Industry associations representing exchange-traded fund (ETF) providers and mutual fund dealers are applauding the Mutual Fund Dealers Association of Canada’s (MFDA) proposed new proficiency standard for mutual fund sales representatives who sell ETFs.
The initiative clarifies the expectations of the self-regulatory organization, helping mutual fund dealers move one step closer to selling ETFs, says Sandra Kegie, executive director of the Federation of Mutual Fund Dealers (FMFD) in Toronto.
“We support the MFDA coming out with this in advance of the mutual fund dealers moving in this direction in a really assertive way,” Kegie says. “It helps the dealers get organized.”
Mutual fund dealers and their reps are permitted to sell ETFs that meet the definition of a mutual fund under the regulatory framework. However, reps are required to receive separate training to do so because the existing courses and exams for mutual fund reps do not adequately address trading in ETFs, according to the MFDA.
The MFDA outlined a proposed proficiency standard in a consultation paper released in July 2015, highlighting the areas of training that should be required for reps to sell ETFs. Last week, it published a more detailed proposal that is out for comment until Sept. 28.
“They’ve just broken things down a little more, provided a little more direction for the course providers, and have been a little bit more explicit about the expectations of their members,” Kegie says.
Implementing a minimum proficiency standard is an important step to ensure advisors who sell ETFs will have sufficient expertise of both the products themselves and the way they are traded, says Pat Dunwoody, executive director of the Canadian ETF Association (CETFA) in Toronto.
“We wanted to ensure there were additional proficiencies, because we knew that the products were quite a bit different from mutual funds,” Dunwoody says. “It’s split between making sure they understand the product, and making sure they understand the trading side, because it is so different.”
The associations don’t expect to see much opposition to the MFDA proposals. In fact, the proposed standard largely aligns with the best practices that the FMFD and CETFA have recommended that firms adopt. “We were pretty comfortable that they captured most of the criteria,” Dunwoody says.
Kegie suspects that the new rule could be adopted by the MFDA by the end of this year, and she is encouraged to see the initiative moving forward.
“This is a really positive thing,” Kegie says. “This is the result of some very valuable industry consultation between … members of our working group who have been trying to bring ETFs to mutual fund dealers for several years now.”
MFDA proposes minimum proficiency standards for reps to sell ETFs
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