(1) Subject to subsection (2), to determine the investment risk level of a mutual fund,
(a) determine the mutual fund’s standard deviation in accordance with Item 2 and, as applicable, Item 3, 4 or 5,
(b) in the following table, locate the range of standard deviation within which the mutual fund’s standard deviation falls, and
(c) identify the investment risk level set opposite the applicable range.
|Standard Deviation Range||Investment Risk Level|
|0 to less than 6|
|6 to less than 11|
Low to medium
|11 to less than 16|
|16 to less than 20|
Medium to high
|20 or greater|
(2) Despite subsection (1), the investment risk level of a mutual fund may be increased if doing so is reasonable in the circumstances.
(3) A mutual fund must keep and maintain records that document:
(a) how the investment risk level of the mutual fund was determined, and
(b) if the investment risk level of the mutual fund was increased, why it was reasonable to do so in the circumstances.
(1) The investment risk level may be determined more frequently than annually. Generally, the investment risk level must be determined again whenever it is no longer reasonable in the circumstances.
(2) Generally, a change to the mutual fund’s investment risk level disclosed on the most recently filed fund facts document or ETF facts document, as applicable, would be a material change under securities legislation in accordance with Part 11 of National Instrument 81-106 Investment Fund Continuous Disclosure.
(3) In deciding whether to exercise the discretion to increase a mutual fund’s investment risk level as permitted in subsection (2) above, consideration should be given as to whether the standard deviation calculation applied under the Investment Risk Classification Methodology may result in a risk level that is below the manager’s own expectations for the mutual fund. This can occur, for example, when a mutual fund employs investment strategies that produce an atypical or nonnormal distribution of performance results. In such circumstances mutual funds are encouraged to consider supplementing the Investment Risk Classification Methodology with other factors or risk metrics in order to determine whether it would be appropriate to make an upward adjustment of the mutual fund’s risk level to better reflect the features of the mutual fund.