From the Regulators

Mutual fund reps would need to receive training on the particular characteristics and features of ETFs, among other key points

By James Langton |

As mutual fund dealers and representatives venture into the business of selling exchange-traded funds (ETFs) alongside their traditional mutual fund businesses, the Mutual Fund Dealers Association of Canada (MFDA) issued a bulletin on Wednesday that sets out details of a proposed proficiency standard for reps to sell ETFs.

"There are important differences between ETFs and conventional mutual funds, including how they are transacted, that [reps] must know and understand to meet the general proficiency principle," the MFDA bulletin says, noting that the existing courses and examinations for reps to sell conventional mutual funds "do not adequately address the sale of ETFs."

The move to establish a proficiency requirement for mutual fund dealer reps trading in ETFs follows on the heels of a move within the industry over the past year to create the necessary infrastructure to allow reps to also sell ETFs.

Specifically, reps would need to receive training on the particular characteristics and features of ETFs, including how they are regulated, how they are constructed, and the accompanying licensing requirements, the MFDA's bulletin says. In addition, reps will need to be trained on how ETFs will be offered through their particular dealer, including disclosure requirements, how orders will be processed, and how evidence of trade instructions and disclosures will be maintained.

Although certain concepts are applicable to both conventional mutual funds and ETFs, the MFDA's bulletin says that ETF-specific training should highlight the key differences between the products.

At the same time, the MFDA is also proposing amendments to its guidance on the outside business activities that reps can engage in and how these activities must be disclosed and supervised.

Comments on both proposals are due by Sept. 16.