The Mutual Fund Dealers Association is confirming that reps at its member firms will not be required to flow their financial planning business through their dealers.

It a regulatory notice, the MFDA says it is of the view that neither the MFDA rules nor its terms of recognition as a self-regulatory organization prohibit reps from selling deposit instruments or providing non-securities-related financial planning services outside a dealer. “However, in these situations it will be critical for the member to ensure that the MFDA’s requirements for ‘dual occupations’ are being complied with.”

The MFDA requires that all “securities related business” be conducted through a dealer. This includes any business or activity that constitutes trading or advising in securities. But it also allows reps to engage in dual occupations, including the sale of deposit instruments (such as GICs) and the provision of non-securities related financial planning services outside their dealers.

The MFDA has maintained that financial planning should be able to be offered outside the dealer, as long as it is flowed through another regulator. But the securities commissions have insisted that this business should flow through the dealer to ensure that clients are protected.

The MFDA says, the dealer must be aware of and approve such outside activity and must ensure that clear disclosure is provided to the client about which activities are the responsibility of the firm and which are the responsibility of the rep.

It recommends that the disclosure should clarify that such activities are not supervised by the dealer and it may not be liable for such activities. It notes that because of the increased possibility of client confusion regarding liability and responsibility, MFDA staff and staff of the regulators intend to monitor this area closely and will continue to evaluate whether additional regulatory requirements are appropriate for these situations.