Enhanced disclosure for scholarship plans

It is becoming easier to understand and invest in scholarship plans, thanks to new, enhanced disclosure requirements.

The Canadian Securities Administrators (CSA), the umbrella group for Canada’s provincial securities regulators, are “modernizing” the regulation of scholarship plans by introducing new requirements for prospectuses. Form 41-101F3 Information Required in a Scholarship Plan Prospectus is tailored to reflect the specific features of scholarship plans.

Scholarship plans provide a way for you to accumulate money for a child’s education. The plans generally help planholders register as an Registered Education Savings Plan (RESP), apply for the Canada Education Savings Grant (CESG), then invest the money in the plan until such time as the child draws down on the plan to pay for higher education. According to the CSA, as of December 2011, the aggregate value of assets held in scholarship plans was $9.1 billion — 28.9% of all the assets held in RESPs.

There are three types of scholarship plans, all of which are offered by prospectus: individual scholarship plans, family scholarship plans and group scholarship plans. The latter, says the CSA, accounts for 95% of the total assets under management of scholarship plans.

The new amendments to scholarship plans require a plain-language “Plan Summary,” a short, concise document that provides investors with key information in a simple, accessible and comparable format. The Plan Summary will address the potential risks and costs of investing in a scholarship plan.

“We expect the Final Amendments to benefit investors by providing them with disclosure that gives them a simpler, clearer understanding of the potential benefits, risks and costs of investing in a scholarship plan, and allows them to meaningfully compare one scholarship plan to another,” The CSA says in its amendments. “By making disclosure more effective, we are giving investors the opportunity to make more informed decisions.”

“Saving for a child’s education is an important step in investment planning and these materials are aimed at providing families with information in an easy-to-understand format,” said Bill Rice, chairman of the CSA and chairman of the Alberta Securities Commission, in a press release.