By James Langton

(February 5 – 16:45 ET) – The Mutual Fund Dealers Association is set to be officially recognized tomorrow in Ontario.

MFDA chief operating officer Larry Waite confirms that, “If all goes according to the current plan we will be recognized by the Ontario Securities Commission tomorrow, February 6th, the BCSC on Friday the 9th and the ASC on the 14th.”

Recognition will officially bring into being the new self-regulatory organization for fund dealers, which has been in the works for several years. The group will perform similar functions as the Investment Dealers Association, but for fund dealers.

Membership is expected to be mandatory for fund dealers, although Ontario finance minister Ernie Eves rejected the rule making membership mandatory back in December 2000. Waite says that the OSC will resubmit that rule for the minister’s consideration later this week. However, the situation is complicated by Eves’ resignation last week to join CS First Boston.

Eves has pledged to stay on until April if necessary, but a replacement is expected to be named soon. “If he signs off on it before he leaves, great!” says Waite. “But if a new minister has to deal with it I’m sure there will be some delay.”

While the exact timing remains a moving target, fund dealers will have to join the MFDA over the next year. The new SRO will take over regulatory responsibility for dealers that are currently regulated by the securities commissions, although evidence of their oversight has been scant. Under the MFDA, dealers will face increased capital requirements, fees for both the MFDA and a new contingency fund, along with the added infrastructure cost imposed by compliance with new operating and administration rules, which the MFDA will administer and enforce.

The MFDA’s startup costs were initially funded by the OSC, the British Columbia Securities Commission and the Alberta Securities Commission, although the MFDA will be expected to repay those costs over the next several years from fees collected from the dealers. Both the MFDA and some dealers continue to hope that the regulators will forgive the debt.