Exchange-traded funds (ETFs) may soon be required to provide investors with a plain-language disclosure document that explains their potential benefits, risks, and costs.

On June 18, the Canadian Securities Administrators (CSA) released a proposal that ETFs be required to offer a summary disclosure document called ETF Facts. Similar to the Fund Facts document that is already required for mutual funds, it is to be no more than two pages double-sided and will highlight information that the CSA’s research has identified as important to investors.

At the CSA’s request, Allen Research Corporation tested a sample ETF Facts with consumers. Among other things, the trial version of the document gave straightforward answers to questions such as: What does the ETF invest in? How has the ETF performed? How much does it cost?

“For the most part, ETF Facts was seen as clear, easy to read, and attractive in layout and colours. ETF and non-ETF investors described the three pages of ETF Facts as about the right length,” says Allen Research. “For many it provided the level of information retail investors need in order to know whether or not to consider purchase of this fund. They did not have to go to the prospectus — which many admitted they do not read."

Besides maintaining a full prospectus, ETF providers will be required to make a copy of the ETF Facts document available on their web sites. Dealers that receive an order to purchase ETF securities must deliver a copy of the ETF Facts to the investor within two days of the purchase.

The 90-day comment period on the CSA proposals will close on Sept. 16, 2015, and they are scheduled to come into effect on May 30, 2016.