estimates industry-wide initial compliance costs of approximately $5.5 million, with ongoing annual costs of approximately $1.9 million. Investment fund managers that manage only reporting issuer funds, or both reporting and non-reporting issuer funds, are expected to incur approximately $5,000 per firm in initial costs and $1,300 in ongoing annual costs. Investment fund managers handling only non-reporting issuer funds face higher costs, with small firms managing one fund estimated to incur $12,200 initially and $2,900 annually.
Concurrently, the CSA published a consultation paper seeking feedback on liquidity risk management tools, liquidity classification of portfolio assets, and regulatory disclosure and data relating to liquidity risk management. The consultation addresses whether Canada should permit or require additional liquidity management tools not currently allowed, proposes a four-category liquidity classification framework, and explores new disclosure and reporting requirements.
The proposals aim to strengthen the regulatory framework following the 2022 IOSCO Thematic Reviews, which found Canada's liquidity risk management framework "fully consistent" for 6 of the 10 recommendations and "broadly consistent" for the other 4. IOSCO noted the framework relied on non-legally enforceable guidance. The International Monetary Fund also recommended in August 2025 that Canada align its regulatory framework with FSB and IOSCO guidance on liquidity of assets held by publicly offered funds.
Subject to regulatory requirements and comments received, the proposed amendments would come into force three months after final publication.
