(September 19 – 16:45 ET) – Canada’s new Mutual Fund Dealers Association should be controlled by mutual fund dealers and financial advisors with rules that serve the public interest effectively, says the Canadian Association of Insurance and Financial Advisors.
CAIFA has prepared a 30-page submission in response to the application of the MFDA to be recognized as an SRO by securities regulators.
“The greatest need for reform is to allow advisors who sell mutual funds to offer that service as part of their comprehensive financial services business,” says CAIFA president Dave Thibaudeau. “After that, the MFDA must create a system of efficient self-regulation that will protect the public and also allow qualified financial advisors to offer unbiased, independent advice.”
CAIFA’s submission makes 21 specific recommendations. Among them, CAIFA recommends that “financial planning” be removed from the definition of “dealer business” and rejects the proposal that fees for financial planning by an advisor must be paid to the dealer. CAIFA believes that a mutual fund dealer has no business interfering with the process of financial planning.
CAIFA challenges the concept that the MFDA adopt rules and practices for mutual fund dealers and advisors that were developed for stockbrokers who are members of the Investment Dealers Association of Canada. CAIFA says the two businesses are different. It believes that there are better models for the MFDA and for the self-regulation of owner-operated financial services businesses.
CAIFA also recommends that MFDA rules specifically prohibit undue influence or coercion by a mutual fund dealer who supervises a financial advisor, for example, by requiring the advisor to book insurance sales through the dealer or to advance the dealer’s business objectives instead of the client’s interests. CAIFA recommends that that kind of “predatory supervision” be deemed anticompetitive and contrary to the public interest.
CAIFA calls for the adoption of consumer protection measures that are well-established in other professional and financial businesses. It feels that the cornerstone of protection should be well-designed professional liability insurance, with mandatory dispute resolution organized by the MFDA so a client does not have to go through the cost, delay and anxiety of a lawsuit before they can file a claim against an advisor’s E&O insurance.
-IE Staff