WealthManagement Magazine

Canada Creates Overseer for Fund Sales

After years of wrangling between Canadian regulators and trade groups over who should oversee Canada's more than 60,000 independent mutual fund distributors and bank employees who sell funds, an agreement was reached to create a new watchdog agency--the Mutual Fund Dealers Association (MFDA).The MFDA, which is expected to begin operations by early next year, will be run jointly by the Investment Dealers

After years of wrangling between Canadian regulators and trade groups over who should oversee Canada's more than 60,000 independent mutual fund distributors and bank employees who sell funds, an agreement was reached to create a new watchdog agency--the Mutual Fund Dealers Association (MFDA).

The MFDA, which is expected to begin operations by early next year, will be run jointly by the Investment Dealers Association (IDA) and the Investment Funds Institute of Canada (IFIC).

The go-ahead to create the new regulator was given at the quarterly meeting of the Canadian Securities Administrators (CSA) held in Quebec City in early April. The CSA, which is comprised of the chairs of Canada's 12 provincial and territorial regulators, agreed to provide interim funding for the new organization with loans from the Ontario, Alberta and British Columbia securities commissions. The organization is expected to become self-funding through mandatory membership fees.

The issue of fund distributors--independent firms that retail third-party funds--has been a thorny one for some time. Neither the distributors, the IDA, the IFIC nor even provincial securities commissions have been willing or able to assert jurisdiction.

According to IDA President Joseph Oliver, the formation of the new regulator was long overdue.

"There has been a serious regulatory gap that we think has now been overcome," he says.

The big issue facing the new MFDA, insiders say, is whether any central organization can really supervise independent salespeople working out of small satellite offices.

"I would think the first order of business would be to give [the MFDA] some real teeth," says one Toronto-based brokerage executive. "By that, I mean the creation of a strict code of conduct that is backed up with stiff and meaningful fines."

The IDA will continue to regulate full-service brokers employed at broker/dealers.

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