Securities regulators have granted some relief from the mutual fund sales practices rule to AEGON Dealer Services Canada Inc.
The firm sought a decision that the prohibitions on certain rebates of redemption commissions or fees shall not apply to rebates paid by reps to clients who switch from third-party funds to imaxxFunds. ADSCI is registered as a mutual fund dealer. AEGON Fund Management Inc. is the manager of the imaxxFunds. The sales rule prohibits reps from paying rebates to clients who are switching from third-party funds to imaxxFunds.
The regulators’ decision notes, that the relief is being applied for in order to facilitate proprietary rebates; the decision to pay such rebates will be made by the reps based on the best interests of the particular client; and that reps are not required to sell imaxxFunds to clients, do not have any quotas to sell imaxxFunds, and are not provided with incentives by ADSCI to sell imaxxFunds.
The regulators granted the relief on the condition that:
- reps comply with the informed written consent provisions of the sales rule;
- that they advise each client in advance that any rebate proposed in connection with the purchase of securities of imaxxFunds will be available to the client regardless of whether the redemption proceeds are invested in an imaxxFund or a third-party fund, and will not be conditional on a purchase of securities of imaxxFunds;
- reps shall not in the future be subject to quotas (either express or implied);
- neither ADSCI nor any of its affiliates shall provide an incentive (monetary or non-monetary) to any rep to recommend the imaxxFunds over third-party funds;
- the amount of the rebate that is borne by a rep is determined by the rep and the client; and
- reps that pay the rebates will not be reimbursed by ADSCI.