Total Cost Reporting

Overview

What is Total Cost Reporting (TCR)?

On April 20, 2023, the Canadian Securities Administrators (CSA) and the Canadian Council of Insurance Regulators (CCIR) announced amendments relating to enhanced cost disclosure reporting requirements for investment funds and new cost and performance reporting guidance for individual variable insurance contracts.

These amendments are designed to improve transparency and investor awareness of all fees and costs paid by mutual fund and ETF investors, as well as segregated fund holders. The onus is on the dealer community to provide this information to their clients, with the first annual reports that incorporate Total Cost Reporting (TCR) enhancements due for the year ending December 31, 2026.

What are the new data points?

• Fund Expense Ratio (FER) = Management Expense Ratio (MER) + Trading Expense Ratio (TER)
• Daily Cost Factor (DCF) = FER * NAVPU (Net Asset Value Per Unit) / 365
• Daily Cost Amount = DCF * Investors’ number of units held

What is RBC doing?

RBC Investor Services (RBCIS) is actively engaged with industry groups including CCIR, CSA, Securities and Investment Management Association (SIMA formerly IFIC), Fundserv as well as our system vendors, tracking regulatory requirements and developing our applications and statement reporting to investors for the year ending December 31, 2026. Our Fund Accounting and Shareholder Service applications will begin collecting additional TCR data points on January 1, 2026, for distribution to applicable dealers throughout the year.

What fund types are in scope vs. out of scope?

Are Investment Counsellor Services (ICS) accounts in scope for TCR?

ICS accounts themselves are out of scope. However, if accounts hold in-scope investment products (e.g., mutual funds, ETFs, segregated funds), investors will receive the required cost disclosures in their annual statements from their dealers and/or applicable fund manufacturers.

Are Separately Managed Accounts (SMA) captured by TCR requirements?

SMAs are generally non-prospectus and not in scope of TCR, however, if they are offered or marketed to retail clients via dealers or include in-scope investment funds in their portfolios, they may require account level disclosure. Please consult the regulatory frameworks for more details.

How will RBCIS support operational oversight and testing during TCR implementation – will you be providing sample reports, parallel runs, or mock audits in advance of the go-live?

RBCIS has a comprehensive testing strategy and we welcome our clients to participate in the cycles. We will provide sample reports, mock data, and conducting joint testing with external parties. If clients would like to participate in testing with RBCIS, please contact your representative.

How does RBCIS plan to handle synchronization and reconciliation across multiple platforms (transfer agency, fund accounting, external price vendors)?

RBCIS is working with our fund accounting and shareholder services vendors, as well as third parties to test all connectivity and timings of data delivery over the summer months.

Calculations

How can RBC facilitate calculation of TCR values for our funds?

If RBCIS is providing Fund Accounting, we can provide FER and DCF as required, and transmit the FER and fund level DCF through to our Shareholder Services or other agreed formats.

Can you show us a sample of how calculations are performed and what’s included?

FER/DCF data templates are available. The FER will reflect a summation of MER and TER in alignment with the CSA and CCIR Notice of Publication and Financial Services Regulatory Authority of Ontario. Please reach out to your RBC representative for samples, as applicable.

Will performance fees be included in the DCF and FER?

Yes, performance fees are included in MER if accrued or charged and therefore part of the FER and DCF calculations

How will RBCIS obtain the DCF for reporting?

The DCF will be calculated in our fund accounting system using daily FER values.

For externally managed funds, TCR data will be requested and integrated into our process.

Can we see a mockup of the FER file RBC will provide?

Yes. A FER file template can be shared upon request. Please contact your representative.

What are reasonable approximations?

Section 3 of the Implementation Framework allows for use of approximations.

Reference Extract from Framework :

• Investment Funds: Section 3 of the Implementation Framework: “When Investment Fund Managers (IFMs) are determining the Daily Cost Factor (DCF) (i.e. fund expenses per security for the day), and IFMs use of reasonable estimates and approximations is permitted by subsection 14.1.2(2) of NI 31-103, provided the use of reasonable approximations would not result in misleading information being reported by the registered dealer/adviser to their clients. 31-103CP guidance also encourages exact information where doing so would not incur unreasonable cost and/or delay”
• For determining reasonable approximations, IFMs may rely on information in an investment fund’s most recently published fund facts document, ETF facts document, prospectus or management report of fund performance (MRFP) provided there has been no significant change in the information and its publication is not greater than 12 months.
• Segregated Funds: Section 4.3 of the CCIR Guidance states that insurers may use reasonable approximations for the fund expense ratio for the day and market value of a unit for the day provided that the insurer reasonably believes that doing so would not result in reporting misleading information to an owner. A reasonable approximation may include estimating the fund expense ratio for the day by dividing the segregated fund’s FER in in the most recent Fund Facts document or financial statement by the number of days in the year. If there has been a significant change to the FER since publication of the fund facts or financial statements, adjustment should be made to avoid being misleading. The requirements applicable to investment funds discussed above can be applied with appropriate modification for segregated funds
• CSA and CCIR Notice of Publication – CCIR Individual Variable Insurance Contract Ongoing Disclosure Guidance and Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and to Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations – Total Cost Reporting (TCR) for Investment Funds and Segregated Funds
• Total Cost Reporting Rule | Financial Services Regulatory Authority of Ontario

If using estimates, how will true up work if the actual is significantly higher?

IFMs will have controls in place to monitor on a reasonable periodic basic suitable for their businesses any variations in MER and TER and perform materiality assessments. The implementation framework recommends that any materiality adjustments be made retroactively for the current reporting calendar year.

Reporting

Is TCR reporting for ALL Dealers?

Yes, Fundserv and Non Fundserv Dealers are mandated to report TCR elements daily.

Fundserv is introducing Associate Memberships for Dealers who are not traditionally registered. RBCIS is working with our vendor to explore non Fundserv reporting options for TCR to better support our clients. to benefit our clients

Who is responsible for reporting TCR to our Investors?

RBC Investor Services can facilitate reporting to House Dealers for those that sign up for the service. Otherwise, it will be the Dealer’s responsibility to disclose the TCR Data to the Investors.

How often will TCR be reported to Investors?

TCR will be reported on an annual basis.

What is the retention period for TCR data?

The retention period will follow RBC Investor Services standard of 7 years, as we do for all our reporting.

Will CRM2 reports evolve to include TCR or will it be a separate report?

Yes, TCR (CRM3) data will be incorporated into the Annual Report on Charges and Compensation (ARCC) which builds on the CRM2 framework.

If we currently received CRM2 Reporting, Fee and Performance Reporting, does this discontinue or are we able to receive the same reporting?

Performance Reporting will still be available. If you currently receive the Performance Report, there will be no change. Charges and Compensation Report will now be referred to as the ARCC Report, which includes TCR Data. Clients with segregated funds will receive TCR data on their Statements. The Performance Report and ARCC Report does not apply to segregated funds.

Will RBCIS provide standardized formats for fee and cost breakdowns that can be directly integrated into investor statements, or will firms be expected to customize outputs themselves?

Where RBCIS provides investor statement services, we will be providing standard formats for fee and cost breakdowns.

If you would like to discuss potential custom outputs, please reach out to your relationship manager.

How will RBCIS align reporting timelines with fund accounting cycles to ensure timely and accurate inclusion for funds with irregular or non-calendar reporting periods?

The TCR implementation framework provides guidance on non-daily priced products and RBCIS is aligned in transmitting these on a daily frequency for each business day (transmission would not occur on weekends or holidays) for consistency purposes (i.e. knowing the Daily Cost Factor will remain the same every day until the next NAV is calculated).

Will TCR data components be available on WealthLink or WealthDecisions?

Yes, TCR data components will be available on WealthLink and WealthDecisions. Currently this is being developed with our vendor.